Reasons for the Collapse of Dick Smith: Lessons Learned

Running head: ACCOUNTING THEORY
Accounting Theory
Name of the Student
Name of the University
Author note

1ACCOUNTING THEORY
Executive Summary
The aim of the report is to analyse the reasons of collapse of Dick Smith and the lessons that
can be learned from the failure of the company. The report gives brief details of the company
and the type of business that the company do. The strategic errors of Dick Smith have
become the reason behind the failure of the organisation. The accounting policies that have
been adopted by the company to manipulate thefinancial records of the company are
analysed. The report also points out the governance issues that led to the collapse of Dick
Smith. The last part of thereport contains the lessons that other companies can learn from the
case Dick Smith so that these events of corporate failure does not happened again.

2ACCOUNTING THEORY
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Overview of Dick Smith holdings Private Limited....................................................................3
Strategic errors that results in the collapse of the company.......................................................3
Accounting practices used by Dick Smith holdings..................................................................5
Governance issues that is responsible for the failure of Dick Smith.........................................7
The lessons that can be learned from the collapse of Dick Smith:..........................................10
Conclusion................................................................................................................................12
References................................................................................................................................14

3ACCOUNTING THEORY
Introduction
The reason behind the failure of any organisation is due to the lack of a strong
corporate governance policy and the absence of a transparent accounting system. Every failed
company has specific reason of failure but the main reason that is associated with all the
companies is their negligence in maintaining a good governance policy. Dick Smith, which is
recognised as one of the largest retail chain in Australia, has collapsed due to their strategic
errors and the poor execution of the governance policies. The company’s board and
management make several mistakes that lead to the sudden fall of business.
Discussion
Overview of Dick Smith holdings Private Limited
Dick Smith Holdings Limited has been an Australian retail store that deals in the
business of selling consumer electronic components and electronic project kits. The company
was founded in Sydney in the year 1968 by Dick Smith who later sold 60% of the shares to
Woolworths in 1980 and hold 40% of the shares and later on 2016 they ceased the operation
of the business. The company was suspended for trading in the Australian stock market by
the Australian securities exchange on sixth of January 2016.
Strategic errors that results in the collapse of the company
The major strategic errors for which the company fails to continue its operation are
stated below;
Despite of realising the high competition in the consumer electronics market, Dick
Smith never tried to understand the change of demand of the consumers and neglected the
requirement of analysing the demand of the market.