J.C. Penney is a complex, yet exciting company that has a long history in the retail sector. The company is passionate about consumer relationships and keeping the brand credible in their eyes. J.C. Penney has veered off course within the last 10 years or so due to continuing management changes and differing opinions on the future direction of the company. As a consequence of this, the brand has become an unknown quantity in that there is no relative prediction as to whether it will continue to be the longstanding retailer it has always been or fold and shut its doors completely. The purpose of this report is to assess and analyze the issues that J.C. Penney is facing and both suggest and recommend three specific strategies that can be implemented to assist the company in remaining a pivotal giant in the retail sector.
J.C. Penney is considered to be one of the leading department stores providing clothing to the mid-range individual. The majority of their department stores are located in shopping malls, although a few still remain that are stand alone. One of the first successful advantages of J.C. Penney was their engagement with consumers by offering discount merchandising and catalog purchases. When thinking and discussing the company, this is the particular element that comes to mind. Moreover, JC Penney provided customers with more than just the usual clothing and accessories, but also had automotive, beauty salons and hardware department that catered to the needs. The company was originally known as Penney's and was started by James Cash Penney after he worked for the Golden Rule dry goods stores with Guy Johnson and Thomas Callahan in around the latter half of the 19th century. J.C. Penney can best be described as having a commitment to the consumer through a variety of offerings while being dedicated to keeping their branding afloat amidst a fluctuating marketplace (Hare, 2004).
Despite their commitment and dedication, J.C. Penney has not been able to keep up with the ever-evolving times. This is a result of a lack of specific direction as to their brand and the future direction it needs. Furthermore, the upper management echelon has operated on a plethora of different managerial styles that has in essence caused serious calamity and chaos both internally and externally. It is as if J.C. Penney as a consequence of this rollercoaster ride of retail was shaken from its proverbial footing and has struggled to maintain a viable voice with consumers. Moreover, the company has often made rash decisions such as closing many of its thriving stores in an effort to maintain semblance with the consumer-business relationship. The company’s ambition has been both its success and penultimate downfall. In order for J.C. Penney to survive as a continuing retail giant, there are some serious considerations that must be made.
The fundamental tenets of J.C. Penney are rooted in ensuring customer satisfaction, maintaining a sense of balance in the customer-employee relationship and making sure employees remain. The company is also driven by sales and profit growth keeping with the attitude that it is the customer and employee first and foremost. Presently, J.C. Penney's Chief Executive Officer is Mike Ullman. The Chief Financial Officer and Executive Vice President is Ken Hannah. There are numerous executive and senior executive Vice Presidents that oversee certain divisions within the company such as General Counsel and Secretary, Human Resources, Investor Relations and Communications, E-Commerce, Planning and Allocation, Fine Jewelry and Accessories, Children's Apparel and Marketing to name a few. The basis responsibilities of the VP's are to keep the vitality and future of J.C. Penney alive by interacting with supply chain management, IT, strategy and cohesion among all employees that work at J.C. Penney (“JC Penney,” 2013). J.C. Penney is known for its effective distribution channels and powerful information integration that was put in practice when the company began. This systematic approach is one of the main strengths that the company has.
For investors hoping to do business with J.C. Penney, a discussion of the financial condition must be had. As of 2012, J.C. Penney undertook a multifold strategy to once again become the known store for consumer goods. As such, sales and operating performance was stable compared to the prior year. For the year, 2012, sales for the company overall were $12,985 million, which was a dip from 2011. Additionally, selling expenses were lowered a total of $603 million, or roughly 11.8% ("Annual Report," 2013). Investors want to understand where J.C. Penney lies on the financial spectrum, a consolidated statement of operations is necessary (see Appendix A).
A company's overall viability in the marketplace is not complete without examining it from the perspective of Porter's 5 Forces. Porter's 5 Forces include the external forces such as culture, demographics, economics, government, technology, physical environment, and military. Porter's 5 Forces illustrate the varying external influences that companies and corporations often face. The five forces are bargaining power of suppliers, how the industry attempts to keep itself balanced, threat of substitute goods or services, the bargaining power of customers and threat of entry.
