Strategic Plan Presentation

Group Research PowerPoint ProjectBy: Michelle Captain, Michelle Nash, Renee Narzako, Phillip Baade, Delphine Lim

Introduction: Issues Affecting JC Penny

Organization

Marketing

Customer Connections

Content

Competitors In Retail Industry

In 2013 J.C. Penney was ranked 215th on the Fortune 500 list

It has been a successful department store in years past

Recently, the retail giant has experienced a drastic drop in revenue and sales

This is due to a consecutive decrease in profits/revenue and its foreseeable future is now uncertain

For this presentation, we will look at why these problems arose and ways J.C. Penny can stop this downward spiral.

Introduction

History

“My name is James Cash

Penny and I was born in Sep 16,

1875 in Hamilton Missouri”

“I was born into a poor farming family & had eleven other siblings”

“I was taught at a young age to value the family's Golden Rule: Honor, Education, Self Discipline, & Self Reliance.”

“This Golden Rule would be the basis of my future endeavors.”

In 1898, Penney moved to Colorado and began working for Thomas Callahan and Guy Johnson who owned several dry goods stores called the Golden Rule

Four years later he was approached by the two men and offered a partnership

A year after opening his new store, Penney was successfully managing a total of three stores

Later in 1900’s, Penney bought Callahan and Johnson shares of the Golden Rule chain

Golden Rule

In 1913, Penney changed the Golden Rule franchise name to J. C. Penney Co.

By then, he owned a total of thirty-four stores

Annual sales exceeded $2 million Penney’s embraces “Honor,

Confidence, Service, and Cooperation” and decides to make it the company motto

This motto is still in place today

JCPENNYThe Beginning

Current situationSales and revenue

have steadily declined and hit an

all time low

Stock prices are plummeting

The reasons for the decline started five

years ago due to the recession and mismanagement

The retail giant is trying to keep up

appearances while rumors swirl on Wall Street of bankruptcy

J.C. Penney has dropped 62 places

from last years stand point on the

Forbes 500 list

Ron Johnson,Operation Vice

President of Apple, joined J.C.

Penny as CEOin Nov. 2011

He was brought in to bring J.C.

Penny out of its perpetual slump

His business strategies were

deemed as thinking out side of the preverbal

box

His goal was to revamp the aging

company and attract new customers

With new pricing and

promotional strategies

It is called the “Fair & Square Pricing” strategy

Which led to……

Within the 16 month stay at J.C. Penney, Ron Johnson: Bypassed market research and put a new pricing

strategy into place Took away all coupons and promotions stating that

coupons were comparable to drugs and customers needed to be weaned off of them

His statement enraged and alienated loyal customers The new changes confused existing and new

customers Insulted customers by stating that they need to be

educated on how the new pricing strategy worked Johnson executed one of the most aggressive and

unsuccessful tenures in retail history He was fired on April 8, 2013

THE MOST spectacular Retail

Failure In Our Generation

Organization• Over the past couple of years, J.C. Penney

went through major transformation under the leadership of Ron Johnson

• Objective was for J.C. Penney to become America’s favorite store which involve changing all aspects of the store, including upper management structure and employment changes.

• The long-term transformation process presented many unforeseeable risks• Declining employee morale• Inadequate management structure

• Beginning in April 2012, massive job cuts occurred.• J.C. Penney cut approximately 600 jobs at its headquarters and just three

months later, the company cut approximately 350 more jobs at its headquarter location (Smith, 2013, para. 4).

• Ron Johnson, CEO and Chairman, of J.C. Penney stated that the job cuts were necessary to move forward. Johnson stated:• “Often in business, companies must streamline in order to leap forward . . . In

our case, this has involved some very difficult decisions that have had an impact on many of our associates, but these changes are essential to help us achieve our long-term goals and, ultimately, grow our associate base as we grow our business. (as cited in Moin, 2012, para. 4)

Employee Morale

• In addition to the massive job cuts, most employees hold entry-level, part-time jobs, thus not receiving sick time, vacation time, insurance benefits, or bonuses.

