Radio Shack (RSH) has just filed for Chapter 11 Bankruptcy as the sluggish global economy takes down another iconic business that once made profitable contributions to the global economy. The company just could not shore up its growing $1.3 billion liabilities with its $1.2 billion in assets (Berman, 2015). To protect itself from creditors and shaft its pool of investors, the beleaguered iconic electronics retail giant will join so many giants in past six years that have stumbled and not managed to get back up after the 2008 financial meltdown. However, it is not simply that issue that has caused the disintegration of this once profitable company. The familiar 4000 stores that Radio Shack now runs have sold many cell phone contracts and smart devices that are partnered with Sprint, a successful iconic cell phone and smart device servicer. It is difficult to understand how a company that provides electronic parts and trendy electronic devices could falter. The contributing stubborn trend of a lack of a solid consumer participation in its efforts is one reason, which has also placed other giants such as American Airlines, Target, K Mart, Sears, Staples, Quiznos, Sbarro and so many Steakhouses such as Bennigans, Black Angus and LoneStar into Bankruptcy (Kim, 2014). Most of these once very profitable businesses have been losing money for the Q4 of 2014 and previously, however, when the Christmas season is as flat as it was in 2014 for many retail giants, the only alternative is Bankruptcy restructuring. For many of these giants, the outcome is another lingering trend of Bankruptcy in the past six years, which could not civically be averted due to lack of consumer ability to participate.
There is only so much that can be done in a limping economy where so many Americans are out of work and have taken cuts in their paychecks from about $3,000 per household. They have skyrocketing healthcare expenses with unexpected high monthly premiums. Consumers no longer have the disposable income to purchase the things they used to in the last two decades. Along with high fuel costs which only recently went down, consumers cannot buy much of anything as they used to. Spending on going out to dinner, trips and presents to put under the tree just did not take place in 2014. Even though consumers got a break in spending on fuel for driving their cars, they did not run to the stores to spend it. They held on to it or had to use it to pay for their monthly required expenses such as rent, food and healthcare premiums. Unfortunately, the recent trend of social media on the Internet has not solved the problems for Radio Shack, even if they have a presence in social media and attempted to influence their supporters in any direction, be it political or social. There is a small segment of society that is active in their community on social media; however, it does not translate into boosting any particular business economically. In fact the Pew Research study on trends in social media revealed that 56% of the American populace has been adversely affected by the prolonged economic slowdown. Of the mainstream grocery purchases 46% of consumers have begun to choose cheaper quality foods to make up of the loss of income. Another 38% of the population keeps delaying visits to the doctor and the dentist. The high rate of foreclosures and evictions have been fueled by some 25% of the population delaying their rent or mortgage payments (Smith, 2013).
Those who are in the 56% of economically challenged still are owners of cell phones, smart devices and do use the Internet. They have a presence to a degree on social networks. The liberal side of this segment of society that hold liberal perspectives politically and socially tend to be of advanced degrees, civically involved and respond to social network activism efforts. Also, it is important to note the extremist groups such as The Islamic State or ISIS, actively recruit their followers using social media. Conservatives tend to become activists off line rather than on social media. The trend currently is documented by statistics that younger aged groups follow and are motivated through social media as well (Smith, 2013).
In a study on Facebook users on social media, with some 1 billion followers, there is a trend of civic activism among younger groups for whatever purpose they are pursuing from lobbying for particular causes to collecting personal information by marketing companies to coordination of events for political activism and collection of donations and other types of activist fundraising (Warren. Sulaiman, & Jaafar, 2014). Because younger groups of the global population have identified with social networks and the use of them for interaction and community activism, the trend is that Facebook is a mechanism for social activism as is true to the category of Internet activity. Facebook was created to encourage interaction between those with common social interests of some kind or another (Warren et al., 2014).
Should the restructuring be a successful one where Radio Shack survives and operates under a smaller and more efficient business model, less stores and a newly operational way forward, investors will return and purchase stock to hold for brighter days ahead. Investors that share this information will be ready to make buys while the stock is very low in price per share. These types of trends are communicated to the global community of buyers to make purchases as the company survives. Consumer investors could realize good gains when the stock rebounds after a successful reorganization by RSH (Berman, 2015).
Radio Shack is suspected to have defaulted on a loan. The investing community has read the tea leaves and has said that Radio Shack is done. There will be no return after the inability it has to pay its loans back. Since loan administrator, Salus Capital Partners, LLC had sent Radio Shack a second default notice, the end is near (Berman, 2015).
It is reported that if Radio Shack can be released from its leases on many of its stores by the trend of bankruptcy action, it can survive. Selling off the underperforming stores will also help the remaining assets. Focusing business on Sprint products, which is what it has been doing for some time, will also help the company get back on its feet. Sprint will be the main focus in Radio Shack stores with less or much less emphasis on electronics (Berman, 2015).
Berman, J. (03 February, 2015). Can RadioShack possibly survive in some form? Analysts are split. thestreet.com. Retrieved from http://www.thestreet.com/story/13033082/1/can-radioshack-possibly-survive-in-some-form-analysts-are-split.html
Kim, S. (14, March 2014). Seven big brands that are struggling. ABC News. Retrieved from http://abcnews.go.com/Business/quiznos-sbarro-lead-brands-struggling/story?id=22917008#7
Smith, A. (15 April, 2013). Civic engagement in the digital age. Pew Research Internet Project. Retrieved from http://www.pewinternet.org/2013/04/25/civic-engagement-in-the-digital-age/
Warren, A. M., Sulaiman, A., & Jaafar, N.I. (2014). Facebook: The enabler of online civic engagement for activists. Computers in Human Behavior, 32, 284-289. Retrieved from http://www.sciencedirect.com/science/article/pii/S0747563213004664