at Concepts and Cases Competitiveness and Globalization 12th Michael A. Hitt.pdf ( 159 D, #768 T) Q 19 ation, focused cost leadership, focused differentiation, and inte- grated cost leadership/differentiation business-level strategies? Mini-Case nds Is JCPenney Killing Itself with a Failed Strategy? A few years ago, JCPenney was a traditional, low-end department store that appeared to be in a slow decline. Bill Ackman of Pershing Square Capital Management, a hedge fund investor, bought a large stake in the company and pushed to hire a new CEO, Ron Johnson. Johnson, who had successfully created the Apple retail store con- cept, was tasked with turning around the company's fortunes. In January 2012, Johnson announced the new strategy for the company and rebranding of JCPenny. The strategy an- nounced by Johnson entailed a remake of the JCPenny retail stores to create shops focused on specific brands such as Levi's, IZOD, and Liz Claiborne and types of goods such as home goods featuring Martha Stewart products within each store. Simultaneously, Johnson announced a new pricing system. The old approach of offering special discounts through- out the year was eliminated in favor of a new custom- er-value pricing approach that reduced prices on goods across the board by as much as 40 percent. So, the price listed was the price to be paid without further discounts. The intent was to offer customers a "better deal” on all products as opposed to providing special, high discounts on selected products. The intent was to build JCPenny into a higher-end (a little more upscale) retailer that provided good prices on branded merchandise (mostly dothes and home goods). These changes overlooked the firm's current customers; JCPenny began competing for customers who normally shopped at Target, Macy's, and Nordstrom, to name a few of its competitors. Unfortunately, the first year of this Conynght 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic nights, some third party content may be suppressed from the look andereChaptens). Editorial review has deemed that any suppressed content does not matenally atteet the overall learning experience. Cengage Leaming reserves the right to remove additional coment at any time of subsequent rights restrictions require it. 真窗口 帮助 97% ca. A DET12:06 Q lanagement Concepts and Cases Competitiveness and Globalization 12th - Michael A. Hitt.pdf ( 160 Ti, #768 TT) Q 搜索 hds The question now is whether the company can sur- vive such a major decline in sales and stock price. In 2013, it announced the layoff of approximately 2,200 employees to reduce costs. In addition, CEO Johnson announced that he was reinstituting selected discounts in pricing and offering comparative pricing on products (relative prices with rivals). The good news is that trans- formed stores are obtaining sales of $269 per square foot, whereas the older stores are producing $134 per square foot. Will Johnson's strategy survive long enough for all of the stores to be converted and save the company? The answer is probably not, because Johnson was fired by the JCPenny board of directors on April 8, 2013, about 1.5 years after he assumed the CEO position. new strategy appeared it to be a failure. Total sales in 2012 were $4.28 billion less than in 2011, and the firm's stock price declined by s5 percent. Interestingly, its Internet sales declined by 34 percent compared to an increase of 48 per- cent for its new rival, Macy's. All of this translated into a net loss for the year of slightly less than $1 billion for JCPenny. It seems that the new executive team at JCPenny thought that they could retain their current customer base (perhaps with the value pricing across the board), while attracting new customers with the new "store- within-a-store" concept. According to Roger Martin, a former executive, strategy expert, and current Dean at the University of Toronto, “... the new JCPenney is com- peting against and absolutely slaughtering an import- ant competitor, and it's called the old J.C. Penney." Only about one-third of the stores had been converted to the new approach when the company began to heavily pro- mote the concept. Its new store sales produced increases in sales per square foot, but the old stores' sales per square foot markedly declined. It appears that Penney was not attracting customers from its rivals but rather cannibal- izing customers from its old stores. According to Martin the new CEO likely understands a lot about capital mar- kets but does not know how to satisfy customers and gain a competitive advantage. Additionally, the former CEO of JCPenney, Allen Questrom, described Johnson as having several capabilities (e.g., intelligent, strong communicator) but believes that he and his executive team made a major strategic error and was especially insensitive