Free Major Problem Identification Case Study Sample
J.C. Penny’s attempt to reverse its downward plunge after Ron Johnson has been quite a struggle. Accordingly, the company’s turnaround is quite uncertain owing to its unpredictable performance. Since the leadership of Ron Johnson, J.C. Penny’s former C.E.O., the company has been on tough times. During his brief stint as CEO, Johnson has made several changes with the company; most of which are drastic and unconventional. Among the major changes that Johnson made was to take out the store’s discounts and promotions. Aside from that, he made a significant overhaul of J.C. Penney’s personnel, taking out some of the executives that oppose him. Perhaps for the reason of saving overhead expenses, Johnson fired 600 employees including corporate staffs and executives while getting rid of the company’s long time ad agency and public relations agency Saatchi & Saatchi and Johnson M Booth & Associates respectively. Despite these major initiatives, Johnson’s strategy ultimately failed. Or maybe it can be deduced that the company is already failing and Johnson just failed to deliver what was expected of him; and that is to turn the company around back to profitability. This paper would like to investigate the major reason why J.C. Penny is failing and perhaps recommend several strategies that could put the company back on track.
Though most people and analysts blame Ron Johnson for J.C. Penney’s failed strategies, there are several indicators that the company is struggling even before Johnson was hired as C.E.O. The company is not new to the department store industry. In fact, it is one of the pioneering retail chains in the U.S. By being historically founded since 1902 by James Cash Penney in Kemmerer, Wyoming; J.C. Penney easily outdates Wal-Mart. The company’s name was ‘The Golden Rule’ back then although it was later on incorporated as ‘J.C. Penney’ in 1913 following the acquisition of the entire chain of The Golden Rule by Penney. The company has maintained its growth since 1980s up to 2000s by giving discounts and promotions. So far, the discounts and promotions have worked out for the company who was, since then; have been struggling with its identity whether or not it would position itself as a mass-merchandise store or a department store. But by the start of the second millennium, the company’s obsolete systems and awkward positioning began to take its toll. The recession was also starting to set in and in a volatile market such as the fashion and department store industry, competitors began to eat away J.C. Penney’s market share. 2011 was particularly not a good year for the company, whose board is already contemplating on giving J.C. Penney a drastic makeover. Among the major issues during that year was the cotton shortage which eventually took cotton prices in an all-time high and for some reason, J.C. Penny’s share dropped to 5%. There was also the problem of having an outdated data system; giving the board all the more reason to seek for professional help in making the needed makeover of the company as they saw fit. Johnson, on the other hand, was a high profile executive who made a reputation of being a game changer. After all, he has been a key figure in Target’s marketing campaign as well as with Apple’s highly successful retail campaign. Evidently, J.C. Penney would like to translate Johnson’s innovative strategies in a department store setting and in the same year, the company hired Johnson as their new C.E.O.
Perhaps Johnson have a haunch that discounts and promotions does not work for J.C. Penney anymore or maybe he would like to steer the company into a new direction; focusing on a select market segment. But whatever his convictions are, Johnson’s first move as C.E.O. was taking out the store’s traditional discounts and promotions. Unfortunately, this move further isolated the company’s avid customers who were expecting to see these discounts and promotions. Also, Johnson may have failed to consider that J.C. Penney is not some fancy store that produces highly demanded products like Apple. In fact, J.C. Penney is just another department store that sells apparels that can be produced generically and can be bought practically anywhere. Unless he wants to position J.C. Penney as a signature brand with the likes of Prada and other Veblen fashion stores, which is very much unlikely, then Johnson’s taking out of the stores promotion and discounts would ultimately fail.
It is quite evident that J.C. Penney is not only suffering from leadership issues as what Johnson’s brief stint suggests but is, in fact, experiencing internal issues that needs to be resolved. For the same reason, changing the company’s leadership does not necessarily guarantee success unless the leader fixes the internal issues of the company. Promotions and discounts are just one aspect of the company’s strategic positioning. Thereby taking back J.C. Penney to its traditional ways of giving discounts and promotions would not guarantee continued success. On the other hand, an overhaul of the company’s operational systems would be necessary to address the company’s issues.
Recommended Course of Action
Taking back J.C. Penney to its traditional roots – being a store that provides cheap but quality clothing line, would stabilize the company’s volatile position. Instead of making radical changes towards customer experience, it is recommended that the company should focus more on improving the efficiency of its internal operations. Among the major elements that the company should focus on are improving customer service; improving its online presence through ecommerce and other online initiatives; improving its data systems and technology; and improving its product quality through careful selection of suppliers. In other words, J.C. Penney should focus its efforts on value-adding activities while staying true to the company’s traditional position of providing inexpensive but quality apparels.
J.C. Penney may not have fully recovered from the fiasco of Ron Johnson, its former C.E.O. Unfortunately, instead of heading towards a definite direction, the company’s current strategies under the new management are quite uncertain. As recommended, instead of exhausting the company’s resources on taking drastic and unproven strategies, it would be best to focus more on value-adding activities starting with the internal operations of the company. Evidently, the company needs to seek stability first by going back to its traditions but on the process, it needs to improve on its internal operations.
Kippen, M., & Quin, K. JCPenney – A New Spin on an Old Idea . 2013. February 2015 <http://www.babson.edu/executive-education/thought-leadership/retailing/Documents/jcpenney-new-spin-on-old-idea.pdf>.
Minato, C. "THE JC PENNEY DISASTER TIMELINE: How Ex-Apple Guru Ron Johnson Is Destroying The Company." 16 June 2012. Business Insider. November 2013 <http://www.businessinsider.com/the-jcpenney-disaster-timeline-how-ex-apple-guru-ron-johnson-is-destroying-the-company-2012-6#>.
Pearce, J., & Robinson, R. "JCPenney's Uncertain Turnaround." (n.d.): 1 - 3.
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