Running Head: J.C.

PENNEY 1





Can J.C. Penney Survive?
Final Assignment
Group Project


Zenaida Barredo
Alley Cheung
Kristy Ibarra-Armas
Linda Noel
Allen Zaghikian

Dr. Schiele
WMBA 506
Marketing Concepts

Woodbury University
April 25, 2013

J.C. PENNEY 2

J.C. Penney History
J.C. Penney is a 111-year old department store chain comprised of approximately 1,100
stores and 150,000 employees across the United States (JCPenney.com). The company was
founded in 1902 by James Cash Penney as a dry goods store in Kemmerer, Wyoming (Guinto,
2011). Penney expanded his store chain through a belief in the golden rule, treating his
employees fairly and keeping them happy, and practicing prudent financial management. He
believed in offering good value at a fair price to his customers and ensuring that they received
the best service possible. Penney once said, Courteous treatment will make the customer a
walking advertisement, maintaining the philosophy that price alone cannot foster customer
loyalty; he believed that customer interaction was required for continued success (Bhasin, 2013
and Lutz, 2013). The J.C. Penney Company went public in 1927, and Penney continued to
effectively manage and grow the company by offering stock incentives to managers and
employees, continuing to meet the needs of the middle income family, and capitalizing on the
advent of the shopping mall. After his retirement, James Cash Penney remained an active board
member of his company until his death in 1971 at the age of 75 (Spiro, 2009).
By the 1990s J.C. Penney had become the top catalog retailer in the United States (Lutz,
2013) while continuing to operate as a successful brick-and-mortar store as well. In 2004, Mike
Ullman became the ninth CEO of J.C. Penney (Guinto, 2011). He took over from Allen
Questrom, who had saved the company from near bankruptcy, but there was still a lot of work to
be done to achieve stability. Ullman leveraged the centralized company structure that Questrom
had put in place to control costs and inventory, restructured the companys debt, and sold off the
Eckard chain of drugstores for $4.5 billion. Ullman drew from his extensive brand experience
with Macys and Louis Vuitton to remake the J.C. Penney brand. He introduced well-known and
J.C. PENNEY 3

popular brands like Sephora, Mango, and Liz Claiborne into the stores, and appointed brand
managers to improve the perception of the stores private labels like Arizona, Washington, and
St. Johns Bay. Ullman elicited feedback from employees via surveys and responded to their
concerns. Based on some of this feedback, he invested approximately $200 million in
technology to improve the in-store shopping experience and become the first big-box retailer to
provide online product sales. Ullman sought to engender customer loyalty with good service and
offer a pricing structure that would place J.C. Penney in a competitive position between discount
stores and higher-priced department stores motives very similar to those of James Cash Penney
himself. Ullman spent significantly on advertising campaigns to promote these changes, and the
company enjoyed tremendous success until the recession hit in 2007 (Guinto, 2011). From this
point forward, J.C. Penney struggled unsuccessfully to regain its foothold due to the weakened
economy affecting its core customer base as well as increasing competition from other
department stores like Macys, Kohls, and Dillards. A pair of investors, Bill Ackman and
Stephen Roth, bought 26 percent of J.C. Penneys common stock in October 2010. After
acquiring seats on the board, they were able to orchestrate Ullmans replacement with Ron
Johnson, the former chief marketing officer at Apple (Guinto, 2011).
On June 14, 2011, J.C. Penney announced that Ullman would be leaving the company,
causing an increase in the stock price (Guinto, 2011). Later that same year, Johnson was
installed as CEO of J.C. Penney amid fanfare and optimism. Ackman and Roth believed
Johnson had the experience, vision, and expertise to turn the brand around. While Johnson had
driven marketing innovation at Apple with the Genius Bar, it was his experience as a senior
merchandising executive at Target that was more applicable to his new role at J.C. Penney
(Guinto, 2011). It had been Johnson who crafted deals between Target and well-known
J.C. PENNEY 4

