Monday, November 26, 2012

J.C. Penney Co's Fixed Strategy Results In Dire State



In “Seven Ways to Fail Big” Paul B. Carroll and Chunka Mui discuss the dire effect that “stubbornly staying the course” can have on a business. Executives are often attached to their strategy and aren’t willing to deviate. This type of stubbornness is very evident in many businesses today, particularly seen in the current state of J.C. Penney Co.  

BF-AD827A_PENNE_NS_20121109195402.jpgJ.C. Penney Co.’s sales are continuing to decline at a startling rate. For the past three months ending Oct. 27 Penney saw sales fall 27% (Figure 1). Sales of the department-store chain have declined by$2.7 billion over the past 9 months. After a change in management a year ago, the new CEO Ron Johnson implemented a strategy that aimed at abruptly reducing discounts. Rather than advertising large discounts, the company aspired to implement “lower everyday prices”.

Review of this fiscal year clearly reveals this new strategy has significantly decreased customer sales and visits. Despite negative results, Johnson refuses to budge on his desire to eliminate discounts.

It seems as though Johnson’s insistence on no discounts is generating a state of confusion among customers. Despite his statements against allowing discounts, the retail store continues to send out coupons and post advertisements including ones that state 30% off sales.

I believe that in order for J.C. Penney to recuperate some of the  $2.7 billion they have lost this year, Johnson must make his strategy clear and react to the negative impact his current plan is 
having on his business.  If Johnson fails to react to the current retail environment, J.C. Penney will likely continue to decline.

What do you think Johnson should do? Is Johnson falling into the “stubbornly staying the course” trap discussed by Carroll and Mui?

Sources:
Mattioli, Dana, and Karen Talley. "J.C. Penney Digs Deeper Sales Hole." Editorial. Wall
            Street Journal n.d.: n. pag. Wall Street Journal. 9 Nov. 2012. Web.
            <http://online.wsj.com/article/SB100014241278873238947045781085730900312
            86.html?KEYWORDS=failed business strategy>.
Seven Ways to Fail Big (Carroll and Mui, Harvard Business Review, Sept ‘08)

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