Case Study Description of J.C. Penney's "Fair and Square" Strategy (Abridged)
As he gets ready to release 2nd quarter 2012 results, Ron Johnson, the new CEO of department store J.C. Penney, is reconsidering the dramatic changes he initiated for the business model and brand image of his company. A new pricing scheme he put in place in February, dubbed "Fair and square", was a central component of the new strategy. The scheme initially had three pricing tiers and eliminated typical sales promotions in an attempt to simplify the shopping experience for consumers; thus moving J.C. Penney off its previous high-low pricing practice. Other components of the new strategy included a new store layout, the inclusion of several well-known brands, and having special lines designed by well-known designers. However, troubling first quarter results that continued into the summer months seemed to indicate that J.C. Penney shoppers, accustomed to receiving JCP Cash coupons and circulars advertising the week's specials, were slow to embrace the new pricing format and began leaving the retailer in droves. Under enormous pressure to turn things around as the all-important back-to-school and holiday shopping seasons were imminent, Johnson decided to make adjustments to the initial pricing scheme that were set to go into effect August 1st. Were these changes enough to turn things around? Should Johnson stay the course on the other elements of his repositioning efforts? Is Johnson's experience in setting up Apple stores helping or hurting him as he tries to achieve his goal of making J.C. Penney "America's favorite store?" (This is an abridged version of the original case, "J.C. Penney's "Fair and Square" Pricing Strategy", 513-036.)
Swot Analysis of "J.C. Penney's "Fair and Square" Strategy (Abridged)" written by Elie Ofek, Jill Avery includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that J.c Penney facing as an external strategic factors. Some of the topics covered in J.C. Penney's "Fair and Square" Strategy (Abridged) case study are - Strategic Management Strategies, Business models, Change management, Collaboration, Customers, Decision making, Entrepreneurship, Financial analysis, Leading teams, Pricing, Strategy execution and Sales & Marketing.
Some of the macro environment factors that can be used to understand the J.C. Penney's "Fair and Square" Strategy (Abridged) casestudy better are - – increasing household debt because of falling income levels, wage bills are increasing, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic ,
central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of J.C. Penney's "Fair and Square" Strategy (Abridged)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in J.C. Penney's "Fair and Square" Strategy (Abridged) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the J.c Penney, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which J.c Penney operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of J.C. Penney's "Fair and Square" Strategy (Abridged) can be done for the following purposes –
1. Strategic planning using facts provided in J.C. Penney's "Fair and Square" Strategy (Abridged) case study
2. Improving business portfolio management of J.c Penney
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of J.c Penney
Strengths J.C. Penney's "Fair and Square" Strategy (Abridged) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of J.c Penney in J.C. Penney's "Fair and Square" Strategy (Abridged) Harvard Business Review case study are -
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For J.c Penney digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. J.c Penney has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– J.c Penney has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. J.c Penney has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– J.c Penney is one of the most innovative firm in sector. Manager in J.C. Penney's "Fair and Square" Strategy (Abridged) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that J.c Penney has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of J.c Penney in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the J.C. Penney's "Fair and Square" Strategy (Abridged) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of J.c Penney
– The covid-19 pandemic has put organizational resilience at the centre of everthing that J.c Penney does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of J.c Penney in the sector have low bargaining power. J.C. Penney's "Fair and Square" Strategy (Abridged) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps J.c Penney to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– J.c Penney has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in J.C. Penney's "Fair and Square" Strategy (Abridged) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– J.c Penney has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in J.C. Penney's "Fair and Square" Strategy (Abridged) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Sales & Marketing field
– J.c Penney is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled J.c Penney in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– J.c Penney has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study J.C. Penney's "Fair and Square" Strategy (Abridged) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses J.C. Penney's "Fair and Square" Strategy (Abridged) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of J.C. Penney's "Fair and Square" Strategy (Abridged) are -
Workers concerns about automation
– As automation is fast increasing in the segment, J.c Penney needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at J.c Penney has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of J.c Penney is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. J.c Penney needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help J.c Penney to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the J.C. Penney's "Fair and Square" Strategy (Abridged) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though J.c Penney has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of J.c Penney, firm in the HBR case study J.C. Penney's "Fair and Square" Strategy (Abridged) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– J.c Penney has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study J.C. Penney's "Fair and Square" Strategy (Abridged), is just above the industry average. J.c Penney needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to strategic competitive environment developments
– As J.C. Penney's "Fair and Square" Strategy (Abridged) HBR case study mentions - J.c Penney takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Products dominated business model
– Even though J.c Penney has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - J.C. Penney's "Fair and Square" Strategy (Abridged) should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, J.c Penney has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. J.c Penney even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study J.C. Penney's "Fair and Square" Strategy (Abridged), in the dynamic environment J.c Penney has struggled to respond to the nimble upstart competition. J.c Penney has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities J.C. Penney's "Fair and Square" Strategy (Abridged) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study J.C. Penney's "Fair and Square" Strategy (Abridged) are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. J.c Penney can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for J.c Penney to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help J.c Penney to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects J.c Penney can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at J.c Penney can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, J.c Penney can use these opportunities to build new business models that can help the communities that J.c Penney operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Better consumer reach
– The expansion of the 5G network will help J.c Penney to increase its market reach. J.c Penney will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Redefining models of collaboration and team work
– As explained in the weaknesses section, J.c Penney is facing challenges because of the dominance of functional experts in the organization. J.C. Penney's "Fair and Square" Strategy (Abridged) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– J.c Penney can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Buying journey improvements
– J.c Penney can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. J.C. Penney's "Fair and Square" Strategy (Abridged) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– J.c Penney has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study J.C. Penney's "Fair and Square" Strategy (Abridged) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help J.c Penney to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– J.c Penney has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, J.c Penney can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, J.C. Penney's "Fair and Square" Strategy (Abridged), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats J.C. Penney's "Fair and Square" Strategy (Abridged) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study J.C. Penney's "Fair and Square" Strategy (Abridged) are -
Consumer confidence and its impact on J.c Penney demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– J.c Penney has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, J.c Penney needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. J.c Penney needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of J.c Penney business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– J.c Penney needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Stagnating economy with rate increase
– J.c Penney can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study J.C. Penney's "Fair and Square" Strategy (Abridged), J.c Penney may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. J.c Penney can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– J.c Penney needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. J.c Penney can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Increasing wage structure of J.c Penney
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of J.c Penney.
Shortening product life cycle
– it is one of the major threat that J.c Penney is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents J.c Penney with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of J.C. Penney's "Fair and Square" Strategy (Abridged) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study J.C. Penney's "Fair and Square" Strategy (Abridged) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study J.C. Penney's "Fair and Square" Strategy (Abridged) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study J.C. Penney's "Fair and Square" Strategy (Abridged) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of J.C. Penney's "Fair and Square" Strategy (Abridged) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that J.c Penney needs to make to build a sustainable competitive advantage.
