Reports > Management

Lessons for corporate management from the fall of empires

2024.12.17 Ho-In Kim

Ho-In Kim

#Hashtag

#change management #management innovation #risk management
Companies that have maintained their position as industry leaders for decades, regarded as impregnable by their competitors and revered as empires, are now facing a series of failures due to their inability to respond adequately to recent rapid market changes. As a result, they are losing their past glory and are rapidly approaching the brink of extinction. Let us examine the decline of three representative companies and consider the implications for corporate management.
Table of Contents

  • 1. Nike: Just don't do it!

  • 2. Boeing: What goes up must come down

  • 3. Intel: The dilemma of “Intel Inside”

Executive Summary

  • Nike attempted bold changes centered on a D2C (Direct to Customer) strategy and digital innovation, but this led to a weakening of its existing distribution network and brand assets.

    • Nike sought to expand sales on Nike.com through its D2C strategy, but the severing of relationships with distribution partners led to excess inventory and supply chain issues, causing consumers to leave.

    • The removal of categories led to a loss of expertise, weakening Nike's solid experience and processes in the sports field, and a lack of innovative new products resulted in a depletion of brand energy.

    • While focusing on digital marketing, the company prioritized strengthening the loyalty of existing customers over attracting new customers, but this resulted in the weakening of brand marketing assets and stagnant sales.

  • Boeing lost safety and trust due to the 737MAX crash, severely damaging its brand image and market competitiveness.

    • Management decisions prioritizing development speed led to insufficient safety reviews, which resulted in design flaws in the Maneuvering Characteristics Augmentation System (MCAS), the automatic flight control system, identified as the cause of the accident.

    • Following its merger with McDonnell Douglas in 1997, Boeing shifted to a profit-centric management philosophy, which weakened its engineering-centric quality and safety culture and led to component quality issues and lower safety standards due to increased cost-cutting and outsourcing.

    • Short-term cost-cutting policies damaged long-term competitive advantages, and the rushed development of the 737MAX to compete with Airbus' new aircraft resulted in the tragic crash.

  • Intel failed to respond effectively to the mobile revolution and changes in the AI semiconductor market, losing its competitiveness to ARM-based mobile chips and NVIDIA GPUs.

    • By rejecting Apple's proposal to develop iPhone chips, Intel missed the opportunity to dominate the mobile market. Despite a subsequent attempt to re-enter the market with Atom CPUs, the effort failed due to performance deficiencies and technological inferiority in advanced manufacturing processes.

    • In development of GPU, essential for AI and deep learning computations, Intel failed to secure competitiveness due to its insistence on the x86 architecture and lack of a software ecosystem.

    • Large-scale workforce restructuring for cost savings damaged core engineering capabilities, and delays in the development of10nm and 7nm microfabrication allowed AMD to surpass Intel in performance by leveraging TSMC's latest processes.

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