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Case Study of Forever 21: Based on Pfeffer and Salancik Resource Dependency Theory and George Ritzer’s McDonaldization Theory

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Forever 21 has been one of the largest fast-fashion companies within the last decade. Recently, the company has announced its decision to file for bankruptcy to resolve financial difficulties that have affected the company for some time now. The enactment of bankruptcy for this organization could provide a clean slate for the company. According to Linda Chang, the Vice President of the Forever 21 company “bankruptcy was “a strategic move on our part”(Maheshwari 2019). However in accordance with Pfeffer and Salancik Resource Dependency theory and George Ritzer’s Mcdonaldization theory, the enactment of the bankruptcy process within the Forever 21 organization could have been avoided. Based on the theories of Pfeffer, Salancik and George Ritzer the organizational change that has taken place within Forever 21 can be implemented to provide a proper solution for this organization.

The Forever 21 organization has been a leader in the clothing industry for over a decade. Forever 21 “was far from a run-of-the-mill family operation. At its peak, the retailer brought in more than $4 billion in annual sales and employed more than 43,000 people worldwide”(Maheshwari 2019). Because Forever 21 is such a large company, the rumors for the possible enactment of bankruptcy was not seen as a real threat. Unfortunately for the company, “Forever 21’s missteps, combined with industry-wide changes in consumer tastes and shopping habits, will have far-reaching effects” (Maheshwari 2019). This decision to file for bankruptcy can have drastic effects on not only the company itself but their employees as well. 43,000 workers depend on Forever 21 for their income and livelihood. This drastic change within the company was something that was not anticipated by such a large successful clothing organization. There must be another way to save this company instead of resorting to bankruptcy.

Pfeffer and Salancik were both American theorists who co-wrote the novel The External Control of Organizations: A Resource Dependence Perspective. Both Pfeffer and Salancik believed in the idea that “To understand the behavior of an organization, you must understand the context of that behavior-that is, the ecology of the organization” (Pfeffer and Salancik 1978). It is this understanding that can shed light as to why the Forever 21 organization has not been as successful in recent years. Pfeffer and Salancik’s Resource Dependency Theory can analyze the bankruptcy process within Forever 21. Resource Dependency theory is a process within organizations that illustrates how “organizations are embedded in an environment comprised of other organizations. They depend on those organizations for the many resources they require.”(Pfeffer and Salancik 1978). As each organization is focused within these external environments, it is the surroundings that can have a direct correlation to the outcome of the organization itself. Pfeffer and Salancik illustrate this with the Resource Dependency Theory. For survival, each organization depends on the other organizations around it. According to Pfeffer and Salancik “ the key to organizational survival is the ability to acquire and maintain resources. This problem would be simplified if organizations were in complete control of all the components necessary for their operation”(Pfeffer and Salancik 1978). The Resource Dependency Theory is clear in this essence that organizations need to acquire outside resources for them to be successful in their environments. Too much dependency on a single resource can ultimately lead to the elimination of that said resource. In turn, this creates an ongoing toxic cycle where organizations are taking on each other. This idea can further be illustrated with a statement made in Pfeffer and Salancik’s piece where “environments can change…and the supply of resources becomes more or less scarce. When environments change, organizations face the prospect either of not surviving or of changing their activities in response to these environmental factors”(Pfeffer and Salancik 1978). As these supplies of resources become more and more scarce the vicious cycle further continues. This toxic cycle of resource elimination is part of the reason why the Forever 21 company has been burdened with millions of dollars of debt. Pfeffer and Salncik’s theory can aid in the development as to why bankruptcy has been the organizations final choice in saving its company.

