Q1. What is the underlying problem in this case from the perspective of Forever 21’s customers and creditors? Q2. Why do you think Forever 21 ended up in this situation?Q3. Did Forever 21 operate more from a principle of efficiency or effectiveness? Explain your rationale. Q4. Which of the three skills that exceptional managers need did the Changs most lack? Explain your answer.Q5. What would you have done differently if you had been a senior executive at Forever 21? WHAT'S NEXT FOR FOREVER 21?The Forever 21 corporation filed for U Chapter 11 bankruptcy protection in September 2019.According to the filing, the Changs owned 99% of the company and Alex Ok owned 1%.166Their decision to file for Chapter 11 bankruptcy provided an opportunity to reconfigure operationsas they attempted to stabilize and, hopefully, come back stronger. 16/ The company sold hundreds ofstore locations along with its LA headquarters and distribution center and negotiated over $100million in deductions to its rent payments.168It planned to abandon operations in Europe and Asia169altogether and focus instead on its more lucrative markets in Mexico and Latin America.Some experts worried that the Changs' continued refusal to cede any equity as they negotiated withcreditors would ultimately be the company's downfall. Others were confident that Forever 21 wouldweather the storm.170 In February 2020, the Changs reached a deal to sell the company's retail storesand e-commerce sites for $81 million.appeared to have little funds left to cover payment plan installments or legal fees, and the UnitedStates Trustee Program (an arm of the Department of Justice dedicated to federal bankruptcy cases)By May 2020 the remaining Forever 21 shell corporation172recommended that the filing be dismissed or converted to a L Chapter 7 bankruptcy (liquidation).As fashion analyst Anusha Couttigane put it, Forever 21's experience should serve "as a cautionarytale for retailers that are slow to innovate and embrace change."„173FOR DISCUSSIONProblem-Solving Perspective1. What is the underlying problem in this case from the perspective of Forever 21's customers andcreditors?2. Why do you think Forever 21 ended up in its current situation?3. What would you have done differently if you had been a senior executive at Forever 21?Application of Chapter Content1. Did Forever 21 operate more from a principle of efficiency or effectiveness? Explain your rationale.2. Which of the seven challenges to being an exceptional manager did the Changs face as leaders ofthe company? How did they handle them?3. Which of the three skills that exceptional managers need did the Changs most lack? Explain youranswer.4. Which career readiness competencies did the Changs display? Which competencies would havebenefited the Changs most? Management in ActionFast Fashion-Was Forever 21 Fast Enough?MR. AND MRS. CHANGDo Won Chang and Jin Sook Chang arrived in the United States from South Korea in 1981. For threeyears, the married couple worked hard-he pumped gas and waited tables, she styled hair- and by 1984they amassed $11,000 in savings that they used to purchase a single retail clothing store in LosAngeles. By 2014 they were billionaires, running one of the most recognizable fashion retailers in theworld-Forever 21.152 And as they required of even their most senior executives, you can call them Mr.153and Mrs. Chang.FAST FASHION, FAST GROWTHForever 21 was a pioneer in fast fashion. Under this model, companies produce and sell on-trendclothing quickly and cheaply, making most current styles affordable and accessible to a wide range ofconsumers. Fast fashion is inexpensive and customers have little expectation for quality. Instead, theimperative is to get of-the-moment styles into consumers' hands within weeks or even days of thetrends first appearing on reality TV or influencers' social media accounts. 154Forever 21 was a massive success, and the company grew very big, very quickly. At one point Forever21 had almost 500 stores in the United States and more than 800 stores globally.retail apocalypse took even the most established brick-and-mortar brands out one-by-one, Forever 21leaned in. Eventually, having a Forever 21 store became a virtual requirement for any struggling mallthat wanted a chance at survival. 156155As the so-calledCONTROL PROBLEMSWhat was it like to work in the upper echelons of such a massive and successful company? Formerexecutives paint a picture of a tightly run ship. The inner circle of executives consisted of the Changs,their daughters Esther and Linda, and their close friends, married couple Alex and Seong Eun KimOk. Over the years only a handful of other close confidants entered and left the group, and somesenior executives say they don't recall having a single e-mail from or conversation with either of theChangs. The small team operated largely in isolation from the rest of the company, and every decisionhad to go through Mr. and Mrs. Chang.157These decisions have been scrutinized in recent years as stories of poor planning andPage 42mismanagement surfaced. Insiders recall watching huge shipments of inventory stagnate in warehousesas they waited for the Changs to approve the items, then shipping at expensive overnight rates to makeup for the lost time. There also are accounts of expensive mistakes in international operations,including shipments of shoes and cosmetics being confiscated at customs because the company hadn'tacquired proper import licenses. Much of this inventory wound up in dumpsters. 158The Changs were presented with big data, including market trends, previous years' sales figures, andinventory projection, but they seemed to make subsequent decisions without regard for the pertinentdata. Orders mostly reflected some combination of the Changs' gut feelings, Western style preferences,and North American weather patterns. In some years this resulted in too much inventory, in others,not enough. It also led to international stores stocked full of clothing that was inappropriate for localThere is little evidence that the Changs made any substantial159weather, norms, and customers.changes to the company's processes, systems, or supply chain in recent years.By 2016 the Changs and their daughters had loaned the business at least $20 million and hadborrowed another $18 million from a company in the Philippines. Their international stores weren't160turning profits, and the company had begun to quietly close some stores and downsize others.Italso opened new stores that year and expanded several existing ones.101NOTHING LASTS FOREVERRetail has changed dramatically in the past 30 years. A young adult's shopping experience in 1986would be unrecognizable to today's Gen Zers and young Millennials. Data show that the 18- to 24-year-old demographic (Forever 21's target market) continues to increase its preference for onlineshopping. 162 Young consumers also place significant value on corporate social responsibility. 163While Forever 21 was busy maintaining laser focus on physical expansion, direct competitors like Zarawere adapting with sustainable clothing lines and streamlined online shopping experiences.164Andsome recent players-ASOS and Revolve, for example-ditched the idea of physical stores altogether.Without the weight of retail space, these companies respond to trends almost instantly and can getnew fashion into customers' hands in record time.165 Forever 21 had increasing difficulty stayingcompetitive in this landscape.

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Understanding Business

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Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

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Q1. What is the underlying problem in this case from the perspective of Forever 21’s customers and creditors? Q2. Why do you think Forever 21 ended up in this situation? Q3. Did Forever 21 operate more from a principle of efficiency or effectiveness? Explain your rationale.