JC PENNY’S FOCUS

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JC Penney to Close 33 Stores, Cut 2,000 Jobs

January 27

2014

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  1. JC PENNY’S FOCUS

J.C. Penney Company, Inc. also known as JC Penney or ‘The Company’ is one of the leading retailers of US. It offers a variety of family apparel, jewelry, shoes, accessories and home furnishings through its department stores’ chain and e-commerce website, “jcp.com.”In 2010JC Penny failed to handle customer traffic through ecommerce. It also failed to translate its business model for an online shopping experience andwas struggling internally; slow to beat competition, inefficient return policy,poor customer relationship management, which resulted in significant financial problemsand lost brand identity.In November 2011, Ron Johnson was appointed as the new CEO for JC Penney to help regain the company’s competitive edge.

  1. THE NEW STRATEGY LINKING IMC

His strategy included Pricingfor Sales Promotions:In order to portray the company image as a higher-quality retailer like its competitors; Macy’s and Kohl’s, JC Penney establishednew, three-tiered “fair and square” pricing strategy; everyday prices,month-long values, and best prices. Everyday prices specified daily low prices (about 40 percent lower than previous ones), month-long values indicatedmonthly discounts on merchandise and the best prices stated the clearance prices established on every month’s first and third Fridays. “Happy Return” Policy:this new friendly policy to return any article, anytime and anywherewas established to regain the agitated customers.In the presence of receipt, the customer could exchange the product or get a full refund. However, in case of no receipt, the item could still be exchanged, or the customer could earn a full refund through a JC Penney gift card.Logo:The new, fresh and sleeker logo, designed to resemble the American flag in order to signify patriotism andemboss JC Penney as an American store.The logorepresented the new “fair and square” pricing strategy. Store Layouts:in order to provide a patriotic American ambience, the large aisle passing through the middle of the store was named “Main Street,” and the old-fashioned central jewelry counters were replaced by a “Town Square.” Spokesperson:Ellen DeGeneres continued to be JC Penny’s spokesperson.

  1. EFFECTIVENESS OF THE NEW STRATEGY

The rebranding strategy by the CEO Ron Johnson had been ineffective as the communication flaws affected the company very badly; IdentityCrisis: Consumers are confused about the repositioning of JC Penny. Thecompany focusas a lower-end discounter and a higher-end department store has damaged the company’s positioning as the retail spectrum where the company falls is no longer clear.Lost Customers, Sales and Profitability: The loyal customers preferred theJC Penney brand’s system of coupons and seasonal sales. The new pricing created confusion over the quality and pricing of products. The new CEO, Ron Johnson focused on gaining new customersat the cost of abandoning its old customers.The result was dissatisfied customers who felt that the department stores became more expensive and less enjoyable. The middle-market lost its expected discounts. Employee Confusion About the new Internal Policies: As a CEO, Ron Johnson failed to communicate the strategy and plans to the employees which created more confusion and it made it hard for the employees to relate themselves to the policies. As a result, JC Penney had to rehire Myron Ullman in April 2013to replace Ron Johnsonfor JC Penny’s survival. In January 2014, JC Penney Co. has planned to close down 33 stores and removearound 2,000 jobs to help save $65 million a year.

  1. LESSONS

The lessons from CEO’s ineffective communication strategy are as follows: Ineffective internal and external communication:While undergoing a radical brand transformation, the current direction needs to be effectively communicated to potential consumers. JC Penney failed to communicate the shift from the store’s traditional model. Italso failed to effectively communicate and implement the new pricing system within the departments. This failure in effort to effectively communicate the transformation of brand image, identity and positioning resulted in the loss of traditional customers and is failure to attract new customers. This negatively impacted the company’s revenue and profitability. This also led to customer ill will and customerunwillingness to shop at JC Penney. Ron Johnson lacked the art of directing the managers and employees to the new strategy and pricing system.As a result,managers and employees could not relate themselves to the stores. Inability to satisfy stakeholders: It is highly important for a CEO to safeguard interests of and satisfy the stakeholders but unfortunately it has not been the case here in Ron Johnson’s tenure. The shareholders desire to retain profits and improve portfolios, consumers are confused about different products and quality, price system, and poor discounts, and employees are worried about losing their jobs with stores closing down.

  1. RECOMMENDATIONS

The recommendations for the new CEO are to design an advertising campaign that can explain to its customers how it has made a transformation to satisfy their shopping needs, improve the reward system to further encourage loyalty by offering more discounts to loyal customers, gain customer insight to refine the shopping experience by gaining customer feedback through surveys,maintain clear lines of communication so that employees are informed of policy and strategic changes, send “Miss You” letters to old customers and letters to current customers to explain to them JC Penney transformation, train employeesregularlybefore implementing changes to ensure employee awareness and understanding, enhance open communication in organization culture for effective information flow between managers and employees, and improve the ecommerce and communication through improvement in website.

STRENGTHS

  • Strong brand recognition
  • Available in all sizes
  • Partners with David’s Bridal & Sephora
  • Affordable rates
  • Sweepstakes
  • Large number of stores nationwide

WEAKNESSES

  • Decline in sales
  • Low popularity
  • Confused brand identity and position
  • Less coupons
  • Moderately expensive pricing
  • Poor advertising campaign

OPPORTUNITIES

  • Interacting through social media
  • Sponsorships
  • Appoint younger designers
  • New spokesperson
  • New product lines can be introduced
  • Improve online sales

THREATS

  • More informed consumers can compare brands online
  • Increasing competition
  • High labor cost in US
  • Same clothing lines as competitors means less differentiation

REFERENCES

  • Beltran, Joshua et al. JC PENNEY, INC: The impact of rebranding on internal and external communication. 2013. The Web

http://classic.marshall.usc.edu

  • Kitchens, Ashley et al. jcp. The Web.

http://www.slideshare.net

  • JC Penney to Close 33 Stores, Cut 2,000 Jobs. 2014. The Web

http://adage.com/article/news

  • JCPenney Strategic Communication Plan Book. The Web.

http://eportfolios.ithaca.edu

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