SWOT Analysis / TOWS Matrix for JC Penney (United States)
Based on various researches at Oak Spring University , JC Penney is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, wage bills are increasing, challanges to central banks by blockchain based private currencies, there is backlash against globalization, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that JC Penney can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the JC Penney, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which JC 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 JC Penney can be done for the following purposes –
1. Strategic planning of JC Penney
2. Improving business portfolio management of JC Penney
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of JC Penney
Strengths of JC Penney | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of JC Penney are -
Sustainable margins compare to other players in Retail (Department & Discount) industry
– JC Penney has clearly differentiated products in the market place. This has enabled JC Penney to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped JC Penney to invest into research and development (R&D) and innovation.
Organizational Resilience of JC Penney
– The covid-19 pandemic has put organizational resilience at the centre of everthing JC Penney does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For JC Penney digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. JC 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.
Diverse revenue streams
– JC Penney is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided JC Penney a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– JC Penney is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Department & Discount) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of JC Penney in Retail (Department & Discount) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– JC Penney has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled JC Penney to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– JC Penney has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Department & Discount) industry. Secondly the value chain collaborators of JC Penney have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of JC Penney in the Services sector have low bargaining power. JC Penney has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps JC Penney to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– JC Penney has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – JC Penney staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the JC Penney are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Retail (Department & Discount)
– JC Penney is one of the leading players in the Retail (Department & Discount) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Department & Discount) industry in United States but also across the existing markets. The ability to lead change has enabled JC Penney in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of JC Penney | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of JC Penney are -
Ability to respond to the competition
– As the decision making is very deliberative at JC Penney, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. JC Penney has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of JC Penney products
– To increase the profitability and margins on the products, JC Penney needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, JC Penney has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Department & Discount) industry using digital technology.
Interest costs
– Compare to the competition, JC Penney has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee of JC Penney is just above the Retail (Department & Discount) industry average. It 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 JC Penney is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of JC Penney supply chain. Even after few cautionary changes, JC Penney is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left JC Penney vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
JC Penney has a high cash cycle compare to other players in the Retail (Department & Discount) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, JC Penney is slow explore the new channels of communication. These new channels of communication can help JC Penney to provide better information regarding Retail (Department & Discount) products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of JC Penney is dominated by functional specialists. It is not different from other players in the Retail (Department & Discount) industry, but JC Penney needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help JC Penney to focus more on services in the Retail (Department & Discount) industry rather than just following the product oriented approach.
High dependence on JC Penney ‘s star products
– The top 2 products and services of JC Penney still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though JC Penney has relatively successful track record of launching new products.
JC Penney Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of JC Penney are -
Building a culture of innovation
– managers at JC 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 Retail (Department & Discount) industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Department & Discount) industry, but it has also influenced the consumer preferences. JC Penney can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for JC Penney in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Department & Discount) industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, JC Penney can use these opportunities to build new business models that can help the communities that JC Penney operates in. Secondly it can use opportunities from government spending in Retail (Department & Discount) sector.
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 JC 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, JC 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 JC Penney to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– JC Penney can improve the customer journey of consumers in the Retail (Department & Discount) industry by using analytics and artificial intelligence. It 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for JC Penney to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for JC Penney to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects JC Penney can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– JC 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.
Developing new processes and practices
– JC Penney can develop new processes and procedures in Retail (Department & Discount) 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.
Learning at scale
– Online learning technologies has now opened space for JC 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, JC Penney is facing challenges because of the dominance of functional experts in the organization. JC Penney can utilize new technology in the field of Retail (Department & Discount) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats JC Penney External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of JC Penney are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, JC 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 Retail (Department & Discount) sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for JC Penney in the Retail (Department & Discount) sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– JC Penney has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, JC Penney needs to keep up with the evolution of technology in the Retail (Department & Discount) 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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. JC Penney will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– JC 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 Retail (Department & Discount) industry regulations.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, JC Penney can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate JC Penney prominent markets.
Easy access to finance
– Easy access to finance in Retail (Department & Discount) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. JC Penney can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents JC Penney with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) sector.
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 JC Penney business can come under increasing regulations regarding data privacy, data security, etc.
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. JC Penney needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
Consumer confidence and its impact on JC 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 Retail (Department & Discount) industry and other sectors.
Weighted SWOT Analysis of JC Penney Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at JC Penney 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 JC Penney 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 JC Penney 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 JC Penney 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 JC Penney needs to make to build a sustainable competitive advantage.
