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Home / Questions / PROBLEM-SOLVING APPLICATION CASE (PSAC) Without George Zimmer, Does Men’s Wear house Like the Way...

PROBLEM-SOLVING APPLICATION CASE (PSAC) Without George Zimmer, Does Men’s Wear house Like the Way...

PROBLEM-SOLVING APPLICATION CASE (PSAC)

Without George Zimmer, Does Men’s Wear house Like the Way It Looks?

What happens when a company fires its own founder, and the founder “fires” back? Men’s Wear house provides an excellent example. Company founder and spokesperson George Zimmer became famous as the face and voice of its company’s media ads. “You’re going to like the way you look,” he’d say. “I guarantee it.” In 2011 Zimmer had handed the leadership reins to Doug  but continued on in other ways. He remained on the board of directors with the elevated title of Executive Chairman and kept on as chief pitchman. But with little apparent warning, on June 19, 2013, he was fired and removed as Executive Chairman. He subsequently resigned from the Board.80 Conflict with the Board Although not immediately, Men’s Wear house issued a statement about the firing. The announcement implied that Zimmer’s termination was a necessary response “to an ego-driven power grab aimed at taking the company private for his own benefit,” according to Forbes. “The board said he demanded control, including veto power over significant corporate decisions, and refused to support management unless they bowed to his demands.”81 The company should have realized that its founder would not go quietly. Zimmer issued his own statement: “Over the past several months I have expressed my concerns to the Board about the direction the company is currently heading. Instead of fostering the kind of dialogue in the Boardroom that has, in part, contributed to our success, the Board has inappropriately chosen to silence my concerns by terminating me as an executive officer.” Conflict with the CEO? Another point of likely contention was suggested by a subsequent event. A few weeks after Zimmer was out, Men’s Wear house bought the designer Joseph  and its US factory for $97.5 million in cash. In other words, the company bought out one of its suppliers and even acquired a means of production. This move was intended to broaden branded product offerings and increase profit margins, which contrasted with Zimmer’s approach of only offering wholesale brands. “It’s really a reshaping of the whole business model,” CEO  said, approvingly.82 Foundering Identity Men’s Wear house has been struggling to manage a new public identity without Zimmer in the picture. (The company has the legal right to use Zimmer’s name and catchphrase for a year, but has chosen not to.) Its first major TV spot played up the role of Men’s Wear house in making men look good through the decades. A young thin male model walked city streets through brief vignettes each representing its own decade with the clothing style changing to match—the seventies, the eighties, the nineties, the thoughts, and the current day. Laura  of Business Insider called the male character “a total sleaze.” She noted that “every time he passes a beautiful woman—one is wearing a schoolgirl outfit—he spins around to ogle them. A Men’s Wear house employee gives an approving nod to each scene.”83 Falling Profits The financial press, which noted little change in the Men’s Wear house stock price right after Zimmer was fired, was less positive three months later when the company announced a 2.3% drop in sales and a 28% drop in profit over the last quarter. Once a Player, Always a Player? It may be difficult for Mr. Zimmer to resist trying to intervene and continue to steer the company he started in 1973 and ran for almost 40 years. Some have speculated that Zimmer would try to take the company private as a hostile takeover.84 He currently owns 3.6% of the company. Zimmer’s letter shortly after the firing had this to say: “To be clear, at this point I have not concluded that taking The Men’s Wear house private is a better means of preserving the unique culture and values that have made the company so successful over the years. What I do know is that as a founder and large shareholder, I am greatly concerned about the future of the company if this culture and these values are lost, and believe that the Board should be open to at least consider the full range of possibilities that could optimize the future value of the company for all stakeholders.” At the time of Zimmer’s statement, financial analysts reported that management has “unanimous board support and is not in favor of a buyout.”85 More recently, other analysts note that if Zimmer did want to take the company private, it is already 10% cheaper than before.86 Apply the 3-Stop Problem-

 

 

Jul 22 2020 View more View Less

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