designers like Michael Graves to produce exclusive designer merchandise at reasonable prices.
Expectation was high that he would be able to work his marketing magic at J.C. Penney as well.
In early 2012, Johnson presented his transformation plan for J.C. Penney, which included
the fair and square pricing model, new shops-within-a-store layout, designer engagement, new
exclusive lines with a focus on attracting a younger demographic, and a new logo which depicted
the companys name shorted to its initials, JCP. The intent of the fair and square model was to
keep prices low year round rather than following the legacy model of inflated mark-ups for the
purpose of holding weekly sales, weekend sales, specialized sales, clearance and coupon offers
(Trewe, 2013). The pricing model proved confusing and unappealing to customers, and on May
16, 2012, J.C. Penneys stock plunged 19.7% to close at $26.57, which was the lowest their stock
price had dipped since Black Monday (Brown, 2012). Profits and revenues were declining, but
opinions were mixed at this point. Many were still optimistically banking on Ron Johnsons
marketing plans to turn the company around. At the end of October, J.C. Penney sent customers
a $10 coupon, calling it a gift because they didnt want to admit they were retreating from
Johnsons no sales or coupons strategy. This was in response to surveys showing that women
shoppers were not visiting J.C. Penney because there were no more sales or deals (Brownell,
2012).
The worst blow to Johnsons strategy occurred during the 2012 holiday shopping season.
J.C. Penneys holiday promotional offerings included one day only discounts, free photo and
haircut promotions, buttons with codes to potentially win prizes, and day after Thanksgiving
sales, showing a further retreat from the fair and square pricing model (Tuttle, 2012). However,
they were not offering the deep discounts that other department stores were, and many of the
sales held by J.C. Penney during the holiday season came with little notice, making them look as
J.C. PENNEY 5

if they were unplanned and in response to what other stores were doing (Loeb, 2013). However,
even these efforts did not attract the desired holiday traffic. J.C. Penneys fourth quarter revenue
was down more than 28% and by the end of the year revenue was down almost 35% from J.C.
Penney's peak (Levine-Weinberg, 2013).
On April 9, 2013, J.C. Penney announced that Johnson would be leaving and Ullman
would be returning as CEO. In the fourteen months Johnson had been with the company, J.C.
Penneys stock price had plummeted a total of 51% to a little less than $14 a share. The stock
rose briefly when Johnsons departure was announced, then dipped again upon news of Ullmans
return (Napach, 2013). On April 15 it was announced that J.C. Penney borrowed $850 million,
nearly half of an available line of credit, to help cover remodeling costs and to complete
merchandise orders for the important back-to-school and holiday shopping seasons
(DInnocenzio, 2013). Currently half the stores are in the midst of remodel and the brand
transformation is incomplete. It is a real and urgent concern whether or not J.C. Penney will
survive.
Problem Definition
The history presented above demonstrated several issues with the execution of J.C.
Penneys brand transformation plan; issues which led to its current dire market position. These
are discussed in more detail below.
Pricing Strategy Issues
Johnson and his marketing team believed that the no discounts marketing strategy
might result in some losses if sales-driven shoppers dropped off, but they believed that those
losses would be more than compensated for by increased sales from the new shops within the
store and the new brands being carried, by the improved margins created by reducing the number
J.C. PENNEY 6

of sales held throughout the year, and by planned decreases in operating expenses. They also
believed this would be the start of an upward trajectory for sustained growth.
However, it turned out that the new pricing structure was confusing and provided no
comparison pricing. The core of J.C. Penneys existing market were customers motivated by
bargain-hunting, and, repelled by the loss of discounts, coupons and sales, they turned away from
J.C. Penney in droves. By the time Johnson responded to this alarming trend, bringing back
sales, coupons and comparison price tags in an effort to woo back this alienated clientele, it was
too late for recovery. The clearance sales and other promotions were not able to generate
sufficient customer response and they damaged margins as well, resulting in an annual earnings
shortfall of $2 billion (Levine-Weinberg, 2013).
Shop Within a Store Issues
The Levis, Izod, and other shops within a store were actually fairly successful from a
sales perspective and also in contributing to the stores improved appearance. However, their
individual successes may have cannibalized the success of other brands and labels within the
store. For example, Levis sales were successful but Lee jean sales declined, which offset the
gains realized with the improved Levis sales (Levine-Weinberg, 2013).
Store Transformation and Cash Flow Issues
Johnson jumped headlong into the transformation of J.C. Penneys store designs,
incorporating such features as Levis denim bars, Joe Fresh and other brand shops, and
refurbished home departments, the latter of which are currently in the midst of construction.
While this would have been viewed as a smart move toward the effort of rebranding the
company and making it more appealing to existing and new customers alike, it was an expensive
endeavor. Also, Johnson did not follow a traditional methodology of refurbishing a few key
J.C. PENNEY 7

