Forever 21: Analysis of Business Problems and Challenges

This report provides a comprehensive analysis of the business environment, ethical considerations, and strategic challenges faced by Forever 21, a prominent fast-fashion retailer. It begins with an introduction to the company, highlighting its market position and global presence, and then identifies the core problem statement: the company's struggles with product quality, innovation, and store layout. The report delves into specific challenges, including competition from industry giants like H&M and Zara, copyright infringement lawsuits, and accusations of unethical labor practices. It examines the impact of these issues, including the company's bankruptcy filing, store closures, and financial restructuring. The analysis explores the failure of Forever 21's fast-fashion model and its inability to compete with better-quality brands. Furthermore, the report discusses the company's overexpansion, ethical issues related to labor practices, and the impact of these factors on its reputation and market position. The conclusion summarizes the key challenges and provides insights into the company's uncertain future, emphasizing the need for innovation and quality to achieve future success.

Business Environment Ethics and Strategy
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Introduction
In the competitive market, Forever 21 is the largest fashion retail brand with rapid
increase across the globe competing based on merchandise, cheap price points, rapid global
logistics and prime locations. The company is based in Los Angeles competing directly with
iconic fashion brands globally such as Zara, Uniqlo, H&M and many other players within the
industry. Forever 21 operates with over 30,000 employees in above 790 stores covering 48
countries (Martin Roll, 2018). The company follows the retail clothing stores chain mainly
concerned towards young women and teenage girls where the focus in on delivering latest
trends at low prices. Now, the company is accomplishing remarkable achievement with
opening of 600 stores across the globe (Forever 21, 2019). This assignment will focus on the
problem statement of Forever 21 and analysing it along with the challenges faced by the
company.
Problem Statement
Forever 21 is one of the top brands across the globe in retail but still faced some
problems that are need to be analysed consisting defective apparel rotation, repetitive trends
and unorganized store layout. The company lack in innovation and creativity so Forever 21
makes sure to aim at product attributes for customers while shopping which shows trend as
an essential factor affecting the consumer buying behaviour. There is an issue of quality
satisfaction sometimes from the people’s side of products. It is essential for the company to
provide better quality and new trends by working with creativity for consumers rather than
providing products at affordable prices considered as primary motive. Thus, Forever 21 faced
the problem of restructuring plans development and financial trouble with the hope of
avoiding bankruptcy or sale possibly (Mensik & Peltz, 2019).
Challenges
Forever 21 face several challenges due to competitors, for instance, H&M suing the
company for copyright infringement because of ripping off cheeky “Beach Please” tote bag
of H&M. This showed the habit of Forever 21 to copy designs of other companies which will
obviously hurt the company’s reputation. Also, Forever 21 was sued by the Asian Pacific
American Legal Center for making employees work allegedly over 12 hours every day
paying less than minimum wage in such filthy conditions with rodents (Schlossberg, 2015).
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Still, Forever 21 maintained its capturing of target customer with proper awareness for
consumers about the derivative brand based on the target demographic as a fleeting and cheap
fashion. The problem faced by the company after the bankruptcy protection though for
possible closure where the stores affected were about to shut within the year end. Moreover,
employees were about to lose their jobs but not waiting for learning their fate (Bellware,
2019).
Moreover, Forever 21 started a fast-fashion model to gain success due to proving the
point of providing trendy clothes at low prices but after sometime, it got fizzled where the
company was not able to increase its competition with the companies like H&M and Zara for
providing better quality products at high costs (Cline, 2019). This costs the company to
provide much of its products online and downsizing the presence in malls slowly. There were
some unethical practices in business founded by the US Labour Department where Forever
21 paid less to workers which is really a minimum wage in California specifically (Kelly,
2019). Also, there were many retailers involved in this wage theft scandal along with some
worst offenses.
The filing of voluntary bankruptcy was done by Forever 21 for the US brick-and-
mortar chain embarking on restructuring where shoppers are migrating online. The step taken
for protection is a decisive and deliberate step putting the company on successful track for
future named as reorganization to make sure about the possession and control of its assets to
carry out (France-Presse, 2019). Accordingly, the company decided to shut down over 100
stores while restructuring which requires continuous funding in operations securing $350
million in financing. Among which, $275 million consisted from JPMorgan Chase as an
existing leader. The company has also obtained $75 million from “TPG Sixth Street Partners”
and its affiliates in new capital. There was drop in ownership maintained at 99 per cent by the
founders Do Won and Jin Sook Chang of the company being a retail after hitting a rough
patch. After the filing, Forever 21 net worth was fallen from $600 million as estimated after
combining where the company once worth billions (Debter, 2019).
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Source: (Biron, 2019).
Comparison between overall retail prices and apparel prices
Source: (HBS, 2016).
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Source: (Buchholz, 2019).
Problem Analysis
Based on the above discussion, Forever 21 made a spectacular success story while
filing about the bankruptcy protection but ended up to be unhappy as destined. The company
business model of fast-fashion was based on the quick-turnaround designs for mass
producing inexpensively along with proving broadly with young customers popularly because
of not having much money to spend. The major problem faced by Forever 21 was its building
up physical space rather than slowing down on it as a tactical mistake (Kahn & Cesareo,
2019). Another failure for the company was baffling to Cesareo due to not bolstering its
platform of e-commerce even when its core customers are majorly prefer to shop online.
Looking towards the retail industry, full apocalypse is that shakeout the position which
requires the company to reposition (Krause, 2019).
Forever 21 relying on unethical business practices describes fast-fashion to be
problematic and is really a tough challenge for the company to stay successful for long while
facing such consequences when caught (Hines, 2012). Furthermore, it is easy for retailers
while being sustained by sweatshops where it is easy to produce clothes in fast fashion relied
on manufacturers underpaying their staff for survival. In developing nations, this made
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retailers work with factories for making it easy to take advantage of employees due to lack of
labour laws. Additionally, the company make small children work as well along with
encouraging unsafe practices as retailers are relied on as profits are crucial for retailers than
human rights uphold (Kitroeff & Kim, 2017). Thus, Forever 21 dealt with the challenge of
overexpansion across the globe for gaining success but led to various consequences, no
doubt, the company is still maintaining its growth within the markets.
In Forever 21, analysing the challenge of restructuring requires exploring options for
getting help in leasing of some store and new loan while making an effort in avoiding to file
bankruptcy. This trouble was generated through the large-format store strategy according to
the employees where the company’s expensive international operational business has been
sucked on resource. However, stores of Forever 21 were accountable for 2.5 per cent of real
state by the time of 2018 being a second-largest tenant (Hensel, 2019). The company worked
on various retail trends consisting investment in fashion subscription start-up and visual
search as specialised in fast fashion. Thus, Forever 21 faced several challenges based on
restructuring, bankruptcy protection, lawsuit filed in alleging sweatshop conditions and
failure of playing legal wages but the company never stopped growing being a top teen
retailer with an uncertain future and slowdown altogether (Ciment, 2019).
Conclusion
Based on the above analysis of the problem, it is concluded that Forever 21 has faced
several serious challenges related to competitors, reputation, product quality, employees and
customers. The company faced the allegations and the problem of restructuring where even
using the different strategies, Forever 21 did not get the way things wanted to be and dealt
with the failure of position and reputation within the retail industry. Across the globe, various
international stores decided to get shut but even after more of challenges, Forever 21 made
sure to keeping growing continuously and accomplish the success in future with better
innovation and quality products through creativity.
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