Bankruptcy

Over the past year I saw many company went out of the business. If Globalization enables corporate to increase the profit, it also trigger bankruptcy. The company has to change the model or a way they do the business.

In the technology and pharmaceutical, many company went out of business or acquired/merged. Software is very sensitive to the downturn of the economy, and so is hardware. Small software company can grow faster but at some point they rely on consulting services or support business, which has low margin. So they cannot spend money in R&D. On the other hand, hardware company has very low margin it is really difficult to sustain profitable. Many e-commerce company also went out of business during .com bubble.

Interestingly, in the retail lot of company either change the business model or went out of business. I saw circuit city stop selling appliances. Kmart, Montogomery Ward (both are 50+ year old company) went out of business. Recently few more on the list Levitz, CompUSA, Drug Emporeum. HD Supply closing lot of stores and so what Sears.

From the investment perspective, we have to watch how company changes the business model over the time. They have to be agile and reinvent themselves or it will be really difficult to sustain in the business. Same thing apply to the small business, in this category it has highest percentage of the bankruptcy.