stores for the purpose of gauging appeal and traffic before proceeding with more stores. He
embarked on redesigning and remodeling too many stores before assessing the new marketing
plans success. This was a costly mistake. As a result, if J.C. Penney continues to burn cash at
its 2012 spend rate, the company will be out of money by Fall 2013 (Levine-Weinberg, 2013).
In response to this cash crisis, J.C. Penneys drew $850 million from a $1.9 billion line of credit
on April 15, a large part of which was to finish construction on its home shops (Dinnocenzio,
2013). This situation leaves J.C. Penney in an awkward position, with some of its stores in the
midst of construction while others are still in the legacy J.C. Penney state, and without sufficient
cash to finish the transformation nor any solid proof that this transformation will even pay off.
This situation will only add to the branding confusion that customers have already experienced,
continue to further alienate existing customers, and prevent the attraction of new customers.
J.C. Penney SWOT Analysis
The SWOT analysis previously prepared by this team has been updated based on the
most recent development and resulting circumstances.
Strengths
J.C. Penney is sadly and seriously lacking in strengths at this point in time. However,
they do possess one significant strength. J.C. Penney owns more than 400 of its 1,100 stores
(Guinto, 2011). This equates to real estate that could be sold, creating cash that could be
invested back into the remaining stores.
Weaknesses
The primary weakness at J.C. Penney is its steep decline in sales and net revenues due to
the loss of loyalty of their core demographic shoppers, coupled with the cash flow crisis. Other
J.C. PENNEY 8

weaknesses include diminished employee morale, brand confusion, low response to the new
changes, management turmoil, and a lack of clear direction for next steps.
Opportunities
J.C. Penney has many opportunities that could be pursued, but unfortunately few options
available to them in their current reality. The primary opportunity they must target at this time is
to stabilize their operations and costs before they can proceed with any other steps; they are in
damage control and recovery mode. If they can achieve this stability, their next opportunity
would be to focus on the things that are working or bring back things that worked in the past
such as catalog and online sales, coupons and promotions. These efforts present the opportunity
to rekindle customer interest and patronage, which would then lead to the extended opportunity
of adding more brands and labels, and continuing the brand transformation at a more realistic
pace.
J.C. Penney also has the opportunity to pursue a completely different recovery tactic by
taking the company private again. This might require selling some of their property to help
finance the endeavor, but it could present a way to retrench and gather the resources necessary to
revive the brand and save the remaining store locations. J.C. Penney could also consider moving
toward a more regionalized management model, where store managers would have more
autonomy to determine the best direction for their stores.
Threats
The most prevailing threat to J.C. Penney is the amount and variety of retail opportunities
available to the average consumer, crippling J.C. Penneys ability to compete in the modern
retail environment. Their struggle to define and reach their target market was very apparent in
their 2012 performance, and the weak economy has continued to hinder discretionary spending.
J.C. PENNEY 9

Brick and mortar retail chains are declining in general, and are expensive to maintain in the areas
of both overhead and labor; J.C. Penney has incurred additional expense in its unfinished store
design transformation. With Penneys finding itself already in a weak financial position,
surrounded by more successful competitors, and struggling to gain back a foothold in the
industry, its ability to succeed looks grim.
Target Market

For retail stores and consumer direct products, it is important to establish a solid target
market to drive inventory off shelves, bring in new customers, and keep the dynamics of a
successful business model going. For J.C. Penney this is unfortunately coming to an undesired
end. The retailer has had some difficult times in the past, but thus far has not dealt with anything
like this before. With the confusion and revamping of their target market it seems as though J.C.
Penney was unsure of what direction to go. Traditionally, J.C. Penney has attracted the older
consumer, perhaps a married housewife, or grandmother of three. Most recently with the
remodeling of their stores, J.C. Penney decided to remold their target market as well.
The change of marketing is seen to be very apparent by J.C. Penney and the market
population they want to be catering to has changed over the past couple of years. Ads and prints
from 1980 through 1990 showed that J.C. Penneys target population was the middle aged
woman (otherwise known as the baby boomer) who had plenty of time during the day to visit
J.C. Penney stores. On the contrary, J.C. Penney is now trying to gather those customers that do
not have a sense of the department store feeling in mind. When generation Y and X want to go
shopping for clothing, they do not automatically think of a department store setting to meet their
needs. Department stores are slowly becoming eradicated. J.C. Penney faces many challenges
with the changes they have decided to make by really alienating their core customer and trying to
J.C. PENNEY 10

