graduate course

1. Running head: TALE OF TWO BUSINESSES 1
Tale of Two Businesses
Terry Dashner
LDR/531
February 19, 2014
Allen Autrey

2. TALE OF TWO BUSINESSES 2
Tale of Two Businesses
Selecting a business that failed and one that has succeeded within the last five years is the
general task for the week six writing assignment. The task includes identifying the business’
objectives, vision, mission and pinpointing the indicators that led to the failure or success of each
business, such as aspects of leadership style, communication, and structure. More specifically, it
will describe how specific organizational behavior theories could have predicted or explained the
company’s failure or success. It will cite the role of leadership, management, organizational
structure, and culture of the organizations and departments that aided and abetted in the
company’s demise or success.
In part two of the week six research document, the author is assigned a fictitious role as CEO
of the failed organization before the business failure takes place. In this imaginary role as CEO,
the author has the opportunity to lead the organization in a change process to prevent the
impending failure. Moreover, the role requires identification of the most vital areas for change
and the potential barriers that the CEO may face during the change process. The power and
political issues within the organization are identified and John Kotter’s eight-step plan is
implemented as a resolution for the change.
Tale of a Business Failure
In 1971 (Bomey, 2011), brothers Tom and Louis Borders opened a small used bookstore
called Borders Book Shop in Ann Arbor, Michigan. Louis Borders developed a primitive
software program that helped manage inventory and, to some extent, project sales, which gave
Borders a competitive advantage for at least twenty years. In the late 1980s, Borders recruited
Robert DiRomualdo to lead the company forward. DiRomualdo is given credit for leading the
company to national prominence in the 1990s. In the national spotlight, the Kmart Corporation

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purchases Borders in the early 1990s. Not long after, Borders separates from Kmart and goes
public on the New York Stock Exchange. Its shares close at an all time high in 1997. In
continuing the company chronology, DiRomualdo the CEO is replaced in 1998; Soon after,
Borders establishes business in the United Kingdom; Borders posts an annual profit of $101
million in 2005; Borders sells its United Kingdom and Ireland subsidiaries in 2007, and its stock
reaches an all time low. Borders never recovers its market share high and continues its downhill
slide until it filed for Chapter 11 bankruptcy protection in 2011 and 10,700 employees lost their
jobs. Borders is a business tale from rags to riches to rags.
Borders Objective, Vision, and Mission Statements
According to author Barbara Farfan (Farfan, 2014), Borders business objective, vision, and
mission statements could not keep it from going under. Its mission statement, vision, and values
were divided into two parts: “Our Vision” and “Our Values.” Borders knew that books and other
types of literature defined humanity, thus making each human unique. Borders embraced a
community spirit in its values’ statement and became good neighbors to enrich the
neighborhoods in which they conducted business. Borders celebrated “discovery” and
“familiarity,” (part of their expressed mission statement). In other words, they believed in
connecting a person’s exploration for knowledge to the moment of discovery, which resulted in
familiarity and comfort; however, in the end, Borders reach was more than its objectives, vision,
and mission statements could sustain. In other words, no lofty, eloquent, or sophisticated mission
statement or system of values works when CEO leadership topples, and owners are too
shortsighted to see the future of books belonging to the digital age.
Indicators of Business Failure
According to an NPR report (Noguchi, 2011), there are several indicators that Borders was

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headed toward its demise in the late 1990s. By the mid-1990s Borders had hit its peak and began
to slide downward. Borders took on CD music and DVD sales at a time when the industry was
making headway into the digital age. This was a costly mistake for Borders. Its chief competitor,
Barnes & Noble, began strengthening its online business with books, not CDs or DVDs. With
that came the e-reader or the Nook. Borders, on the other hand, built physical plants and stores
and outsourced its online sales to Amazon.com. NPR compared the action to that of giving one’s
competitor the keys to its entire operation.
Organizational Behavioral Theories Predicted the Demise and Leadership Role
Although John Miner’s book entitled, Theories of Organizational Behavior, received a
negative review by Richard Guzzo (Guzzo, 1981), in the journal: Industrial & Relations Review,
it still warrants consideration when underscoring the importance of organizational behavior on a
company’s success or failure. According to Guzzo (1980), “This book is not completely
satisfactory as a methodological appraisal because it lacks the criticisms that deductive theorists
would make (such as the logical consistency of various approaches).” (p. 469). A
methodological appraisal of Borders poor business decisions is not necessary to understand the
“big picture” as to why Borders failed. As economists predicted (Lowery, 2011), in 2011,
Borders was doomed to fail because investors believed it had no economic future. Its leadership
from the top, down could not get this. Although Barnes & Noble saw the digital age as the future
to book sales, Borders organizational behavior from the “Macro” perspective could not learn
from its industry and, thus, met its demise.
Tale of a Business Success
According to Bloomberg Businessweek (Stone, 2013), Costco Wholesale is the second largest
retailer in the United States behind Walmart. In a world economy marked by the recession and