• Additionally, the first year of the transformation process led unexpectedly lower revenue.

• Ultimately, this meant employee morale was affected even more because the ability to give bonuses, raises, an or incentive compensation opportunities were decreased.

Employee Morale

• Reducing company costs was a major goal of the transformation process.• e.g., massive job cuts employees faced

• Job cuts also took place in the upper management structure of J.C. Penney.• The significant reduction resulted in the company operating with

fewer individuals and increased job responsibilities (J.C. Penney Annual Form 10-K Filing, 2013, p. 8).

Inadequate management

• The upper management restructuring resulted in J.C. Penney having a decentralized management structure, which ultimately has potential risks for all levels of the company.

• The decentralized management structure, “distributes significant control and decision-making powers among our senior management team and other key employees, some of whom are located in satellite offices” (J.C. Penney Annual Form 10-K Filing, 2013, p. 8).

• As a result, communication, morale, management cohesiveness, and effective decision-making are negatively affected.

Inadequate management

Solutions• To increase employee morale:

make sure employees on all levels are aware of the company’s long-term goals for transformation and success.

Provide to employees all information that does not violate legal restrictions.

• This way, employees would be more likely to have the mindset to jump on board and be a team member with the company’s transformation process.

Solutions• Focus on hiring talents that will ensure

long-term success for the transformation. Talents in management, sales,

marketing sourcing, and human resources

• Make sure that employees know that the long-term goal is for company growth, meaning more jobs will be needed once growth begins to occur.

Solutions• Shift away from the decentralized

management structure to: Remove communication barriers Improve decision-making Increase employee morale

• Look at the management methods used by their competitors to compare management structures. Macy’s is ranked 109 (previously 110) on

the 2013 Fortune 500 List Kohl’s is ranked 148 (previously 146) on

the 2013 Fortune 500 List J.C. Penney’s is ranked 215 (previously

153) on the 2013 Fortune 500 List

marketing Ron Johnson failed to understand the

customer’s needs and he believed J.C. Penny needed to update its image by:

• Selling higher priced items• Selling more brand name

merchandise• Totally making over some of the

store’s departments

marketing Ron Johnson adopted the wrong

marketing strategies which became a total disaster

• Totally eliminating sales coupons and sales circulars

• Adopting a 40% off “all the time” pricing policy

• Eliminating special sales events• Pursuing a younger sales

demographic • Eliminated popular store brands• Implementing strategy quickly

Marketing Debacle Johnson’s plan left behind J.C. Penney’s core

customer base• Customers miss coupons and sales• Customers miss the brands that were

eliminated Younger customers never bought into the new

concepts Redesigned departments left customers feeling

alienated from the sales experience Sales dropped by over 60 to 70% Stock price fell to almost “junk status” J.C. Penney is teetering on bankruptcy No sales clerks to help with shopping experience J.C. Penney’s online sales system was basically

ignored

Solutions• Bring back sales coupons and special sales

events• Bring back popular store brands• Bring back sales clerks• Remodel some store departments• Shore up home goods and furniture

departments• Reemphasize center store cosmetic counter• Invest in commercial advertising• Commit to stronger online presence and

inventories

Department stores overall have had a tough time amid stiff competition from specialty and online retailers.

The closest competition of J.C. Penney have all had sales growth for 2013, yet J.C. Penney has had a significant decrease.• 2013 - a 24.77% decrease

CompetitorsIn the retail industry

Competitors 2.53% Growth in Sales/Revenue for

2013 Special Buying Incentives:

• Kohl’s cash which gives customers reason to return and spend more money• Large discounts of up to 30% can be

used in conjunction with sale prices and Kohl’s cash

Display Sale Prices – on everyday prices

Competitors 4.92% Growth in Sales/Revenue for

2013

Advertise like no other

Brand’s product and advertisements are aesthetically pleasing

Focus on creating fun and intuitive shopping experience that considers customers

Competitors 4.97% Growth in Sales/Revenue for

2013

Convenience of in-stock merchandise

They have massive buying power

Try to cut costs out of operations such as distribution centers, home office, fleet, etc.