In examining the external factors that threaten the company, J.C. Penney has offered several different marketing strategies to keep their brand viable to the consumer marketplace. It appears as though economics are affecting the company more than anything as consumers did not gravitate toward the online website to purchase as anticipated following the elimination of the catalog. J.C. Penney thought they understood the shopping behavior of the consumers, but did not. This reveals that there is a shift in the consumer bargaining power and thus J.C. Penney should observe the population that are shopping at similar retailers and align themselves with the buying behavior of their consumers (Anitsal & Anitsal, 2011; Harvard Business School Press, 2005).
Additional explanations per Porter's 5 Forces unveil that J.C. Penney is no longer the mid-range department store it used to be. Substitutes have come such as Target and Kohl's, which have existed for quite some time - but began offering clothing and similar products that consumers could buy. These substitutes are also rivals, which is another force that J.C. Penney has to be reckoned with. Consumers are moving away from the traditional, expensive brand names such as Penney's and gravitating toward others such as SteinMart and the like. The barriers to entry for J.C. Penney have also changed such as the aforementioned consumer buying power. Consumers can now purchase from online retailers rather than visiting several different J.C. Penney stores hoping to find the product they want, when they want it. J.C. Penney's supplier power can also be reasoned to be in failure also as the corporation's strategic mistakes continue to haunt them and no supplier wants to deal with a company that is not selling product.
In Mourdoukoutas (2013), he specifically cites the pricing strategy as the beginning of the proverbial end for the department store. J.C. Penney sought to replace sales through everyday low prices coupons in an effort to draw attention to consumers’ post-catalog elimination. While the strategy did encourage some consumer buzz, it was done away with by the then helm of the company, Ron Johnson, who wanted to engender a company profile that was similar to Apple, Inc. Johnson did not understand the soundness of consumer loyalty when the catalog, that was something that "JCP had cornered" (Mourdoukoutas, 2013, p. 1). Furthermore, Mourdoukoutas (2013) states that it was foolish for J.C. Penney to think they could operate on the level of Apple, Inc. in terms of pricing strategy because they do not sell similar product nor do they have a similar marketing machine (p. 1). Thus, when analyzing the department store from Porter’s 5 Forces, J.C. Penney was not able to recover as a result of failed strategy, which was a lack of understanding of the ever-evolving consumer buying trends and supply chain fundamentals.
To gain some insight into the financial liquidity of J.C. Penney to assist them with suggestions, a report from 2007 was analyzed and then the annual report as of 2013. That report states that the "current ratio [in terms of liquidity] is the relationships between a company's current assets and liabilities" ("J.C. Penney Company, Inc. Equity Valuation and Analysis," 2007). The following is a summary of the cash to debt ratios for a period of three years for J.C. Penney.
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While J.C. Penney’s cash to debt ratio has dropped in terms of percentage since 2010, their debt to working capital has increased, giving way to a significant infrastructure issue in terms of finance. It is not necessary for the rationale that J.C. Penney is living outside of their means, their strategies are just misplaced. The company did not see the error of its way until it was too late.
According to Zacks Equity Research, J.C. Penney has performed pretty lackluster these past few years. There is agreement to that point in this particular analysis, however, for the purposes of this section, assessment of their strengths, weaknesses, opportunities and threats is needed.
J.C. Penney's strengths lie in their longevity and consumer loyalty. Despite a rather lackluster performance since they opted to do away with their catalog and changed their pricing strategy, J.C. Penney was created on the love of the consumer and the employee relationship. J.C. Penney himself was determined to have a department store that was not too upscale, but not overly low-range or discounted either. Consumers will still go to J.C. Penney with the hopes of obtaining the quality merchandise that it has always had. While the company eliminated its automotive and hardware departments, products are still reasonable for consumers that they do in fact shop there despite reports to the contrary. J.C. Penney would be out of business if consumers were no longer believing it was a viable brand name with such a long retail history.
Secondly, J.C. Penney has consumer loyalty. Consumers are very loyal to brands and companies. Martisiute et al. (2010) noted that consumer satisfaction with a company is what influences their marketing actions. A correlation can be made between the consumer and the brand. The author discuss several reasons for consumer loyalty noting an abundance of literature. The essentially dynamic of the article is that brands are valuable to organizations and in turn consumers. Brands are the functioning parts of a company or corporation. Products are only successful if they are identifiable and add value to the consumer's everyday lives. Thus, J.C. Penney in offering mid-range products at the onset of the early 20th century up until present day, understood what Martisiute et al. (2010) stated regarding consumer loyalty. Thirdly, J.C. Penney prides itself on its employees having a good relationship with retail management as well as the consumer. Their mission statement, which was expressed earlier, defines the associate-manager relationship as essentially, the glue that holds the company together. There is continual involvement in the operational aspects by the management of J.C. Penney to ensure that the relationships between them and the employee are upheld.