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downsizing, Costco with its $55.00 a year membership is not typical. Costco has succeeded over
the last five years while the competition has lost customers to the Internet. Costco sales have
increased almost 40% and its stock price has doubled since 2009. Even with a change at the
helm, share prices are up 30% under the leadership of its new CEO Craig Jelinek. Costco pays its
hourly workers an average of $20.89 an hour, not including overtime. Walmart in comparison
pays an average wage of $12.67 an hour. Almost 90% of Costco’s employees have company-sponsored
health insurance, whereas, Walmart claims that half of its employees do.
Costco’s Objectives, vision, and mission
Costco’s headquarters (Stone, 2013), which is twenty miles from Seattle, Washington, reflects
frugality. The executive wing is covered with a worn and well-faded blue carpet. There is no
expensive art in the halls. Several walls have a few Van Gogh prints hanging, worth about
$15.00 a piece. The CEO earned $650,000.00 in 2012, plus a quarter million more in stock
options and bonuses. These business values of frugality and keeping costs at bay reflect the
success of a company that is serious about staying ahead of the competition. Costco believes that
ethical business determines profits and success. Part of its mission statement says that it will
conduct business with ethics in mind, such as obeying the law, taking care of its membership,
and caring for it employees, and its vendors.
Indicators of Success
CEO, Jelinek is focused on Costco’s future. He (Stone, 2013) vows to keep prices low,
volumes high, and—in a rare move—keep his employees happy. Jelinek is determined to deepen
the Costco footprint in France and Spain, thus strengthening its International presence. Costco
has no public-relations staff. This no frills attitude defines the style of over 600 warehouses
around the world. Not even Amazon.com can beat Costco’s prices. But, not all is well in

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Camelot. Costco must concern itself with danger signs. For example, in February of 2013,
Tiffany (Bomey, July), filed a trademark infringement suit against Costco alleging it improperly
labeled engagement rings as belonging to Tiffany. Costco called it an honest mistake, saying it
should have been labeled “Tiffany-style” rings. Nevertheless, Costco values its employees and
honors them as investments. It pays its employees a living wage, unlike some of its competitors
like Walmart; therefore, Costco is riding high by scaling waste and frivolity that some other
businesses may flaunt as prosperity and success. Costco is here to stay.
Specific Organizational Behavioral Theories and Leadership Role
Costco is modeled after Price Club (Stone, 2013), a 1976 store founded by Sol Price and his
son, Robert. Price Club stocked only about a thousand products in large quantities and marked
prices up to a set amount in the belief that retailers added only limited value. Sol Price is
deceased, but his right hand lieutenant by the last name of Sinegal brought Price’s model to
Washington in 1983. Price Club and Costco merged in 1992. Sinegal maintained Price’s pro-labor
principles and instead of reducing wages and health benefits for employees at the request
of Wall Street, Sinegal boosted them every three years. The legacy lives on at Costco and
employee satisfaction ranks among the highest for any American business. This organizational
behavior in light of other retailers, such as Walmart, is uncommon, but it is working.
II.
Tale of Two Businesses
Leading Organizational Change
In part two of the week six research document, the author of this document is assigned a
fictitious role as the CEO of the failed organization (Borders) before the business failure takes
place. In this imaginary role as CEO, the author has the opportunity to lead the organization in a

7. TALE OF TWO BUSINESSES 7
change process to prevent the impending failure. Moreover, the role requires identification of
the most vital areas for change and the potential barriers that the CEO faces during the change
process. The power and political issues within the organizat ion are identified and John Kotter’s
eight-step plan is implemented as a resolution for the change.
The New CEO
As the newly assigned CEO of Borders, Tee Dashner has assessed the company’s state of
health and created a business plan that addresses the issues that are hindering the growth and
business dynamic of Borders. There (Sandburn, 2011) are five issues identified in the plan:
 Failure to see the value in the Internet market. No longer will we use Amazon.com as our
principle vendor. Online sales should come directly through our website.
 We will embrace the e-reader market immediately. We will compete with Barnes &
Noble for our share of the e-reader market and begin developing a digital reader
comparable to the Nook and Kindle.
 We will not open any more physical locations. We are reviewing the feasibility of closing
properties that are currently in operation.
 We will attack our debt aggressively.
 We will stop marketing music CDs. It’s a new day, and Apple® is crippling the CD
industry with iPod music downloads. This begins immediately.
The CEO is aware of the difficulties this change may impose upon leadership. Old concepts die
hard, but they must die in order for Borders to rise to new heights. Borders will lead the industry
once again.
Steps to Success