Competitors4.85% Growth in Sales/Revenue for 2013

Fierce competitor – especially during holidays with exciting merchandise and promotions

Always looking for ways to surprise and delight the consumer - newness and quality

Logistics and Operations - constant push to improve, raise the bar, challenge assumptions, and deliver value to stores, consumers and shareholders

Competitors22% Growth in Sales/Revenue for 2013

Innovative and lots of selection

Platform for sellers from all over the world, therefore prices are competitive

Offer promotions like 2-day free shipping during festive season e.g. Christmas

Solutions• Stand out among their customers

Work with suppliers to develop

exclusive product for J.C. Penny only

Loyalty Points

Price match

Improve e-commerce site and allow more suppliers from all over the world to participate

Customer Connections

How did J.C. Penny lose touch with

our customers?

Took away their most popular cheap and good quality home brand. E.g.

St John's Bay Gloria Vanderbilt in attempted to

upscale the retailer by bringing in well-known

brands like Martha Steward Living and dedicating floor

space to boutique like Levi’s and Liz Claiborne

Customers feel alienated

and never come back

Stop listening to what our

customers want

Took away sales and coupons

Customer Connections

How did J.C. Penny lose touch with

their customers?

J.C. Penny ex CEO, Ron Johnson, arrogantly

commented that “customers needed to be educated as to how the pricing strategy work”

when shoppers were not reacting positively to the

no more coupon marketing strategy

Insensitive to customers Johnson also compared

their customer’s usage of coupons to addictive

drugs which insulted their most loyal

customers that used coupons for many

years.

Solutions• Public campaigns to gain trust and build

loyalty among customers and investors Help customers and investors

understand J.C. Penny’s future plans

Efficient communication with customers and investors

Consider writing a sincere publication to tell their customers that we have changed and are here to listen to them.

Solutions• Engage with our customers

Using social media like Facebook,

twitter, and Instagram to:• Show appreciation• Create Facebook or Instagram

Contest• Update customers on deals and

promotion Have surveys to find out how we can

improve to please our customersBring back the coupons and brands

that customers like

References

J.C. Penney Company, Inc. (2013).  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for fiscal

year ended February 2, 2013. Retrieved from http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-sec

Moin, D. (2012).  Penney’s cuts 900 jobs.  WWD, 203.71, n. pag.  http://

go.galegroup.com/ps/i.do?id=GALE%7CA286522386&v=2.1&u=lom_lansingcc&it=r&p=ITOF&sw=w&asid=f3d1149c916d2

6b7a3cc2fd7f69871ee

Smith, K. (2013).  US: JC Penney coy on potential job losses.  Just-style.com. n. pag.  http://

go.galegroup.com/ps/i.do?id=GALE%7CA317973981&v=2.1&u=lom_lansingcc&it=r&p=ITOF&sw=w&asid=0ecd9b862f84c7

a36b3db8baef5d3ba5

"Business & Money." Business Money The 5 Big Mistakes That Led to Ron Johnsons Ouster at JC Penney Comments. N.p., n.d. Web.

10 Nov. 2013. Retrieved from

http://business.time.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnsons-ouster-at-jc-penney/

References

"Fired - Google Search." Fired - Google Search. N.p., n.d. Web. 10 Nov. 2013.

"J. C. PENNEY COMPANY, INC. PROVIDES UPDATE ON PROGRESS OF TURNAROUND." MarketWatch. N.p.,

n.d. Web. 10 Nov. 2013. Retrieved from https://www.google.com/search?q=fired

"JCPenney's Senior Management Team Knows There's Only One Way Out Of This Mess." Business Insider. N.p., n.d.

Web. 10 Nov. 2013. Retrieved from http://www.businessinsider.com/jcpenney-must-regain-consumers-trust-2013-3