J.C. Penney's main weakness is sales or lack thereof. Zacks Research (2012) specifically outlined the falling decline over a period of months in the year, 2011 to engage the reader on the systemic problems with retail sales at J.C. Penney. It is as if the company's rivals are better equipped, better maintained and quite frankly to a certain extent - have greater product. Companies such as the aforementioned Target and Kohl's as well as Marshalls' and Ross Stores have capitalized on appealing to consumers via their pocketbook and this has in turn hurt J.C. Penney in the realm of sales. Zacks Research (2012) argued that "J.C. Penney could not make the most of the Black Friday weekend sales" (p. 1). The company is just in a sales slump and has not been able to dig their way out of the ditch.
Another weakness of J.C. Penney’s lies in their marketing strategy. With the ever changing management that has occurred at J.C. Penney throughout the years, there is reason to believe that J.C. Penney has not taken advantage of the digital marketplace nor come up with a sound marketing strategy long enough to see the fruit from the trees. There was a light at the end of the tunnel with the everyday pricing strategy, however, that light was quickly blown out when the CEO at the time, opted to shift the dynamics of the strategy completely. While the innovative and impulsive nature of Johnson was perhaps something credible and believable at the start of his tenure as CEO, but shifting strategies mid-stream did not lend itself to providing the retail giant any support in remaining credible.
The question then must be asked, does J.C. Penney know its customer? The company's strength does lie in consumer loyalty, but what about new customers? Younger generations? Are J.C. Penne stores doing anything about evoking an emotional response from the customer? Claire (2013) spoke on the need for companies to have an effective marketing strategy for both customer retention and attraction. It is crucial to the competitiveness and development of the company. Moreover, there has to be a promotional element intertwined with the strategy because at the core of the company is advertising and promotion a.k.a. getting the name out there. J.C. Penney has not been getting its name out there because it is stuck in the past as far as not recognizing the sign of the times.
The biggest opportunity for J.C. Penney is to employ a successful social media strategy. Consumers have continued to take to the Internet and more now than ever - social media platforms have been on the rise. Leto (2013) argued that social media provides a direct outlet to consumers to see where their heads are at as far as product. Company marketing departments want to connect with their audience (p. 1). Therefore, J.C. Penney can definitely consider employing better social media efforts in order to assist their failing brand.
There are a few threats that could harm J.C. Penney and cause them to sink even farther than they already have in terms of sales. First, the aforementioned rivals could bring their own catalog and capitalize on the market that the company had in its hands. Second, other companies along the same wavelength as J.C. Penney could potentially deploy a social media strategy that would cause J.C. Penney consumers to consider purchasing from them rather than JCP. Third, limiting their promotional and marketing efforts. There are so many ways in which J.C. Penney could revive their brand (these will be discussed in the recommendation section) that is astounding that they have not tried to do better given the longevity of the name.
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What exactly can J.C. Penney do to better manage its resources? Since the value chain observes how businesses receive their input all the way to the end result, J.C. Penney will need to examine its strategy from start to finish in terms of remaining viable in the marketplace. First, what resources are available will have to be asked and answered. Next, the process of revitalizing the brand will begin. This will be done through an evaluation of the company as a whole in varying processes. This will take time to tackle as management will need to look at what has worked in the past, what is working now and of course, what is not working. Finally, J.C. Penney will have to assess the new strategy they have come up based on the initial input to see if it will be something that consumers will gravitate toward or not. This is probably the most essential component of the analysis of the value chain because it demarcates the validity of J.C. Penney as a continuing retail brand given the rivalry that takes place in the sector.
