JC Penney Analysis

 

 

STR/581

30 Jan 2022

 

 

 

 

 

 

 

 

 

 

 

JC Penney Analysis

External factors have a huge impact on the success of an organization. Competition is one of the biggest factors that can lead to the collapse of a huge corporation. Most of the businesses implement a competitive advantage that allows them to remain competitive. However, others have difficulties in fighting the competition and eventually become insolvent. JC Penney is one of the company’s that has survived two World Wars, the Great Depression, and financial crisis only to collapse due to the aggressiveness of the competitors. JC Penney is one of the oldest retailers having started in 1902 with its first store in Kemmerer, Wyoming (Kelly, 2021). It is one of the few retailers that have been trading for over a century. However, due to various factors like competition and the pandemic, the company had to file for bankruptcy as the debt kept on increasing.

Financial Plan

JC Penny had to file for bankruptcy protection as its debt kept on increasing. The company’s debt stood at $4 billion and its stock price was below $2 (Meyersohn, 2021). According to the Annual report (202), the net loss of the company for the five years dating from 2015, has been on the increase as the loss for 2019 standing at $268 million. 2015 saw the company post one of its worst losses which stood at $513 million. The debt-to-capital ratio for the financial year ended 2019 was 81.8%. These results are partly the reason why the company opted to file for bankruptcy.

The company has also opted to close down most of its stores and lay off the workers. JC Penny’s stores in the West were the first to lose down as the company wanted to reduce its operating costs (Tokosh, 2018). The closure of the stores would also allow the company to continue its operations in some of the stores that have improved their revenue. The plan could have worked if the cost of maintaining the debt was lower.

The revenue for the past decade cannot help the company sustain the debt. The measures taken by the company to reduce its costs and protect itself and can be effective in helping the company. Closing some of its stores and filing for bankruptcy can be useful strategies which will help the company fight another day.

JC Penney can implement various marketing and financial strategies which can ensure one of the oldest retailers stays in business. One of the issues highlighted as part of the failure of the company was outdated policies. The company has to change with the tide and implement strategies that will help them compete with some of the biggest retailers like Walmart. This will involve changing its technology strategy and adapting a stronger e-business model. The company faced technology problems when trying to implement its e-business strategy. The collapse of its website in 2014 was one of the signs that JC Penny was not prepared to adopt e-business model. Therefore, the company can learn from previous mistakes and adopt the model. The success of some of the retail giants like Walmart will be based on e-business.

The return policy and discount policies will have to be changed. This is based on complaints by customer about the company using outdated policies and having issues with the return policy. The only way out for JC Penney is recovering its sales. Sales recovery will help the company repay a chunk of its debt and remain competitive. Implementing marketing strategies that attract older customers and new customers will be one of the strategies that will help the company. Changing the discount and return policies will be the beginning of revamping the once retail giant.

Strategies for Competitive Marketing Advantage

JC Penney has already been saved from extinction. However, even with a new management team, the company will have to implement various strategies to remain competitive. Changing its business model will be an essential factor for the success of the company. The current B2C model has not been effective as the company has changed various features over the last decade. There are three features that have to be included in the new business model. The features include; competitive advantage, value proposition, and revenue model. Competitive advantage will include the unique features of the company’s products that cannot be copied by competitors. There are various retail companies in the market like Macys, Walmart, and Target. The company can use the experience it has in the retail industry especially in sourcing to create a competitive advantage. The experience in sourcing will also allow the business model to include B2B rather than having only B2C.

The most effective way of improving the financial performance of the company is to improve its revenue. The revenue model has to be changed to a model that identifies all the income sources in the market. The company cannot rely on brick and mortar business in the current information age. Implementing strategies to revamp and improve the company’s e-business will be effective in improving the revenue streams.

 

 

Plan to Implement Strategies

JC Penney has to change the business model to remain competitive. The retail industry is highly competitive with new players emerging daily. However, each company has several advantages over the others which can be used to improve the company (Brien & Scott, 1992). The plan will require SWOT analysis of the market before implementing the strategies. One of the strengths of the company is its experience in the market. JC Penney has been in the market for over a century where it has gained valuable experience in sourcing. JC Penney will have to leverage on the experience in creating and implementing a competitive advantage.

The company will define the business goals. The management will have to set short-term and long-term objectives. The current short-term objectives are to ensure the company returns to the market. The long-term goals include improving the financial position of the company. This has to be communicated to the departments with departmental goals being set. The staffing, financial needs and budgeting needs will be identified. The business goals will also ensure the right objectives are set and they can be achieved. The performance of the company has to be tracked and the use of key performance indicators will be effective in monitoring the performance.

An evaluation of both the customer and competition will help in determining the market. The company has lost its market share to competitors like Macy’s and has to implement the strategies to regain the market share. Evaluating the needs of the customers will help in identifying gaps in the market which the strategies will help in filling. A gap can be identified where the revenue sources will be increased. The management and the whole organization will then implement the strategies proposed. The strategies will ensure the revenue of the company is improved and the financial issues resolved.

 

References

Brien Ellis & Scott W. Kelley (1992) Competitive advantage in retailing, The International Review of Retail, Distribution and Consumer Research, 2:4, 381-396, DOI: 10.1080/09593969200000014

Kelly Jack. (2021). J.C. Penney’s Sad Story Of Going Broke Slowly, Then Suddenly. Forbes. Retrieved from https://www.forbes.com/sites/jackkelly/2021/01/08/jc-penneys-sad-story-of-going-broke-slowly-then-suddenly/

Meyersohn Nathaniel. (2021). How it all went wrong at JCPenney. CNN Business. Retrieved from https://edition.cnn.com/2018/09/27/business/jcpenney-history/index.html

Tokosh Joseph. (2018). Is the Macy’s in my mall going to close? Uncovering the factors associated with the closures of Macy’s, Sears, and J.C. Penney stores. Growth and Change. Volume 50, Issue 1, Pages 403-423.  https://doi.org/10.1111/grow.12269

United States Exchange and Securities Commission. (2020). JC Penney Company, Inc. retrieved from https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_JCP_2019.pdf

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