Collapse of Dick Smith Holdings Limited

Accounting Theory & Contemporary Issues-
The Collapse of Dick Smith Holdings
Limited
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Executive Summary
This report is made to highlight different factors responsible for collapse of Dick Smith, the giant
electronic consumer retail outlets. The factors for failure are broadly identified as strategic
errors, accounting practices and application of corporate governance of Dick Smith. This report
had highlighted those issues with consultation of different articles. The report is summed up with
the lesson learnt from this collapse to give an idea of the situations, which dragged the company
to collapse for different reasons or inappropriate practice of management for their short-term
gain ignoring the ethics and integrity part with accountability to the stakeholders and employees.
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Table of Contents
Sl
No
. Heading Subheadings
Page
No.
1 Introduction 4
2 Background 4
3 Strategic Errors 5
3.
1
Changing pattern of
customer demand 5
3.
2 Bigger network 5
3.
3 Declining market shares 6
3.
4
Failure in Clearance sales
output 6
4 Responsible Accounting
Practices 7
5 Corporate Governance
Issues 9
6 Lessons Learnt 10
6.
1 Inventory management 10
6.
2 Private Equity float 10
6.
3 Customer service 11
7 Conclusion 11
8 References 13
9 Bibliography 14
10 Appendices 15
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1. Introduction
This report will feature the collapse of Dick Smith Holdings Limited with different reasons like
strategic errors, accounting errors, malpractice of corporate governance, along with lessons learnt
from this case study. This report will also feature practical recommendation for other retailers to
understand the reasons of the collapse so that they can avoid such incident while the same
features would be signaled. A corporate business is consisting of long term strategic plan to
highlight sustainability efforts. Short term measures can lead to debacle with resultant collapse
for the company. A retail company has to be very strict about compliance of their strategy related
business operation, financial reporting and healthy practice of corporate governance as
demanded by the business scenario. The objective of corporate business is to protect the interests
of the stakeholders by prudent approach in each segment of operation including reporting of
those operations. A short-term planning for generation of profit should not be encouraged in
public limited company business, which was featured to collapse of Dick Smith Holdings
limited.
2. Background
The business house, Dick Smith, was launched by Dick Smith in 1968 with his wife from a small
establishment of Sydney to sell car radios. (DickSmith, n.d) Later on, the organization has
started its expansion empowered by the Australian Government’s decision to cut-off the import
duty to 25% on electronic goods. Through the business development, the organization had
expanded their identity from different outlets all over Australia. The company had faced its first
acquisition process through 60% share take-over by Woolworth in 1980 followed by further
take-over of remaining shares in 1982. With a new strategic move, Woolworth had revamped the
business of Dick Smith as part of their electronic business in 2008. In 2012, after completion of
thirty years of ownership, Woolworth had decided to Anchorage Capital Partners. (Gannon,
2012) In December 2013, Dick Smith was enlisted by Anchorage Capital Partners in ASX for
its share trading under public limited company category with the valuation of market
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