implement a fresh now look and feel to their stores. Chief Executive Officer Ron Johnson is to
blame for many of the mistakes that are causing J.C. Penneys overwhelming failure. In a recent
news article in Time Magazine titled, The 5 Big Mistakes That Led to Ron Johnsons Ouster at
J.C. Penney, the author, speaking about Johnson, states that, There is nothing good to say about
what hes done (Tuttle, 2013). In the same article, Mark Cohen, a former C.E.O. of Sears
Canada who is now a professor at Columbia, had this to say about Johnson, Penney had been
run into a ditch when he took it over. But, rather than getting it back on the road, hes essentially
set it on fire.
In conjunction with many other issues identified, Ron Johnsons plan to bring in a fresh
new feel and look to the stores has seemed to cause an issue with the former customers that were
loyal and willing to continue to shop at J.C. Penney. The fingers have all pointed to the CEO,
who was let go from the company although he had tried to instill plenty of change within the
look and feel of the stores. According to the Time Magazine article, Johnson pictured coffee
bars and rows of boutiques inside J.C. Penney stores. He wanted a bazaar-like feel to the
shopping experience, and for J.C. Penney to be Americas favorite place to shop. He thought
that people would show up in stores because they were fun places to hang out, and that they
would buy things listed at full-but-fair price (Tuttle, 2013). This model may have been
successful for a startup company but not one that has an established name and clientele that are
not necessarily interested in a brand new look and feel to the stores that they have grown
accustomed to.
In the same article, the writer focuses on the J.C. Penney consumer look and feel, stating
that the target market of J.C. Penney is not what Johnson wanted it to be. The author states that
early and often during the Johnson era, critics pointed out that J.C. Penney was not the Apple
J.C. PENNEY 11

Store. The latter features cutting edge consumer tech that shoppers have grown accustomed to
purchasing at full price. J.C. Penney, on the other hand, is stuck with a reputation as the place
your mom dragged you to buy clothes you hated in 1984, as a Consumerist post put it. The idea
that people would show up at J.C. Penney just to hang out, and that its old-fashioned shoppers
would be comfortable with Johnsons radical plans like the removal of checkout counters almost
seems delusional (Tuttle, 2013).
It seems that Johnsons biggest miss in his new marketing plan was that he was
producing offerings for a new, desired clientele before they existed, while at the same time
removing the products and promotions which appealed to a clientele that did exist.
Competition Analysis
The closest competitors of J.C. Penny are Kohls and Sears department stores in terms of
product homogeneity, pricing and retail locations. The decline in the purchasing power of
American consumers and economic downturn compelled businesses to be creative in their
marketing mix in order to achieve sustainability and maximize profitability.
In the course of analyzing the effectiveness (or ineffectiveness) of each companys
strategic efforts, there are three main elements that impact customer responsiveness as follows:
promotion, product and place.
Promotion
J.C. Penney, Kohls and Sears all utilize taglines in order to establish individuality, create
brand awareness and communicate the type shopping experiences that each company offers to
their customers. Taglines also define the mission of the individual company while establishing a
separate identity from similar organizations or businesses in the same industry. The following
are the most current taglines utilize by the three competing companies:
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Kohls Expect great things (Kohls fact book, 2013)
Sears Life. Well Spent. (Zerillo, 2009)
J.C. Penney Enough. Is. Enough. (Olenski, 2012)
The newest tagline for J.C. Penney was created last year in an effort to reinvent the
companys image. The tagline Enough. Is. Enough. was intended to liberate J.C. Penney
customers from overwhelming sales, coupons and sales promotions by offering products at
everyday low prices (Olenski, 2012). The intension was good but the choice of words created
confusion and negative impressions as to the real message that J.C. Penney wants to convey.
Kohls tagline , Expect Great Things on the other hand, reflects positive feelings and a sense
of adventure. The Life. Well Spent tagline of Sears is not as good as Kohls but delivers a
positive message compared to J.C. Penneys tag line.
Product
One notable strategic effort that could have contributed to Kohls success is its consistent
merchandise mix. As reported in its 2012 fact book, womens department stayed at 31%,
followed by mens at 19 %, home 18%, childrens 13 %, accessories 10% and footwear at 9 %.
JC Pennys most recent merchandise mix reported in its 2010 Investors Fact Book has the
following breakdown: 24 % womens, 20 % mens, 18 % home, 12 % accessories, 11 %
childrens apparel, 7 % footwear, 4 % fine jewelry, 4 % services and others. The distribution
has changed from its 2009 merchandise mix. Pending to the release of its 2012 Investors Fact
Book and based on the strategies that its former CEO Ron Johnson has implemented, there is a
big likelihood that the mix has changed. While Sears continue to experiment with different
avenues to gain footing in the retail industry, it hasnt been transparent with its merchandise mix
for Sears domestic.
J.C. PENNEY 13

