Page 164 - Accelerating out of the Great Recession

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RadioShack’s substantial success in the 1970s was largely the
result of its deconstructed model of product development and
production. By working with Japanese electronics companies,
RadioShack was able to develop and manufacture new private-
label consumer electronics products.
To manufacture its products, RadioShack applied the orches-
tration method, using a wide range of electronics components
suppliers while maintaining tight control of the process. In this
way, it was able to minimize risk and, at the same time, develop
more innovative and superior consumer electronics products at
lower prices.
In 1973, RadioShack’s EBIT margin was 7 percent, but that
margin increased to 12 percent in 1975 following an expansion
of its private-label electronic products range. This was a
remarkable performance given the fact that the EBIT margin
for the whole of the retail industry in 1975 was 7 percent.

New Businesses Can Thrive in a Downturn

As tough as the Great Depression was, companies were still cre-
ated, and smaller companies were able to grow quickly, as
demonstrated by Chrysler. Revlon, another household name
today, was started in 1932, the worst year of the Great
Depression. More recently, in the 1970s, FedEx was founded
and Wal-Mart grew quickly—not despite but because of tough
economic conditions. While high inflation and low economic
growth presented serious challenges for other businesses, the
forms of business model innovation adopted by FedEx and
Wal-Mart allowed them to capitalize on those trends.
When Federal Express (as it was then called) started operat-
ing in 1973, it offered a new model of business with an entirely
new product—an airline dedicated to freight that could deliver

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