to the JCPenny customer base. lan Sources: P. Wahba, 2015, J.C. Penney still blaming Ron Johnson-era for slow profit growth Fortune, www.fortune.com, March; N. Tichy, 2014, J.C. Penney and the terrible costs of hiring an outsider CEO, Fortune, www.fortune.com, November 13: J. Reingold, A. Sloan, & D. Burke, 2013, When Wall Street wears the pants, Fortune, April 8, 74-81; S. Schaefer, 2013, Ron Johnson out as JCPenney chief, Forbes, www.forbes.com, April B: M. Nisen, 2013. Former JC Penney CEO says Ron Johnson is a very nice man who will probably fail, Yahoo! Finance, finance.yahoo.com, accessed April 6; B. Byrnes, 2013. How J.C. Penney is killing itself, The Motley Fool, www.fool.com, March 31; B. Jopson, 2013, JC Penney cuts 2,200 jobs as retailer struggles, Financial Times, www.ft.com, March 8; J. Macke, 2013, J.C. Penney's last shot at survival, Yahoo! Finance, finance. yahoo.com, accessed March 1; S. Clifford, 2013, Chief talks of mistakes and big loss at JC Penney, New York Times, www.nytimes.com, February 27; M. Halkias, 2013, J.C. Penney CEO Ron Johnson says changes will relurn retailer to growth, Dallas Morning news, www.dallasnews.com, February 9: They're back: JCPenney adds sales, 2013, USA Today, www. usatoday.com, January 28; A. R. Sorkin, 2012, A dose of realism for the chief of J.C. Penney, New York Times DeulB%k, dealbook.nytimes.com, November 12. 具窗口帮助 A Management Concepts and Cases Competitiveness and Globalization 12th AKO 97% 29 周三下午12:06 四 Michael A. Hitt.pdf ( 160 i, #768 TT) Q 里索 Wicicas uc viuc Its are producm 91594 Per square foot. Will Johnson's strategy survive long enough for all of the stores to be converted and save the company? The answer is probably not, because Johnson was fired by the JCPenny board of directors on April 8, 2013, about 1.5 years after he assumed the CEO position. hds vast penraps www mc vanuc Picing across Uit voaru while attracting new customers with the new "store- within-a-store" concept. According to Roger Martin, a former executive, strategy expert, and current Dean at the University of Toronto, “... the new JCPenney is com- peting against and absolutely slaughtering an import- ant competitor, and it's called the old J.C. Penney." Only about one-third of the stores had been converted to the new approach when the company began to heavily pro- mote the concept. Its new store sales produced increases in sales per square foot, but the old stores' sales per square foot markedly declined. It appears that Penney was not attracting customers from its rivals but rather cannibal- izing customers from its old stores. According to Martin the new CEO likely understands a lot about capital mar- kets but does not know how to satisfy customers and gain a competitive advantage. Additionally, the former CEO of JCPenney, Allen Questrom, described Johnson as having several capabilities (e.g., intelligent, strong communicator) but believes that he and his executive team made a major strategic error and was especially insensitive to the JCPenny customer base. I Sources: P. Wahba, 2015, J.C. Penney still blaming Ron Johnson-era for slow profit growth Fortune, www.fortune.com, March; N. Tichy, 2014, J.C. Penney and the terrible costs of hiring an outsider CEO, Fortune, www.fortune.com, November 13; J. Reingold, A. Sloan, & D. Burke, 2013, When Wall Street wears the pants, Fortune, April 8, 74-81; S. Schaefer, 2013, Ron Johnson out as JCPenney chief, Forbes, www.forbes.com, April 8; M. Nisen, 2013, Former JC Penney CEO says Ron Johnson is a very nice man' who will probably fail, Yahoo! Finance, finance.yahoo.com, accessed April 6; B. Byrnes, 2013, How J.C. Penney is killing itself, The Motley Fool, www.fool.com, March 31; B. Jopson, 2013, JC Penney cuts 2,200 jobs as retailer struggles, Financial Times, www.ft.com, March 8; J. Macke, 2013, J.C. Penney's last shot at survival, Yahoo! Finance, finance. yahoo.com, accessed March 1; S. Clifford, 2013, Chief talks of mistakes and big loss at JC Penney, New York Times, www.nytimes.com, February 27; M. Halkias, 2013, J.C. Penney CEO Ron Johnson says changes will return retailer to growth, Dallas Morning news, www.dallasnews.com, February 9; They're back: JCPenney adds sales, 2013, USA Today, www. usatoday.com, January 28; A. R. Sorkin, 2012, A dose of realism for the chief of J.C. Penney, New York Times DealB%k, dealbook.nytimes.com, November 12. lan Case Discussion Questions 3. Why was this strategy a disaster for JCPenney? 1 What strategy was the new CEO at JCPenney seeking to imple- ment given the generic strategies found in Chapter 4? 4. What does it mean to be "stuck in the middle" between two strategies (i.e., between low cost and differentiation strategies)? 2. What was the result of change in strategy implemented?
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