Strategy Mistake of Jcpenney
In the past few years, J. C. Penney sale is falling rapidly. Competitors such as Macy’s, Target, and Wal-Mart are one of the reasons. The rise of Kohl’s is another major concern. However, putting these companies aside, the company J.C. Penney itself has problems.
Wrong Strategy: At the beginning of 2012, J.C. Penney was trying to remodel its business. Ron Johnson, the chief executive of J.C. Penney, announced in January to take out all of the coupon discount system. Instead, J.C. Penney would introduce “everyday low prices”, “month long values specials”, and “clearance events” every month. However, the result does not work well. In May, J.C. Penney announced their first-quarter report that dropped 18.9% of sales comparing with the same quarter last year. It was $163 million loss for only the first quarter of the year. J.C. Penney did not realize that the coupon strategy is like a symbol of J. C. Penney. This is how J.C. Penney survives all these years. By eliminating this strategy, J.C. Penney suddenly has no advantage to competitors and had no meaning to the customers. This new pricing strategy change is confusing for customers. Customers would rather shift to similar companies such as Macy’s. The new strategy is losing its current customers and keeping new customers away from J.C. Penney because it fails to provide what the customers need. In order to minimize the loss, J.C. Penney would cut 350 people at its headquarters, but this can barely make the cost problems better. According to Market Watch, Michael Exstein, a credit Suisse analyst, adjusted his prediction about J.C. Penney that it would double his original loss estimation for the second-quarter of the year, from 19 cents a share to 38 cents a share.
Executive Team Failure: Another big issue for J.C. Penney is that one of the key executive, Michael R. Francis, left the company suddenly and immediately. Mr. Francis was the retailer’s president who was responsible for marketing, merchandising, and
Wrong Strategy: At the beginning of 2012, J.C. Penney was trying to remodel its business. Ron Johnson, the chief executive of J.C. Penney, announced in January to take out all of the coupon discount system. Instead, J.C. Penney would introduce “everyday low prices”, “month long values specials”, and “clearance events” every month. However, the result does not work well. In May, J.C. Penney announced their first-quarter report that dropped 18.9% of sales comparing with the same quarter last year. It was $163 million loss for only the first quarter of the year. J.C. Penney did not realize that the coupon strategy is like a symbol of J. C. Penney. This is how J.C. Penney survives all these years. By eliminating this strategy, J.C. Penney suddenly has no advantage to competitors and had no meaning to the customers. This new pricing strategy change is confusing for customers. Customers would rather shift to similar companies such as Macy’s. The new strategy is losing its current customers and keeping new customers away from J.C. Penney because it fails to provide what the customers need. In order to minimize the loss, J.C. Penney would cut 350 people at its headquarters, but this can barely make the cost problems better. According to Market Watch, Michael Exstein, a credit Suisse analyst, adjusted his prediction about J.C. Penney that it would double his original loss estimation for the second-quarter of the year, from 19 cents a share to 38 cents a share.
Executive Team Failure: Another big issue for J.C. Penney is that one of the key executive, Michael R. Francis, left the company suddenly and immediately. Mr. Francis was the retailer’s president who was responsible for marketing, merchandising, and