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Forever 21 filed for bankruptcy on September 29th, 2019. Part of the reason for this sudden organizational change was the large amount of rent debt that the company owed to a surplus of vendors. In September,“when [Forever 21] filed, the company owed $347 million to its vendors” (Maheshwari 2019). The Resource Dependency Theory in summary states that organizations thrive on the success of other organizations. Forever 21 continuously chose to invest within malls and open up large retail stores in various locations throughout the world. However, there has been a dramatic decerase in the success of malls during the last decade. There has been a “cited shift in mall traffic and the rise of e-commerce…[has become a] challenge” (Maheshwari 2019). So why did Forever 21 continue to invest millions of dollars into mall stores and merchandise? There competitors had managed to leave low profiting malls and focus their marketing on the ever increasing ecommerce trend. Yet Forever 21 has failed to acknowledge this shift from in-person shopping to a primarily online shopping method of retail commerce. As a result, the organization has seen a dramatic decline in sales and unfortunately resulted in the inability to pay their rental leases. The Forever 21 company has been blind to the environmental changes that have taken place within this organization’s surroundings which is a key element in understanding Pfeffer and Salncik’s theory. If Forever 21 would have analyzed how other contemporary organizations have been functioning within the last few years, there is a large possibility that this organization would not have to file for bankruptcy. Unfortunately, “Forever 21 made its biggest mistakes in real estate. In the years before and after the recession, the company expanded aggressively and decided to open huge flagship stores” (Maheshwari 2019). If the Forever 21 organization would have depended on the current environment of similar organizations like this company, they would have been able to survive. Pfeffer and Salancik clearly illustrate that organizations need to depend on one another to generate success. Forever 21 has a history of being autonomous and not allowing outside sources to intervene with their business. This lack of dependency is the reason as to why they are filing for bankruptcy now despite all the years of success. Their environment has begun a shift and they failed to accept this change.

George Ritzer was also an American theorist who wrote the novel titled The Mcdonaldization of Society 6. George Rirzer’s ideas and theories, like his Mcdonaldization policy, goes hand in hand with Max Weber’s ideals and his viewpoints of society. George Ritzer and his Mcdonaldization theory can help illustrate the problems within the Forever 21 through the lense of a fast food company. Ritzer’s Mcdonaldization theory is “the process by which the principles of the fast-food restaurant are coming to dominate more and more sectors of American society as well as the rest of the world”(Ritzer 2011). This process explains the rise in efficiency within contemporary societies. Companies throughout the modern world have adopted this process due to the amazing success that companies like Mcdonald’s have had in society. Ritzer’s Mcdonaldization theory also has a subcategory called disenchantment. This is the idea that “anywhere you go in the United States, and increasingly throughout the world, you are likely to find the same products offered in the same way” (Ritzer 2011). Unfortunately for many organizations within contemporary society, there is a visible lack in the amount of differentiation available between organizations. As a result, even the products available can ultimately become just as disenchanted as the organization in which they derive from. George Ritzer also argues that “Mcdonaldization [overall] works against enchantment…anything that is magical, mysterious, fantastic, dreamy, and so on is considered inefficient…. [this] elimination… is one of the reasons that Weber saw rationalized systems as disenchanted systems” (Ritzer 2011). As this rationalization process eliminates these aspects in society, a majority of organizations continue to remain very similar to their competitors and even other organizations. The question here is why are the organizations that are capable of standing out and having the enchanted properties are seen as inefficient according to Ritzer? An answer to this would be that enchantment and focusing on the “magical” properties of an organization might take away from the mechanistic functions of an organization. There would be too much focus on the stylistic properties and very little focus on how this organization can function in the most economically feasible ways possible. The implications of George Ritzer’s Mcdonaldization theory can be further explained with the current organizational change within Forever 21.

