Wednesday, November 14, 2012

JCPenney: Is It Really Toast?


JC Penny has reported yet another fall in Sales for Q3 of 2012 and its stocks fell down further by 13%. InvestorPlace.com in its article “JCPenney is Toast: Walmart Wins Among Retailers” calls JCPenney toast and clearly has no faith in its comeback. Since the company got Ron Johnson from Apple, hopes were high that he would revive the company with his new “Fair and Square” strategy. But so far it is not really working and numerous experts are calling Johnson’s strategy a failure. New York Time in its recent article A Dose of Realism for the Chief of J.C. Penney criticizes Johnson’s strategy saying that what worked for Apple may not work for JCPenney.

Despite all the criticism, Ron Johnson sounds optimistic about his strategy and claims that once the transformation is complete, the company would be turned around. And Mr. Johnson is not alone. Carmine Gallo in his Forbes article 5 Reasons Why JCPenney’s Ron Johnson Will Re-invent Retail… Again” has full faith in Mr. Johnson’s strategy.

            Image Source: http://anxietyindex.com/2012/02/jcpenneys-new-fair-and-square-pricing-addresses-bargain-seeking-burnout/

Reading all these articles I thought I should analyze JCPenney’s new strategy based on some key concepts we studied so far.

Vision: Ron Johnson has a clear vision on what he wants to do and where he wants to take the JCPenney stores after his transformation is complete. His focus is on providing customers a great experience and making the store your favorite store.

Leadership: This week’s reading Right Leaders for Your Growth Strategies points out the importance of leadership in making a company’s vision and strategy a success. Ron Johnson has had a successful track record transforming Target and then Apple, and has proved himself as a leader who brings in change – not just improvement, but a transformation.

Strategic Positioning of the company: We studied in the first week that it is important that a company positions itself strategically in the market. It needs to offer something unique in terms of product or service or quality or experience to differentiate itself from its competitors and have its customers come back to it. Before Johnson, JCPenney was just another Macy’s or Sears with a lot of promotions and coupons. It did not offer anything unique. But Ron Johnson’s strategy is to change that and transform JCPenney into a destination shopping experience.  He aims to bring brand such as Spehora, Levis and Disney as boutiques within the store. JCPenney stores that have implemented the changes have actually seen an increase in sales.

Porter’s Five Forces: No analysis of a company’s strategy can be complete without studying the five market forces that Michael Porter suggests should shape the company strategy. In case of JCPenney, the store had poor grasp over the forces of customers, competitors and substitutes. It had no distinction in terms of product or service that would distinguish it from its competitors like Macy’s or Sears. It carries same or similar brands as other stores. Moreover, with brands now being available online, the company has new competition.

But Ron Johnson is attempting to change this by focusing on providing its customers with a unique experience by transforming JCPenney into a store that provides destination shopping. He aims to transform JCPenney into a company that offers a unique destination shopping experience where customers come back to shop.

Conclusion: I think Ron Johnson’s strategy is in the right direction with respect to repositioning the company in the market. Now implementing strategies, especially the ones that involve transforming stores spread so extensively all over the country would take time, and involve the faith and patience of its employees and customers. Johnson’s efforts are in the right direction and it may be a little early to write off JCPenney .

What do you think? Is Johnson realistic in his vision for JCPenney , or is he fighting a lost cause and failing to give up?

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