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J.C. Penney Company Analysis and Recommendations Case Study

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Updated: May 8th, 2020

Problem Definition

J.C. Penny established in 1902; the main problem of this company was to create a brand image to satisfy existing customers and attract young customers.

Decision Facing the Company

The marketing strategy of JCP based on promotions discounts policy and sales commissions; however, the customers of this company were dissatisfied with a new pricing structure, which needs to change.

Core Value and Positioning Strategy

The core values of the company are to improve and recompense the talents of the workers, work with the maximum moral principles, train prospective workers, celebrate small successes, assist sincere communication, promote the innovative idea and smart risk-taking, and most importantly, to care about the people in the localities.

Target Market

Stock (2013) pointed out that older, less hip, lower-middle-class mothers and shoppers that are older than 55 years of age are the main target market for most department stores; in addition, extremely price sensitive and price-conscious people are loyal customer group of this company because it offered good value for the money (Thompson, 2013). At the same time, this company offered high discounts in order to attract older, price-conscious customers (Thompson, 2013).

Competition

Johnson (2013) stated that Macy’s Inc and Kohls Corporation, Target, Wal-Mart, Foundry Big & Tall Supply stores are the major and closest competitors in the market; in addition, the competition of the market has increased for the enchantment of the retail e-commerce business.

On the other hand, this company faced enormous competition at the time of the global financial downturn because consumers only visited its stores and looking for discounts, offers, and coupons (Johnson 2013). In 2011, net income of Wal-Mart was $15,699 million, Target Corporation was $2929 million while a net loss of JCP was $152 million; however, the following figure gives more information in this regard-

Comparative Performance Relative to Direct Competitors
Figure 1: Comparative Performance Relative to Direct Competitors. Source: Johnson (2013, p.11)

4 P’s Analysis

Product/Service

Ostlund (2012) stated that apparel, accessories, footwear, fine jewelry, furniture, and Sephora beauty care products are the main products of JCP; however, this company generated the highest revenue from women’s apparel segment. The following figure gives more information in this regard-

Sales revenue from different segments
Figure 1: Sales revenue from different segments. Source: Johnson (2013, p.11)

Price

After assessing the existing high-low pricing structure, CEO of J.C. Penny had introduced new pricing strategy containing three pricing tiers, for instance, price of everyday items reduced by 40%, and value of monthly products decreased by 20-29%; moreover, customer enjoyed special offer on the first and third Friday of each month (Johnson, 2013). The next figure gives more information in this regard-

Comparison between old pricing and new pricing structure
Figure 3: Comparison between old pricing and new pricing structure. Source: Johnson (2013, p.13)

Promotion

According to Johnson (2013), this company had spent more than US$1200 million to implement about 590 promotion events in 2011, and it had generated 72% of its sales revenue from products with a 50% discount offer and its stock soaring up 24%. However, this strategy failed to solve existing problems of JCP as it was confusing to the customers; moreover, competitors have an enlarged promotional budget to overcome from recessionary impact (Ostlund, 2012 and Kardashian, 2012).

Place Strategy

Johnson (2013) reported that JCP operated about 1100 stores with 41 million square feet of retail space among them it operated 700 stores in metropolitan areas and 400 stores in small-town; however, the CEO of this company identified that JCP was bound to close its outlets due to high rent of retail space and small customer base.

SWOT analysis of J.C. Penney

Location of Factor Type of Factors
Favorable Unfavorable
Internal Strengths Weaknesses
700 stores located in metropolitan areas; however, it operates nationwide More than 400 of its stores located in small towns where lives less than ten thousand people
It has a long historical background as it was founded in 1902 Implementation of ‘Fair and Square’ strategy
JCP had started strategic partnerships with high profile brands to satisfy new, younger, and more affluent customers It has failed to develop a strong brand image in the market
It had diversified and wide range of product offerings; thus, JCP is a one-stop-shop for individuals and families Limited resources, lack of efficient employees and so on
Many customers shop there for high-low pricing structure though new pricing structure removed JCP has changed its logo and name three times in 3 years, which confused customers
This company cares about each and every customer it failed to communicate its message to the purchasers; so, customers do not know what to believe
External Opportunities Threats
Johnson had leadership qualities to transform business. In the 1990s, Johnson negotiated a contract with designer Michael Graves, which developed brand awareness; in addition, he worked with Steve Jobs for which its stock jumped 18% At the time of global recession, purchasers were looking for more than the lowest price
Customers attraction on online business enhanced niche markets; however, JCP could focus more on social media marketing strategy Decline market share, reduce revenue, increase labor costs, hedge fund manager, weak stock market performance, and higher rents of the stores are the main external threats for this company
It could penetrate a new market, for instance, India is a very prospective market for new entrants Some decision was controversial such as elimination of all sales discount was cause serious dissatisfaction
It has the opportunity to diversify the product line to attract new customers The strong market position of the competitors

Table 1: SWOT Analysis

Analysis

Effectiveness of the “Fair and Square” repositioning strategy

CEO of JCP had designed radical makeover known as “Fair and Square” strategy to increase sales revenue and brand awareness; however, he mainly changed the logo, spokesperson, and environment of stores, sales structure, and pricing strategy.