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The CEO has consulted with John Kotter’s organization to map out a step-by-step strategy
that will move us forward. Although John’s book entitled, The Leadership Factor, received a
negative peer-review assessment from Sharon A. Tucker (Tucker, 1989), Director of
Compensation and Organization Consulting for C & B Consulting Group in St. Louis, MO, the
review was written over a decade ago and should hold little relevance to the current time and
markets. Kotter’s (Kotter International, 2014) steps are outlined:
 Establish the Immediacy of the situation
 Gather a consensus
 Implement a new vision
 Communicate to gather support
 Empower those who can make things happen
 Establish goals that come quickly
 Stay the course
 Change the mindset
A Walk Through
Beginning immediately, all Borders Administration personnel should assess their operations
and report their findings to the Department of Strategic Development, headed by the CEO.
Department Plans are due within two weeks. These plans should include a strategy for a turn
around for Borders. Once the reports are received and approved by the Department of Strategic
Development, Action Plans become priority. Departments of Operations, and each Borders
business entity is put on notice of the immediacy of the assignment. Every CFO, CIO, and other
entity leadership personnel are responsible for gathering a coalition for action. In other words, it
is imperative that everyone is on board and communicating the action plan in one accord as one

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voice. Company culture opposed to the changes is banned and forever buried. Borders seeks and
implements a new vision for change from this time forward. The payoff for participating in the
vision is within reach and assured as the company makes forward progress. Mid-line managers
and supervisors are hereby empowered to make command decisions as they implement their
action plans. Hierarchal command channels are dead. Administration officials are responsible
within their action plans in formulating teams that share responsibil ities in managing and
building a new company. The first departments to show movement toward this outcome will
receive bonuses. Other bonuses and rewards are herby activated to address short-term goals. It’s
a new day and Borders will come through on top.
Conclusion
This document has met the challenge of identifying two businesses that, within the past five
years, has either failed or succeeded as a viable and sound business entity. The document
includes the business' objectives, vision, mission and pinpoints the indicators that led to the
failure or success of each business, such as aspects of leadership style, communication, and
structure. More specifically, it describes how specific organizational behavior theories could
have predicted or explained the company's failure or success and citing the role of the leadership,
management, organizational structure, and the culture of the organizations and departments that
aided and abetted the demise or success of the businesses.
In part two of the document, the author took the fictitious role as CEO of the failed
organization before the business failure took place. In this imaginary role as CEO, the author
took the opportunity to lead the organization in a change process to prevent the impending
failure. Moreover, the role required identification of the most vital areas for change and the
potential barriers that the CEO might face during the change process. The power and political

10. TALE OF TWO BUSINESSES 10
issues within the organization were identified and John Kotter’s eight-step plan was implemented
as a resolution for the change. Furthermore, the document presented research from peer-reviewed
journals that added depth and expertise for the reader. Thus, the tale of two businesses is told
with the goal of educating the reader as to business volatility in both worlds of success and
failure.

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References
Bomey, N. (July 18, 2011). Borders' rise and fall: a timeline of the bookstore chain's 40-year
history. Retrieved from http://www.annarbor.com/
Farfan, B. (2014). About.com Retail Industry. Retrieved from
http://www.retailindustry.about.com/
Guzzo, R. (1981). Theories of Organizational Behavior. Industrial & Labor Relations Review,
34(3), 468-469. Retrieved from http://www.apollolibrary.com
Kotter International. (2014). Retrieved from http://www.kotterinternational.com /our-principles/
changesteps
Lowery, A. (2011, June). Readers without borders. Retrieved from http://www.slate.com
Noguchi, Y. (July 2011). NPR. Retrieved from http://www.npr.org
Sandburn, J. (2011, July). Time Business & Money. Retrieved from
http://www.business.time.com
Stone, B. (2013, June). Bloomberg Businessweek. Retrieved from
http://www.businessweek.com/