JC Penny Case

Step 1: What is the major theme? (Bryan)

What broadly is the case about?
JC Penny, and other large retail department stores were victim to the 2007 financial
crisis where consumers disposable income fell quickly, and willingness to spend
followed suit. JC Penny’s sales decreased as a result, where they were out performed
both on price from companies such as Walmart and Target, and quality by Nordstroms.
This forced JC Penny to reevaluate their strategy as a company in order to regain
market share in an already diluted market. JC Penny’s strategic plan was to get rid of
many generic products and focus on their private and exclusive brands. They paired this
with a new ad campaign, redesigned stores, additional private brands, and new 3-tier
price tag system. All of this was done to increase the flow of customers into their brick-
and-mortar stores, as well as increase sales and profit for the company. The theme of
the JC Penny case is the importance of having a sustainable competitive advantage
based on your core competencies to protect you from external environment affects.

Identify case theme. What is the central focus of the case?

Focusing on core competencies is necessary. Understanding who your target market is,
and why they would choose to shop at your store is essential. Important to ask the
question: how do they differentiate themselves?

Why has the authors written this case? What are they trying to convey?

The author wrote this case to give a perfect example of a company that tries to do too
much, and loses out on their core competencies in the process. In addition, it is also
important to review your core competencies on a regular basis to prevent the loss of
sales before they happen.

Step 2: Flag Strategic Issues (Thomas)

What are the key strategic issues?
Is it related to strategic marketing, HR issues, financial growth, revival, value chain,
industry structure, what are the subthemes?
List themes 1-5
Step 3: Link Concepts to Practices
SWOT - Kaili
Five Forces- Thomas
PESTEL - Inayat (TEL)/ Bryan(PES)
Political- Opportunities: Constitution based federal strong democracy, well established
legalThreats: political scenario is changing in upcoming year, Taxes, Standards,
policies, all can affect a company’s pricing, profitability, and development
Economical - Opportunities: large economy, low inflation rates, free market economy,
Threats: decrease in disposable income
Socio-cultural - Opportunities: Ellen Degeneres is face of company, social media,
new marketing campaign, updated store design. Threats:
Political: Political volatlity especially with “the federal taxes they will pay if not their
state and local taxes as well.”
Economic: targeting middle class consumer as an alternative to Target.
“JCP was using a traditional pricing strategy with relatively high prices punctuated by
hundreds of promotions and sales that occurred at different times during each year.”

During recession, competition increased from lower priced retailers such as Walmart
and higher retailers such as Nordstrom, as a result, couldn’t compete on price and
product quality and selection to attract customers looking for differentiated products.
To combat this JCP “ 97 percent of JCP merchandise was sold at sale or promotion
prices.”

Disposable income decreased during recession.

The lower to middle class families were hesistant to buy things which were historically
JCP’s primary customers. Demand for luxuary goods and inexpensive lower quality
were rising.

Unemployment and underemployment high

is affecting consumer confidence to spend money. Substitutes affecting JCP sales such
as Sears, Walmart, Target, Khols, Macy’s.

The new JCP focus on middle to high class people who are dissatisfied with the
products lower retailers offer (Walmar) and dissatisfied with the high price retailers offer
(Nordstrom)
Legal: didn’t mention any. the only thing I can come up with is if somehow Walmart or
any other retailer sued JC Penny for some reason such as a low pricing model or
something like that or labor laws
Technological:

External/Internal Environment - Everyone

Connecting theory to practice of managements

Very critical
Step 4: Generate Alternative Approaches (Everyone)
Link issues identified in step 1 and 2 to identify alternative approaches
Generate multiple approaches. The more the better for brainstorming
Identify pros and cons of each approach. Justify your responses

JC Penny could use Zara’s strategy of reducing their inventory on- hand, and focusing
on only carrying in their department stores the private label clothes that are the most
popular. This could create the same effect that Zara had, where because there was a
limited selection of a particular style of clothing, the customers became more loyal and
customers would return to the stores on a bi-weekly basis to check on the new deals.
This strategy has proved to be very effective for Zara, who has captured most of the
European department store market share. JC Penny may have to change some of its
core competencies, but this strategy could be very effective for the company.
Pros: reduces on- hand inventory bringing down costs for JC Penny, increased sales of
private label clothes
Cons: JC Penny doesn’t have the distribution channel, or customer service program of
Zara so it may be hard to implace.

Places like Nordstom now offer a rewards system linked directly to your bank account
when you shop that tracks how much money you spend in the store. So now, instead of
having to open up a store credit card, the debit card is linked directly to your bank
account when you shop but tracks your purchases allowing you to earn rewards at the
same time. Perhaps they could create a reward system of sorts, enticing more
customers to shop at their store over their competitors.

Pros: Provides customers with a reason to shop at JC Penny if there is an easy reward
system that lets them track their purchases and earns rewards just with their credit card.
Cons: These types of reward systems can be timely and costly to implement across
the company. JC Penney would have to spend many of their resources trying to start
this reward system. Also it is unsure if this rewards program would improve JC
Penney’s profitability as a company.

Step 5: Generate Recommendations (Everyone)

Based on your alternative approaches – make final recommendations
Classify recommendations into:
· Urgent fire fighting recommendations
· Short term recommendations
· Long term recommendations