George Ritzer’s aspect of Mcdonaldization and the disenchantment that has taken place within the Forever 21 organization can also be analyzed regarding their recent file for bankruptcy. Forever 21’s lack of uniqueness had contributed to their lack of sales and loss of consumers within recent years. “Forever 21 said in the filing that most of its international locations were unprofitable as of 2015 and that its stores in Canada, Europe, and Asia were losing an average of $10 million per month in the past year”(Maheshwari 2019). The reason for the loss of 10 million dollars? There is a continuous problem that Forever 21’s marketing strategies remain very similar to their competitors. This organization thrives on imitating popular styles and fashion trends, yet fails to realize that this company is not the only company selling the same pair of blue jeans or same graphic tee. “The retailer… raced into[these] expensive, massive new stores overseas…the chain often did not understand local labor laws and made mistakes… It didn’t help that many of these areas were familiar turf for H&M…and Zara”(Maheshwari 2019). These large stores like H&M and Zara have been large clothing companies that have dominated countries overseas for years. Forever 21 taking the initiative and stepping into these areas to “take some of the wealth” was another very big mistake made by this company. George Ritzer illustrates in his views of disenchantment the lack of individuality among companies. Having a third company coming into an area where already two large clothing stores are competing one another does not make sense to take on. The world needs uniqueness and variation, especially when it comes to clothing and individual style. Forever 21 simply does not offer anything different than these opposing organizations.

The organizational change that is taking place within Forever 21 ultimately could have been avoided. If the organization would have implemented Pfeffer and Salancik’s Resource Dependency theory the company would not have been in debt of millions of dollars from rental fees. If Forever 21 was able to understand George Ritzer’s Mcdonaldization theory and the aspects of it maybe the company could have taken extra steps into becoming unique instead of following the same paths as their competitors. If Forever 21 was able to revisit their rental process and depended on other companies like themselves, this organization could have seen the shift from in person shopping to ecommerce. With the implication of these two theories, the success of the Forever 21 clothing organization could be a reality. The company overall is completely autonomous and unopened to outside reform. The enactment of bankruptcy for this company was ultimately a matter of self-destruction. The idea of shopping now is no longer primarily done at a shopping mall or retail store. Due to the development of technology and other online retailers like Amazon, eBay, Fashion Nova and other large scale retailers have quickly become a powerful organization that cannot only provide a surplus of goods but is available 24/7 for all customer needs. Based on George Ritzer’s ideals, society is quickly becoming more efficient as the decades progress and more closely related to a “McDonaldized” society. Bankruptcy for the Forever 21 company is not an optimal solution. It will not provide a clean state for the company and nor will it be a permanent eraser for the organization’s current financial issues. Society has the tools available to aid this organization into success. All it takes if for the hierarchy of this company to sit down and realize what must be implemented to appropriately benefit this organization. If the company chooses to remain isolated and closed off to the ever-changing world, this large fast-fashion company will never be able to survive.

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Case Study of Forever 21: Based on Pfeffer and Salancik Resource Dependency Theory and George Ritzer’s McDonaldization Theory. (2022, September 27). Edubirdie. Retrieved February 8, 2023, from https://edubirdie.com/examples/case-study-of-forever-21-based-on-pfeffer-and-salancik-resource-dependency-theory-and-george-ritzers-mcdonaldization-theory/
“Case Study of Forever 21: Based on Pfeffer and Salancik Resource Dependency Theory and George Ritzer’s McDonaldization Theory.” Edubirdie, 27 Sept. 2022, edubirdie.com/examples/case-study-of-forever-21-based-on-pfeffer-and-salancik-resource-dependency-theory-and-george-ritzers-mcdonaldization-theory/
Case Study of Forever 21: Based on Pfeffer and Salancik Resource Dependency Theory and George Ritzer’s McDonaldization Theory. [online]. Available at: <https://edubirdie.com/examples/case-study-of-forever-21-based-on-pfeffer-and-salancik-resource-dependency-theory-and-george-ritzers-mcdonaldization-theory/> [Accessed 8 Feb. 2023].
Case Study of Forever 21: Based on Pfeffer and Salancik Resource Dependency Theory and George Ritzer’s McDonaldization Theory [Internet]. Edubirdie. 2022 Sept 27 [cited 2023 Feb 8]. Available from: https://edubirdie.com/examples/case-study-of-forever-21-based-on-pfeffer-and-salancik-resource-dependency-theory-and-george-ritzers-mcdonaldization-theory/
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