Borders files for bankruptcy, impacts publishers

Borders scaled to the top from a modest beginning in 1971. They opened first book store near the campus of the University of Michigan in Ann Arbor. The company at present has more than 650 stores and provides employment to 19,500 persons.

Some of the troubles are Borders’ own creation
The insiders feel that many of the problems Borders had to face were their own creation.

Borders’ troubles steamed out of a series of wrong strategic decisions and its failure in comprehending the importance and impact of the digital revolution. There is little scope for errors in this highly unpredictable industry.

Borders also failed miserably in managing its operations once it expanded its business. They even had opened stores overseas, a strategy which stretched the company resources too much.

Michael Souers, Analyst for Standard & Poor’s, said, “The book retailing industry is very challenging right now. We’ve had significant transformation. Bookstores have been losing their prominence, and the U.S. market is oversaturated in terms of the number of retail stores. So that trend will likely continue as e-books gain more prevalence in the market.”

The company's 200 stores are set to be close down in future. As a consequence, many of its employees will be laid of.

In its filing before the Bankruptcy Court in Manhattan, company has listed $1.29 billion in debt and assets of $1.27 billion.

Impact on publishing industry
Though publishers are aware of the magnitude of the problems faced by the company and are shaken by the news, they expressed hope that the company will be able to “reinvent itself.”

Borders also assured publishers that the company is working on a long term strategy for revival.

Company president, Mike Edwards, said in a statement, “It had become increasingly clear that in light of the environment of curtailed customer spending, our ongoing discussions with publishers and other vendor-related parties, and the company’s lack of liquidity, Border Group does not have the capital resources it needs to be a vital competitor and which are essential for it to move forward with its business strategy to reposition itself successfully for the long term.”

The one area that Borders lagged behind is online business. The company had to face stiff competition from Amazon.com and Barnes and Noble.

Borders also failed miserably in managing its operations once it expanded its business. They even had opened stores overseas, a strategy which stretched the company resources too much.

Sr. Analyst at Simba Information said, “they over expanded. They just had the mentality of, ‘if we open a new store, the growth will happen.”