Jcpenney Strategic Analysis
STRATEGIC ALTERNATIVES
In January 2012, newly appointed CEO, Ron Johnson introduced a plan to rebrand the department store chain into a 21st century retail powerhouse. Launching of the new J. C. Penney brand identity was set to occur over four years and would include a new logo, a new in-store experience featuring new and transformed brands, and most importantly, it would change the way that the company priced merchandise. Unfortunately, J. C. Penney suffered a 25% sales decline in the first year and Johnson was fired after only 17 months.
Historically, J. C. Penney’s strength had been communicating the relationship between quality and value, in a way that the customer could understand. J. C. Penney lost this connection when we introduced a complicated, three-tier pricing strategy that eliminated the use of promotions and coupons. Despite research-supported ideas and the conscious rebranding efforts, we have failed to generate the urgency and excitement required to win the support of customers and employees. Poor messaging regarding the rebranding, paired with miscommunication between the company and our customers, has left us in a major financial bind and business crisis.
With the reinstatement of former CEO, Mike Ullman, we find ourselves at a strategic crossroad and the Board of Directors has made the decision to explore and evaluate strategic alternatives. We are soliciting your expert advice in creating a more cohesive image through one of the following approaches:
1. New management, same rebranding strategy. The rebranding strategy was poorly executed under Mr. Johnson’s management and took extraordinary measures, but under the right management and after a few adjustments, the branding strategy will be a success.
2. New management, new brand. Another option is making J. C. Penney a leader in style, by offering stylish, high-quality merchandise for new customers’ lifestyles, as well as an exceptional and complete assortment of apparel, accessories, and home merchandise to regain old customers. This would mean repositioning a low-end bargain department store as a high-end, high-style store.
3. Revamping an old brand. Reconnect with the customer using the price and value perception that was lost during the rebranding initiative by reintroducing an updated version of the old pricing strategy.
BACKGROUND AND STATE OF INDUSTRY
Historically, the department store affected every facet of social and economic life in America. The rise of the department store from the mid-1850s to the end of the 19th century was a major revolution for business and society. It revolutionized the shopping experience and created an entirely new view of ordinary retail stores. Endless categories of items from jewelry and accessories to home goods and furniture were available to all customers under one roof. Department stores found success in the early years, because they were selling more than just “products.” They were selling an entire experience to the American consumer. Known for their low prices, convenience, experience, and variety, department stores emerged as the iconic establishments of their time. These stores became mainstream institutions in downtown areas. Some department stores, such as Filene’s, even had restaurants and tearooms located inside the building. They had services like photo studios and special events like fashion shows and parades. Macy’s Thanksgiving Day Parade is still a widely popular event today, originating in the 1920s. Consumers didn’t just come to department stores to shop; they came to spend time with family and friends and fully experience every element in these new “stores.” When American cities began to struggle in the 1940s, department stores opened up in suburban shopping malls. At the same time, the first Wal-Mart, Target, and K-Mart stores emerged with their low prices and convenience that was hard to replicate.
Today, companies like Nordstrom, Saks Fifth Avenue, Neiman