Another strategic initiative that works well for Kohls is introduction of new brands,
merchandise content and new concepts every year without changing its merchandise mix. The
most recent addition to its already robust line of brands, such as DesigNation, Princess Vera
Wang, Rock & Republic, has made Sears and JC Penny fall further behind. Kohls also carries
premium brands like Jennifer Lopez, LC Lauren Conrad, Dana Buchman, Simply Vera Vera
Wang, ELLE, Daisy Fuentes, Marc Anthony, and Candies. Sears premium lines include
Kardashian, Gloria Vanderbilt, Laura Scott, Methapor, Covington, and Jacklyn Smith. Recently
J.C. Penny launched MNG by Mango, Joe Fresh, Nicole by Nicole Miller, Marchesa,
Worthington, Alfred Dunner, A.N.A. Joe Fresh, Cosabella Amore, and Spanx.
While Kohls focus is on offering a variety of choices in its top two merchandise mixes,
womens and mens (Kohls fact book, 2012), Sears is busy expanding its business to business
initiative, promoting Lands' End store within a store and focusing on promoting its Home
Services (Sears 2012 Annual Report). JC Penny is focusing on promoting the shop within a shop
concept for MNG by Mango, Call it Spring, and Sephora. It recently hired Ellen DeGeneres as
its celebrity endorser and has a pending contract with Martha Stewart.
Place
JC Penny has been extensively focusing on store makeovers that resulted in $810 million
of capital expenditures in 2012 (Mead, 2013) and costs are still rising. Conversely, Kohls has
been very conservative in spending cash on its capital assets adding only one e-commerce
distribution center last year to support its growing online sales ( Kohls Fact Book, 2012). Sears
is expanding its Sears Market Online market place, providing repair parts for do-it-yourself
customers through the searspartsdirect.com website, and separating Sears Hometown & Outlet
stores (Sears 2012 Annual Report).
J.C. PENNEY 14

Effect of Strategic Initiatives
As shown on the graph below, Kohls emerged as the most profitable compared to Sears
and JC Penny with the latter having the greatest loss in 2012. Kohls strategic initiatives in
regards to keeping its product mix unchanged, expansion of e-commerce coupled with
conservative spending in capital infrastructure resulted to a net income of $986 million. JC
Pennys store makeover initiative accounts for 82.23 % share on the total loss of $985 million.
Sears ended up with $930 million net loss (Sears Annual Report, 2013).

While Kohls and Sears represent competition that is comparable to J.C. Penney in scope
and business model, there are other forms of competition that pose a threat to J.C. Penneys
success. High-end department stores, discount department stores, and a few other mid-range
stores all jeopardize J.C. Penneys success in the retail market, as well as specialty retail stores,
and the seemingly limitless amount of online retail sites.