Loeb (2013) noted that J.C. Penney recently hired a new Chief Marketing Officer. Therefore, it stands to reason that the brand can revive itself in such a critical time. The CMO, Debra Berman, has stated that the company is "at a critical time. The company is still smarting from Ron Johnson's missteps. J.C. Penney [however] is gearing up for a more potent promotional calendar" (Loeb, 2013, p.1). J.C. Penney is failing in many respects and Berman is seeking to rebuild the strong representations and values that J.C. Penney has stood for. One of the first items that Berman states was value priced merchandise, which is ideal at any time of year and captures consumer demand effective. Additionally, providing more pizazz to the home area, which has been a significant part of J.C. Penney sales for a number of years. Berman hopes to close the gaps that have widened since before Johnson took the reins. Finally, Berman believes that JCP needs to fix its advertising problem (Loeb, 2013). There is reason to believe that the JCP brand can be mended, adjusted and become a thriving whirlwind again. It of course will take immense strategy and decision making as well as cooperative team of individuals to properly execute it so the core consumers who have left can return, and new prospective consumers can look at JCP as a viable brand among many.
There are three recommendations that will be made to J.C. Penney.First, bring back the catalog. As quiet as it is kept, catalogs are still quite popular among consumers. Catalog marketing is defined as a specialized niche of direct marketing to the consumer. Retailers still utilize the catalog as a way to connect with consumers and ensure brand recognition and sales. J.C. Penney should bring the catalog back. This will do two things immediately. (1) The core consumer that J.C. Penney lost when the catalog was discontinued will return and (2) with the changes in the ways consumers can be marketed to, there is a lot that can be done to spruce up the catalog before it is sent to consumers in order to keep with the revitalization process.
Second, use social media more effectively. J.C. Penney does use Facebook, Twitter and others but a better understanding of when to use them in their marketing campaigns is needed. Each social media platform has can be immensely potent in the area of retail if companies in that sector understood what to use when. It will need to be mandatory for the marketing department to hire strategists to assist the CMO in her marketing plan to make sure that the social media campaign, such as with Twitter marketing, can be done properly and thoroughly. With the world moving more and more toward technology, J.C. Penney must move with it or risk getting left behind as they have been in the past. Finally, bring back the automotive and hardware departments. If JCP does this, they will undoubtedly gain the consumers they lost when they eliminated those areas. It will open up another avenue of competing with rivals such as Firestone and Home Depot. Sales will increase and JCP will hopefully be on their way to becoming a voice among many department stores in the consumer world. The best recommendation that can be done is to execute a social media plan that will work for JCP. The following is an implementation plan and timeline.
The timeline for execution is within 1 year. Media Measurement (2013) noted that companies that create social media campaigns have a lot of work ahead of them in terms of cohesively putting together strategies and analytical monitoring. A social media strategist will assess and measure whether the campaign that is chosen/selected is working as far as bringing consumers into the company or organization's umbrella. Essentially, what kind of ROI (return on investment) of the advertising (which is what social media is) are the companies receiving? The social media strategists will be hired to examine the current platforms that JCP is using and analyze how they are utilizing them since certain ones work better than others depending upon a company’s objective. The social media strategists will then discard what is not working and formulate new strategies for the ultimate success of the J.C. Penney brand.
Annual Report. (2013, February 2). J.C. Penney. Retrieved from http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-irHome
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Claire, A. (2013, September 22). The Importance of a Good Marketing Strategy. YODspica Ltd Retrieved from http://www.yodspica.org/2013/09/the-importance-of-good-marketing.html
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Leto, F. J. (2013, June 12). Why is Social Media Important For Business: The Tangible and Intangible Benefits Of Social Media. Bumblebee Media. Retrieved from http://bumblebeemedia.org/why-is-social-media-important-for-business/
Loeb, W. (2013, August 7). J.C. Penney: We've Got Marketing But What Will We Sell? Forbes, Retrieved from http://www.forbes.com/sites/walterloeb/201 3/08/07/j-c-penney-weve-got-marketing-but-what-will-we-sell/
Martisiute, S., Vilutyte, G., & Grundey, D. (2010, June). Product or Brand? How Interrelationship between Customer Satisfaction and Customer Loyalty Work. European Journal of Interdisciplinary Studies, 2(1), Retrieved from http://ejist.ro/files/pdf/346.pdf
Media Management. (2013). Media Measurement & Mediapro. Retrieved from http://www.mediameasurement.com/what-does-it-take-to-be-a-social-strategist/
Mourdoukoutas, P. (2013, September 27). A Strategic Mistake That Haunts JC Penney. Forbes, Retrieved from http://www.forbes.com/sites/panosmourdoukoutas/2013/09/27/a-strategic-mistake-that-haunts-j-c-penney/
Zack's Research. (2012). Retrieved from http://www.zacks.com/stock/news/67216/J- C-Penney-A-SWOT-Study
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