The new brand spokesperson was an efficient strategy since new spokespersons would have the capability to protest the company from controversy and gain a positive image (Johnson 2013). The aim of this company was to create a loyal customer base and build brand image, but a frequent change of logo had confused customers and created a chance of fraud (Johnson 2013).

Indicators are pointing to a possible Need to go back

After implementing the new pricing strategy, the sales revenue had decreased rapidly as it failed to attract both new and old customers; at the same time, employees of this company demoralized, frustrated, and unhappy to execute the new system; thus, “Fair and Square” was a mistake.

Indicators are pointing to a more positive direction

Johnson had endeavored to develop a team of specialists to change the sales structure of the company, which indicated Fair and Square” would potentially succeed; however, the employees had started to sale aggressively, which created controversy.

The key assumptions about JC Penny’s 5 C’s Analysis

Customers Customers were the first priority to JCP, but it failed to give the right message to customers due to lack of promotional activities and other wrong decision
Competitors Wal-Mart focused on the EDLP strategy and gained a competitive advantage. Competitors’ product line, pricing strategy and sales approach attracted young customers (Isaacson, 2013);
Collaborators Collaboration with DeGeneres became a problematic issue while conservative moms or main target market switched off due to DeGeneres’ homosexuality
Context Social and cultural factors influenced its business
Company “Fair and Square” strategy, diversified product line, and less customer base

Table 2: JC Penny’s 5 C’s Analysis

Repositioning with a new target market

JCP has redesigned its stores to attract younger shoppers as it has only 20% of clients under the age of 35; in addition, older customers are price-sensitive, and they only purchase necessary products; however, removed coupons and reduced promotion were the prime factors of failure (Stock, 2013).

New target with the “Fair and Square” brand repositioning

Older customers liked discounts and bargains while younger and modern customers wanted stylish products; therefore, it redesigned stores and sales structure to simulate the buying structure.

Johnson wanted to attract the new target customer

There were many reasons for trying to attract new customers, such as Macy’s and Kohls gained a competitive advantage, older customers were conscious, face financial hardship, increase sales revenue, develop stock performance and change the overall business environment.

Comparison between existing core customers and a new target of JCP

Existing Core Customers New Target Customer
Demographics/Psychographics JCP was a place where they feel welcome; traditional family shopper Seek more information to make a decision
Shopping Behavior More dependent and enjoyed coupons Like discounts and other offers
Product Preferences Consider their needs consider brands
Service Preferences Courtesy, respectfulness, and availability of assistance Quick and expert service,

Table 3

The customer delivers more value to JC Penny

Existing Customers Potential New Customers
Annual Profit High value – as JCP’s revenue based on old customers Low value: as it failed to attract them
Customer Lifetime (in years) High value Low value
Acquisition Cost Low value High value

Table 4

Pros and Cons of Different Types of Pricing Strategies

Pricing Strategy Pros Cons
High-Low Only attract highly price-sensitive consumers who have the patience to wait for sale days less price-sensitive consumers
Sales revenue generated quickly in season Losing key customers
EDLP Promise customers that it will pay the same low price each time Difficult to change the brand image
Develop a loyal customer base Reduce sales at the time of the occasion
Fair and Square Attracts new customers particularly younger shoppers Confused customers and failed to generate profits
Increase stock-price for a short-term period Reduction of loyal customers due to change discount policy

Table 5

Transformation of JC Penny with the radical shift in pricing

It was essential to change pricing policy, but it was only factored to transform; however, competitors occupied a large market share while it strived to survive in the market; therefore, it should focus on the overall transformation of the company.

Attitude and Leadership Approach of Johnson

Johnson was neither genius nor a fool; he had just tried to execute the repositioning strategy and wanted to make the business profitable, but he dealt with a sinking ship. More market research was required to introduce a new strategy, but Johnson has not focused on this issue, and he failed to understand shoppers’ behavior, for instance, consumers loved the bargain hunt, but he removed favorite coupons and sales commissions.

Steve Jobs Johnson
Similarities Had patience and clear vision Determined to change business position in the market
Differences Steve always cared about the customer He never considered what the customers of this company liked;
Designed products according to customer choice He alienated the core customers

Table 6: Similarities and differences between Johnson and Steve Jobs

Source: Self-generated

Recommendations

JCP should change pricing strategy, increase the budget for promotional activities, conduct more research on the market, and follow retrenchment strategy in order to survive in the retail industry.

Reference List

Isaacson, B. (2013). Lessons in Pricing Strategy from JCPenney. Web.

Johnson, R. (2013). J.C. Penny’s “Fair and Square” Strategy (Abridged). Web.

Kardashian, K. (2012). . Web.

Ostlund, A. (2012). JC Penney Strategic Marketing Plan 2012: Product Strategy. Web.

Stock, K. (2013). . Web.

Thompson, D. (2013). Web.

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