Situational Analysis
Most people with empathy for American business icons cannot assist but be alarmed over the fate of JC Penney. The company continues to burn cash and loses money at the same time without any hopes for a turnaround. According to Forbes, a large number of investors are bailing out of the company through their stock. The case of J C Penney is attributed to its strategic mistake the management made a few years back before their downfall. What still haunts JC Penny to this date is related to the strategic error concerning pricing strategy (Strong and Lawrence 1). The administration of the chain store made a decision to replace sales through coupons with daily low prices. Apart from the broken pricing model, the management employed a new strategy that tried to alter J C Penney’s positioning without clarifying the kind of customer segment they were eyeing.
The company’s previous policy had been working effective before its current and continuous downfall. It had a functioning policy in place before the strategic mistake to change their pricing model as well as their target consumers. The previous policy worked well for the retailers since it hyped consumer emotions thereby making them feel encouraged and smart. This encouraged the customers to spread the word around, thus increased sales.
However, the adoption of the new policy spear headed by CEO Ron Johnson, the company has been on a fast track to failure. The company adopted a new pricing model which entailed replacing their coupons with an everyday low price. Furthermore, the company failed to state clearly the market segment their products were targeting (Strong and Lawrence 1). Apart from changing their pricing model and strategy, the company moved away from its core business. It moved away from what it did best; selling well made and well fitting closes targeting the whole family to selling club-ware and see through close for the young and restless. The company’s main consumers have long been families on a budget in search of good quality products at a reasonable price. The company’s positioning was great at the time, but ever since it changed, they lost their core consumers.
Recommendations
There are a few lessons that can be learned from JC Penney's case. From these lessons, recommendations can be drawn to avoid a similar situation to JC Penney Company. It is imperative for executive and management to test and try novel strategies and initiatives before implementing them. When changing new positioning, it is crucial for the business to be clear the customer segment they are after. Managers should put more effort in understanding and know their consumers. In the case of J C Penney, the new management changed positioning without clearly stating the segment of consumers they were after. Consumer segments should not be straddled; instead, the organization should carefully pick one segment and serve it appropriately.
Also, fair and square pricing is imperative in avoiding a similar situation to JC Penney. Retailers should offer their consumers appropriate products within the appropriate atmosphere at a price deemed fair by the consumers. Businesses should struggle to maintain their identity since it is one of the foundations by which customers stay loyal to the business. A change in identity requires thorough research and should be a gradual process. In the case of JC Penney, the company lost its identity and consumer segment through the introduction of new merchandise that the old and loyal consumers were not accustomed to.
Works Cited
Strong, John, and Lawrence Ring. "Lessons From JC Penney | Retailing Newsletter | Babson College". Babson.edu. N.p., 2016. Web. 1 Mar. 2016.