-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
$1,000
Kohl's Sears JC Penny
2012 Net Income (Loss) in millions
Net Income (Loss) in millions
J.C. PENNEY 15

Marketing Research Data and Analysis

Figure 1 Perceptual Map of JCPenney and its Competitors in USA
The above perceptual map with multidimensional scaling (MDS) gives a graphical
visualization of customers perception of brands which are competitors of J.C. Penney.
According to Strategic Marketing by Todd A. Mooradian, Kurt Matzler, and Lawrence J. Ring,
the positions of the brands reflect the similarity of each other; brands that are closer together are
more similar and brands farther away are less similar (2012, pp. 235). As shown in the map,
Sears is located at the exact same location as J.C. Penney, which implies that Sears is extremely
J.C. PENNEY 16

similar to J.C. Penney in many ways, including the brand image, product varieties, or pricing
strategy, etc. Other brands such as Marshalls, Nordstrom Rack, TJ Maxx, Last Call by Neiman
Marcus, Kohls, and Off 5
th
Saks Fifth Avenue are the brands sharing similar market positioning
with J.C. Penney, as they locate closely around J.C. Penney. They are all selling average quality
goods at moderate price. Stores such as Walmart, Target, Ross, and Kmart are selling products at
relatively lower prices when comparing with J.C. Penney. However, the quality of goods from
these stores is relatively low in customers perceptions, too. Stores locating closer to the top right
hand corner of the perceptual map reflect a more premium pricing, and the quality of goods are
higher. This interprets that these stores are carrying more premium brands, or luxury goods. The
only store which locates far from all other stores is Burlington Coat Factory, its location tells that
it is selling overpriced low quality goods.
BCG Matrix

The BCG matrix developed by
The Boston Consulting Group is the
best known and most often applied
product portfolio model nowadays
(Mooradian, Matzler, & Ring, 2012). It
describes the growth rates and market
shares for the products carried by J.C.
Penney. The matrix is divided into four
quadrants, with stars (high market
Figure 2 BCG Matrix for JCPenney share and high market growth rate);
question marks (low market share and high market growth rate); cash cows (high market share
J.C. PENNEY 17

and low market growth rate); and dogs (low market share and low market growth rate). The
store-within-store concept is significant to J.C. Penneys competitiveness, and brands like MNG
by Mango gives customers a reason to shop often at J.C. Penney. The childrens store and older
brands such as Liz Claiborne, and Worthington are not doing as well as the previously mentioned
brands, they have a relative low growth rate, yet still having a high market share which can bring
constant profits to J.C. Penneys sales. Other designer brands are questions marks to J.C. Penney,
as their market shares are still low, making their potential unknown to the company. The jewelry
department has a low growth rate and low market share, mainly because they are expensive but
have low quality which is getting more unfavorable to both the customers and the company.
An online survey with 100 respondents has been analyzed (see Appendix A) in order to
determine the customers attitude towards shopping at J.C. Penney. The results show that a
majority of people from different demographics never or seldom shop at J.C. Penney, although
most of them think the company sells products carrying good value at low price. Moreover, J.C.
Penney fails to define their target market effectively, as customers generally do not like the styles
it carries, and would rather go to other department stores. These factors can draw a conclusion
that J.C. Penney is facing tough competition with other companies in the industry. If it does not
come up with a good marketing plan, it will be hard for the company to return to the black.
Strategic Alternatives Current Situation
The conditions and mistakes created by former CEO Johnson have left J.C. Penney with
very few options to choose from in order to recover from the disastrous changes he implemented.
One way JCP is trying to recover is by bringing back the companys former CEO, Myron
Ullman. According to CEO of Belus Capital Advisors, retail stock expert, Sozzi (2013),
Bringing back Ullman is a big mistake (as stated by Macke, para. 5). Sozzi believes that
J.C. PENNEY 18

