They where all family businesses which either went belly up, as they failed to see shifts in their markets, as they where not strategically focused, or had to sell off the family business due to lack of succession planning or proper policies to prevent conflict.

The collapse of Kodak
The Eastman Kodak Company, founded by George Eastman and his mother, Maria Eastman, was once a household name in photography. For decades, Kodak dominated the film photography market. However, the company made a fatal mistake: it failed to adapt to the digital age. Despite inventing the first digital camera, Kodak chose to sideline this technology to protect its film-based business model. This decision led to a gradual decline, culminating in bankruptcy in 2012.

Lesson: Adapt or perish. The Kodak story is a cautionary tale about the importance of proper strategic focus, innovation and adaptability. Family businesses must be willing to evolve with changing market conditions and consumer preferences. Ignoring technological advancements can lead to obsolescence and ultimately, failure.

The decline of Sears
Sears, Roebuck and Co., founded by Richard Sears and Alvah Roebuck, was a family business that became an American retail giant. However, the company’s decline began when it failed to adapt to the rise of e-commerce and discount retailers. Sears continued to invest in large department stores, ignoring the shift toward online shopping. This led to dwindling sales and eventually, bankruptcy in 2018.

Lesson: Just like Kodak, family business that remain operationally focused and fail to focus on strategy, risk becoming obsolete. Hence the importance of keeping up with industry trends. Family businesses need to stay abreast of industry trends and be willing to invest in new technologies and business models. Ignoring changes in the retail landscape had cost Sears dearly, serving as a lesson for other family businesses to adapt continually.

The fall of Anheuser-Busch
Anheuser-Busch, the brewer of Budweiser, was a family business for five generations. However, it was sold to InBev in 2008 due to a lack of a succession plan and internal family disputes. The Busch family could not agree on the company’s direction, leading to a weakened position and making it an easy target for acquisition.

Lesson: Have a clear succession plan. Succession planning is crucial for the longevity of a family business. Without a clear plan, internal disputes can lead to the company’s downfall. A well-thought-out succession plan can help avoid conflicts and ensure a smooth leadership transition.

The demise of Forever 21
Founded by the Chang family, Forever 21 was a fast-fashion empire that expanded globally. However, the company made several mistakes, including rapid expansion without market research and failure to adapt to sustainable fashion trends. These missteps led to its bankruptcy in 2019. The year 2020 saw the sale of Forever 21 to Authentic Brands Group for $81 million. Forever 21 had previously achieved $4 billion in sales.

Lesson: Sustainable growth is key. Family businesses must focus on sustainable growth, to do so they need strategic focus based on real data. Rapid expansion without a solid business plan can lead to financial instability. Understanding market needs and adapting accordingly is crucial for long-term success.

The collapse of Toys “R” Us in the US
Founded by the Lazarus family, Toys “R” Us was once the go-to place for toys. However, the company failed to adapt to online retail and eventually filed for bankruptcy in 2017. Despite the rise of e-commerce giants like Amazon, Toys “R” Us continued to focus on brick-and-mortar stores, neglecting its online presence. Toys “R” Us first had to close all of its locations across the globe due to bankruptcy. But by the end of 2022, the company had teamed up with Macy’s department shops and was functioning in a few select US cities. Additionally, Toys “R” Us still sells to foreign markets online and you can still find stores named Toys R Us in different regions, including Asia. However, in these cases, they sold the licensing rights to other local retailers that retain the Toys “R” Us brand or operate under branded concessions.

Lesson: Yet again, working like they always did, thinking that past success is going to be working into the future, is a common mistake. This is because many family business do not have any strategic focus.

Hyatt and the Pritzker family
Hyatt was founded by Jay Pritzker in 1957. A dispute within the family resulted in a settlement in 2005. The legal battle was resolved when the family agreed to break apart their $15-billion empire over a decade. The 11 cousins who were beneficiaries of the trust decided to divide the assets among themselves. This division led to each member pursuing independent ventures. The family’s businesses were sold off or taken public. For instance, a portion of the Hyatt Hotels Corp. went public in 2009.In retrospect, while the Pritzkers managed to resolve their dispute, the process was painful, drawn out and it tarnished their reputation. It also led to the dismantling of the empire that their patriarch, Jay Pritzker, had built.

Lesson Learned: This is a crucial lesson about the importance of succession planning and conflict resolution strategies in family businesses. Having these frameworks in place is always better to prevent family conflicts from escalating to such levels.

The failure of Blockbuster
Blockbuster, initially a family business, was the go-to place for movie rentals. Despite having the opportunity to buy Netflix early on, Blockbuster chose to stick with its brick-and-mortar model. This decision led to its decline and eventual bankruptcy in 2010.

Lesson Learned: Keeping a strategic focus will help you not to underestimate emerging competitors. Blockbuster’s failure to recognise the potential of Netflix serves as a lesson not to underestimate emerging competitors. Family businesses should always watch the competitive landscape and be willing to pivot when necessary.

Cadbury

Cadbury was once a family business. It is no more. Paul Cadbury, chairman from 1959 to1965 and great-grandson of the company’s founder John Cadbury, faced a huge challenge – the company’s increasing share base. In the early 1960s the number of family members who held shares had increased to several hundred – of which only 10 were actively involved in the business. With non-managing family members keen to have access to their capital, pressure to take the firm public was growing and the Cadbury board floated the company in 1962. For the first time in its history, Cadbury was no longer under direct family control.

Lesson learned: With no proper succession planning about future shareholding and possibly different levels of shareholding, ended up in having the Cadbury family lose their family business.

Subway

Subway was founded in 1965 by 17-year-old Fred DeLuca and his family friend Peter Buck. Neither Fred nor Peter are alive today. Fred DeLuca left his 50% share of the company to his wife, Elisabeth DeLuca, who has one son Jonathan. On the other hand, Peter Buck donated 50% of his stake to his family foundation which shields his two possible heirs, his sons Christopher and William, from nearly a $2 billion tax bill. The problems arose as the persons inherited the shareholding lacked the foresight of the founders and thus succession had failed. This meant that towards the end of the family ownership of Subway it had closed thousands of stores to manage lower demand stemming from low-carbohydrate diets and the slow post-coronavirus pandemic return of workers to the central business districts where many of its restaurants were located. By 2023 Subway was sold off to a private equity group.

All the above real life cases of family businesses show the importance that family business owners and leaders harness the skills to lead their business with the right strategic approach and having all the governance structures, policies and plans in place. It is for this reason that at EMCS Academy we are running once again the only accredited course at MQF Level 5, in Malta, at how to lead a family business, which will kick off as from the 1st October 2024. Click HERE for more details and to REGISTER for this course. We will handle your application for funding for this course.