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| COURSE CONNECTOR |
| ARTICLE SUMMARIES AND QUESTIONS |
"The Business of Style: King of Cool," pp. 50-61: You know someone is cool if the coolest innovator (Steve Jobs) at arguably the coolest company on the planet (Apple) asks for his advice, right? Guilty as charged for Mickey Drexler, the retail guru who most notably remade Gap from a hum-drum sweatshirt store into a pop-culture phenomenon in the 1990s. Aside from that feat, Drexler is also responsible for launching the popular Old Navy chain in 1994, and for suggesting to Mr. Jobs that he build a prototype Apple store in a warehouse — a piece of advice he heeded. Since 2003, Drexler has headed the preppy outfitter J.Crew. What's his plan for steering the company through the economic downturn that is hitting retailers like a ton of bricks? Repositioning J.Crew as a luxury-for-less alternative to big-name designers, whose dominance is, in his opinion, totally played out. It's a gamble to go upscale when the average American is scaling back on discretionary spending, but industry watchers and retail veterans think Drexler may be onto something. After all, even belt-tighteners want quality merchandise. As long as Drexler can avoid pricing himself beyond the reach of customers he already has, J.Crew soon may prove to be a real threat to department stores and designers.
In this article, students read about CEO Mickey Drexler’s plans for growing the clothing retailer J.Crew.
Discussion Questions:- What consumer does Mickey Drexler hope to target with his new Madewell line of clothing? Who are his primary competitors in this market? What advantages and disadvantages does Madewell have? In your opinion, will it be successful? Explain.
- What two aspects of the corporate culture at J.Crew's headquarters
are most striking, according to the author? Why? What is the driving
force behind some of the company's new luxury-for-less ventures?
- What major change has occurred at J.Crew since Drexler took over? What is his greatest long-term challenge? When these issues intersect, how is Drexler most likely to react?
"The Business of Style: Prada Goes Shopping — For Money," pp. 74-80: The devil may wear Prada, but that hasn't helped the legendary Milanese fashion house resolve the hefty debt it carries — $956 million at last count. How is it that Miuccia Prada, the designer who dresses some of the world's biggest celebrities and wields tremendous influence on the global fashion scene, finds her company in such serious financial straits? Blame it on a failed acquisition spree led by none other than her husband, Prada’s CEO, Patrizio Bertelli. While no one denies that Bertelli is a driven genius, with an uncanny knack for knowing which of Miuccia's creations will be commercial winners, his management style leaves much to be desired. With a personality marked by temper tantrums and a tendency to micromanage, Bertelli has had disastrous relationships with designers and executives alike, creating not only rifts within the company but also business losses that have caused Prada's money woes. To compete with other companies in the luxury industry, Prada needs to raise cash . . . fast. Bertelli's plan is to sell about one-third of the company's shares on the Milan stock exchange by year's end — a risky but apparently necessary move. Whether it rescues the struggling company from the clutches of stronger, more nimble competitors remains to be seen.
Students examine the capital and management challenges faced by one of the most famous symbols of haute couture, Prada.
Discussion Questions:
- What happened when Prada attempted an IPO in the past? Why do some analysts doubt the company will go through with an IPO anytime soon? Do you agree with them? Why or why not?
- Why has Prada had difficulty in making the transition from quirky
family business to professionally run corporation? How has that hurt
the company's growth? In your opinion, what specific steps will it
need to take to remain competitive?
- According to Patrizio Bertelli, what are Prada's strengths? Will these assets be impacted if the company goes public? How?
"Looking for Trouble," pp. 92-102: Even in the worst of times, somebody always benefits. In today's skittish economy, one of those somebodies is hedge fund manager Richard Cayne Perry. He was already one of the most successful investors of our time, comparable to Paul Tudor Jones or Stanley Druckenmiller. In the two decades since he left Goldman Sachs to start his flagship fund, Perry Capital, currently with about $14 billion in assets, he has never had a down year. In fact, he's been up an average of 15.4% annually after fees over that time. Not too shabby. But what really makes Perry stand out now is something he started doing in late 2006, when hardly anyone else on Wall Street was — betting against subprime mortgages. Perry Capital shorted $3 billion in subprime securities, a bet that yielded $1 billion last year. How did he know? "We could see there was a lot of bad behavior by financial institutions," he says. Indeed, looking for trouble is what Perry does best. Some top investors are calling the present economic situation the "second Great Depression." Perry doesn't disagree, and so he's forging ahead. For some folks, there’s a lot of money to be made in times like these.
This article explains how Richard Cayne Perry identifies distressed securities to yield financial gain for his hedge fund.
Discussion Questions:
- What different types of hedge fund managers does the article describe? Based on these descriptions, how would you define Richard Cayne Perry?
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In your opinion, who have played the most significant roles in shaping Perry and his business practices? What are some of the lessons he has learned along the way?
- What complaints has Perry had lodged at him by employees? Corporations? Other investors? How does he deal with them? Have they hurt him? Why or why not?
"The Bottom Line," pp. 107-112: It took three years of research and design to create. It must meet rigorous product quality standards. It was the most successful nonfood brand of 2007, and single-handedly narrowed its company’s market share gap with an archrival. Is it the iPhone? The Wii? The Prius? No. It's the Huggies Supreme Natural Fit diaper, created by Kimberly-Clark. Hard to believe so much innovation can be packed into something as simple as a diaper, but K-C takes its product as seriously as GM takes automobiles. And as it turns out, diapers aren't as simple as they may seem. What's really interesting is how all the sectors of K-C worked together to produce the Supreme Natural Fit, the most technically advanced disposable diaper ever. When company executives discussed how to grow the brand in the face of flattening birth rates, they decided to motivate parents to pay more for diapers by trading up from other brands. Enter the consumer-research team, which was charged to find out what would make parents do that. Their findings were passed onto the R&D teams, which after much testing and retesting, ultimately created the Supreme Natural Fit. And that's how you do a successful product launch.
Students take a closer look at how FORTUNE 500 company Kimberly-Clark (#136) innovated the Huggies Supreme Natural Fit diaper.
Discussion Questions:
- What is Kimberly-Clark's position with regard to retail price? Do
you think it is wise? Why or why not?
- What steps did K-C's consumer-research team take to "get into the
heads" of new moms? What was the primary insight that led to the development
of the Huggies Supreme Natural Fit diaper?
- How did K-C's R&D teams respond to the findings of consumer research? Why did they have to check in with the manufacturing side of K-C’s operations so frequently?
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