bringing back the old strategy the company worked so hard to undo for the past 15 months is a
big mistake. Taking this strategy alienates their core customers, the baby boomers and puts them
in a position to plead for their business. Ullman is also faced with having half of J.C. Penney
retail stores un-remodeled, which brings on one of the biggest financial burdens on the company.
What are customers to expect of JCP now?
Jeff Macke, former Fast Money stock trading talk show host, asserts there are three
options J.C. Penney might consider that could either lead to keeping their doors open or lead to
their demise. Each option is discussed separately below with consideration of pros and cons.
Option 1 Undo Johnsons Work
According to Macke, the first option is to undo everything Johnson did and go back to the
J.C. Penney of old (Macke, 2013, para.10). If J.C. Penney decided to go back via the deep
discount route and mark all of its merchandise down, the pro might be the possibility of
redirecting traffic and business back to the retailer. As noted earlier, the typical customer was
interested in visiting the store for their shopping needs provided they were able to get discounts
and use coupons. The attraction for this type of consumer at this retail chain has prominently
shown up repeatedly throughout the research and analysis conducted. The con to this option is
that it will further decrease its overall revenue, which will lead to financial suicide by drying up
all of its financial resources.
Option 2 Stick With Johnsons Work
Mackes second option is to stick with Ron Johnsons plan (Macke, 2013, para. 14).
Since J.C. Penney is currently heavily invested in remodeling half of their 1,100 stores
nationwide, it would be a good move to complete their task at hand and give the stores that have
started the remodeling process their intended cleaner, slick, new look. Conversely, by doing so it
J.C. PENNEY 19

would decrease their cash flow immensely at a very rapid rate. By following through on the
previous leaders intentions, there is a high possibility of aggravating their investors and board
since they are the ones that ousted Johnson and his plans in the first place.
Option 3 Split the Company
Mackes final suggestion is to split J.C. Penney into two chains (Macke, 2013, para. 16).
If J.C. Penney commits to completing the stores in which the remodeling projects have begun
and where there has already been significant investment, the pro would allow room for creating
two separate entities within the J.C. Penney umbrella. One would cater more towards the
younger generation that Johnson was hoping to attract. The remaining stores, where remodeling
has not yet started, would cater to J.C. Penneys traditional baby boomer customers. This would
free up quite a bit of financial resources by not having to remodel any further stores. The
problem with this option is the lack of consistency with the look and feel of the stores.
Furthermore, the brand identity would be completely lost and further confuse all customers.
Team Recommendation
After consideration and discussions, this team devised a fourth option which J.C. Penney
could pursue, and through consensus the team felt this was the best recommendation. This
fourth option would allow each store to have its own autonomy from corporate headquarters.
This popular model has been taken directly from a very successful retailer who has
succinctly identified its customer demographics as well as psychographics, Lululemon Athletica.
Christine Day, Lululemons CEO, is heavily into following a laissez-faire approach to her
leadership and management style. This adaptable theme would potentially allow J.C. Penney to
save its marketability by giving each store the ability to make its own decisions on how to target
their constituency as they see fit, just as Lululemon does. The empowerment provided to J.C.
J.C. PENNEY 20

Penney store management team would speak volumes for their returning CEO, Mike Ullman.
The pro in this scenario would allow employees to engage and connect with their individual
community. The employees would know what strategic position to take with their store and
know what would work best for the community the store resides in.
The team recommendation saw a hybrid pro/con to this alternative option. The con is
that JCP is currently on the brink of losing everything as the current situation stands. Taking any
risk at this time could potentially bring J.C. Penney to close their doors much sooner than
anticipated. On the other hand, the team believes that without taking any risk there is absolutely
no possibility of achieving any kind of success. The positive outcomes of risk taking have been
proven many times over with successful companies such as Toms, Method, Apple, Veev,
Zappos, and One Shot just to name a few.
The overall outcome in this scenario is that it would give J.C. Penney a new life by
positively affecting and influencing the body, namely the employees of each individual store.
By giving autonomy and ownership, employees would also be held accountable for the success
of each store by means of hard work, creativity and the kind of influence that they hold in their
respective communities. Sam Golter, City of Hopes first executive director ,was quoted saying,
There is no profit in curing the body, if in the process you destroy the soul. J.C. Penneys
source of inspiration at this time may very well lie in the hands of the right employees
particularly those with longevity. J.C. Penney must rediscover its soul once again by risk-
taking and investing throughout the overall body, vis-a-vis the right employees, if it is going to
succeed.

J.C. PENNEY 21

Appendix A: JCPenney Customer Survey Results
J.C. PENNEY 22

J.C. PENNEY 23

J.C. PENNEY 24

J.C. PENNEY 25

J.C. PENNEY 26

J.C. PENNEY 27

J.C. PENNEY 28

J.C. PENNEY 29



J.C. PENNEY 30

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