Demise of Hostess Essays

Submitted By nickkolkman
Words: 731
Pages: 3

Nick kolkman
December 1, 2012
Microeconomics
M,W,F 10:00 A.M.- 11:20 A.M.

The demise of hostess For all of us who love the golden fattening treats made by Hostess Brands, our days of enjoying Twinkies and Ding Dongs are over. After 82 years of production Hostess brands is now closing factories down due to absolutely no funds, and overwhelming debt. As we look at the financial situation of this company it is obvious to see the problems. On Hostess Brands balance sheets from the last few years it is blatant that assets are much less than liabilities, and the company has failed to become profitable. There are simply three reasons for this bankruptcy. Lack of innovation, faulty management, and work unions that halted production in factories are the reason Hostess Brands will be closing Twinkies have been a delicious product for many years, but it is an old fashioned idea. This is the case with many of the products we know and love from this company. Over the years we have hardly ever seen new innovations. With the junk food craze ending years ago, Hostess has failed to be innovative, and come up with healthier products for children and adults to consume. Hoping for improved revenues, without innovation delivers poor results. Creative destruction is the reason for this demise. “If you always do what you have always done, then you will always get what you have always gotten.” Hostess lack of innovation has driven sales into the ground, but that is not the workers fault. The everyday factory workers do not come up with new innovations, and new products. The fault lies with a management system that has completely failed to adapt to the changing market. A company is only as good as its work force, and work force is determined and led by management. Hostess Brands management has not done everything in their power to protect this legendary brand. In fact the CEO and high ranking management officials basically sat back and let their bank accounts take in as money they could, while the ship was going down. CEO Gregory Rayburn who was hired earlier this year rakes in a hefty $125,000 per month and didn’t involve himself in the company wide payroll cut. High management has sat back and watched the company fail, with money falling out of their hands and pockets while unhappy work unions went on strike. The Teamsters and the BCTGM are two work unions that caused the hault of production. With a company that was already failing, and concessionary costs of labor being far too high, the company’s future was not promising. The unions felt that stopping production completely was the right choice, although sanity of these unions is often questioned. The company released statements telling the workers on strike that…