Capstone Strategy Playbook for Exceptional Results: Description of the Playbook
The company that I will like to conduct my strategy planning and analysis on is J.C. Penny. J.C. Penny has been around for decades helping families to meet some of their needs. I chose this company because of the major positives and negative effects it has on families. The new management failure understands the environment or focusing on results has run customers away leaving the company in decrease in revenues. The strategy used in the past has brought the company from top to button and as parent who used to shop from this store; I have interest in analyzing and planning strategically to revamp this department store.
Top of Form
The new business model at J.C. Penny involved a transition from the High-low price strategy, to a fair & square pricing system; a system that offered customers cheaper prices on a regular basis (Ofek & Avery, 2012). The price strategy was just one of the components of the new business model, in his bid to reposition the company, newly appointed CEO Ron Johnson introduced a new logo, new brand spokesperson, new store design and new sales strategy (Ofek & Avery, 2012). The new business model was effective in integrating all the components of the turnaround strategy. Although the new pricing strategy was the fulcrum of the company’s turnaround strategy, having a new logo that represented the company’s new mantra (Ofek & Avery, 2012) was a step in the right direction. Similarly, scrapping sales commissions and creating a new sale structure was in line with the company’s adoption of the EDLP strategy. Johnson claimed the turnaround will be based on the company’s heritage, he explained that……. “Every initiative we pursue will be guided by our core value to treat customers as we will love to be treated- fair and square” (Ofek & Avery, 2012).
In my opinion, Johnson failed to treat customers fair and square by ignoring their feedback on taking away sales and discounts, which was one component that attracted customers to the store. Tuttle (2013) stated that Johnson’s focus was on making JC Penny an experience hub with boutique stores, ignoring coupons and sales thereby alienating core customers. By doing this, most loyal customers felt they were no longer the company’s target market. Another missing component was Johnson’s failure to conduct market research to test the appeal of the new pricing strategy with customers before implementation (Ofek & Avery, 2012). Since Johnson didn’t test new strategies in his days at Apple, he didn’t see the need to do otherwise as CEO of J.C. Penny. Ultimately, Johnson failed to ask what customers really wanted. One customer commented that “he is working hard to de-frump the store without considering that many if not most of its customers might have shopped there precisely because they like the more conservative frumpy look” (Ofek & Avery, 2012).
I think there was a disconnection between J.C. Penny’s business model and price strategy. In implementing a business model that offered fair and square prices to its customers, the company deviated from that plan by adopting a strategy that offered three different pricing tiers. I believe the pricing approach was confusing to customers who were familiar with coupons, sales, and seasonal discounts. The lesson learned from this experience is that a company’s business model and pricing strategy should be in unison, any deviation from that might result in customer dissatisfaction.
Granted! Johnson did a great job in his time with Apple. However, he failed to realize that J.C. Penny and Apple had different products. In a 2013 HBR interview, Johnson stated that department stores are gradually losing their relevance because they lacked imagination about the products they stocked, store environment, customer engagement and their enthusiasm for the digital future (Morse, 2013). Such perspectives helped at Apple, but clearly, J.C. Penny wasn’t ripe for such radical change.
References
Morse, G. (2013). What Ron Johnson Got Right. Harvard Business Review. Retrieved from
https://hbr.org/2013/04/what-ron-johnson-got-right
Ofek, E., & Avery, J. (2012). J.C. Penny’s “fair and square” pricing strategy. Watertown MA:
Harvard Business School. Retrieved from https://cb.hbsp.harvard.edu/cbmp/pl/65117437/65117568/3fa19abda3db2de31a445765f249d1bf
Tuttle, B. (2013). The 5 Big Mistakes That Led to Ron Johnson’s Ouster at JC Penney. Retrieved
from http://business.time.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnsons- ouster-at-jc-penney/
Bottom of Form
Message Unread
Message Not Flagged