Expert answer:Strategic Management Quiz with 4 questions
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THERE ARE 4 QUESTIONS AN EACH ONE NEEDS TO BE CITED CORRECTLY WITH
THE ACTUAL REFERENCE (S) UNDER THAT QUESTION. TIMES ROMAN, 12 FONT,
DOUBLE SPACE ANSWERS.
1. Define retrenchment strategy. Describe any one of the retrenchment strategies.
2. Is it possible for a firm to pursue a strategy that simultaneously encompasses costleadership and product differentiation? Explain
3. What are the purpose, benefits, and limitations of the QSPM?
THE COMPANY IS JCPENNEY. THIS IS A DRAFT OF THE ASSIGNMENT AND I
WANTED TO INCLUDE IT IF IT HELPS. IF YOU WORK THIS ONE ASAP AND GET IT
TO ME I WILL DO THE EXAMPLE PORTION REGARDING MY PROJECT COMPANY
(JEPENNEY) AND THEN RETURN FOR YOU TO PROOF.
4. Separately discuss backward integration and forward integration (explain what they are
and when they should it be pursued). Then give an example of how your project company
could use or has used one or both of these strategies.
Running head: JCPENNEY STRATEGIC PLAN
JCPenney Strategic Plan
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Running head: JCPENNEY STRATEGIC PLAN
JCPenney
I. INTRODUCTION
A. History of the Company
On April 14, 1902, 26-year-old Missouri native James Cash Penney and two business partners, Guy
Johnson and T.M. Callahan, opened a store in Kemmerer, Wyoming. Penney had been an employee of Johnson
and Callahan for five years prior, working as a clerk in their general store in Colorado (J.C. Penney: American
Businessman, n.d.). The new store, called Golden Rule, sold dry-goods; it expanded to two other locations by
1904. Just three years later, Penney bought out his business partners and began working alongside Earl Corder
Sams. It was not until January of 1913, with nearly three dozen stores in the United States, that the company
officially became J.C. Penney Store Company, Incorporated (J.C. Penney Corporation, Inc.: American
Company, n.d.).
By 1951, JCPenney reached one billion dollars in sales (History, n.d.). Twelve years later, in 1963, they
issued their first mail order catalog. In fact, after discontinuing their “Big Book” catalog in 2009, the company
realized that it did serve a purpose. The catalog returned to circulation in early 2015 citing that customers
“prefer to browse a traditional print piece” prior to purchasing the item in store or online (Sanders, 2015).
JCPenney launched jcpenney.com in 1994 when e-commerce was young; they were one of the first national
retailers to do so (History, n.d.).
The product-market scope of JCPenney covers several consumer areas. A quick glance at the website
jcpenney.com shows shoppers many different buying options. From housewares to appliances to clothing for
all ages, JCPenney is practically a one-stop-shop. The site’s homepage in early October 2017 touts “Columbus
Day” sales on appliances alongside Halloween costumes for children, adults, and pets. With locations across
the United States and Puerto Rico, as well as the company website, the consumer market is vast. Although the
company offers items for both men and women, young and old, their main customers are women. Their
partnership with Sephora and the JCPenney Salons are aimed toward the company’s female buyers. In 2016,
nearly 50% of the merchandise mix was geared toward women, including women’s apparel, fine jewelry, and
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Running head: JCPENNEY STRATEGIC PLAN
women’s accessories (Company Info, n.d.). Recently, JCPenney joined forces with Lifetime television reality
show “Project Runway.” For seasons 16 and 17 of the show, JCPenney will be the retail partner. Over 500 of
their stores are currently selling clothes inspired by the show. Select designs from the current season will also
be available on jcpenney.com after each episode airs (JCPenney newsroom, 2017).
JCPenney suppliers must follow principles set forth by the company. They strive to source responsibly
and maintain strong supplier relationships. The principles outline ethical business practices, working
conditions, environmental impact, and other rules suppliers must abide by to supply to JCPenney. The
company requires the supply chain to be socially responsible. “JCPenney is dedicated to preventing the sale of
products produced at the expense of communities, workers or the environment” (Supplier Principles, 2017).
Some of the company’s current facilities include thirteen supply chain facilities, an in-house center in India, and
the Home Office in Plano, Texas (Company Info, n.d.).
B. Company Mission and Philosophy
Vision Statement
“Get Your Penney’s Worth”
In JCPenney’s clearly defined new vision statement, “Get Your Penney’s Worth” (jcpenney newsroom,
2016), JCPenney believes in reaching the consumer by offering greater value within their private brands. They
offer “Penney” days in order to entice customers to shop at the brick and mortar stores. JCPenney has a vision
to allure shoppers into believing money savings are just around the corner. Their vision statement takes
advantage of the slight difference between ‘penny’ and ‘Penney.’
Mission Statement
“JCPenney is a Company built upon the Golden Rule-the concepts of treating other’s the way we would
like to be treated-and we’ve operated in this spirit since our founding in Kemmerer, Wyoming, over 110 years
ago. Today, we continue to honor our heritage by being a destination for all customers to find what they love
for less money, time, and effort, from a leading portfolio of private, exclusive and national brands.
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Running head: JCPENNEY STRATEGIC PLAN
The JCPenney culture is fueled by the Warrior Spirit of over 100,000 associates around the globe. We
believe that values of loyalty, passion, courage and service define who we are and how we serve our customers”
(JCP Company, 2017).
Based on the mission statement, JCPenney has made it evident that the company values not only
earnings, but the customers and associates as well. The Golden Rule mentioned is a key critical component that
outlines all will be treated equally and fairly, with service, pricing, and quality, always.
II. THE PROBLEM
JCPenney has experienced a net loss for 4 of the last 5 consecutive years. Data gathered from the 2016
annual 10-K report, drawn from the Securities and Exchange Commission’s website (sec.gov/edgar, 2017),
approximates these losses to be in the millions of dollars with 2013 exceeding 1 billion. Consequently, there are
multiple external and internal factors that are contributing forces to the collapse of the JCPenney brand. Our
team will attempt to pinpoint these external and internal factors and ultimately devise an execution plan that
management can implement to reverse the current economic situation.
III. ANALYSIS
A. The External Assessment
1. Economic
Although disposable income for Americans has risen over the last five years, the retail industry is not
reaping any benefits from this increase (tradingeconomics.com, 2017). According to Tom Popomaronis, a
contributor for Forbes (2017), traditional retail establishments like JCPenney are destined for failure as
consumers are shifting their focus to a more service-oriented economy (Popomaronis, 2017). Popomaronis goes
on to say that not only are consumers migrating more towards services, they are also utilizing their cash for
investments such as better living conditions. Finally, Popomaronis says that the average consumer’s ability to
obtain credit and ever-changing housing expenses are factors that are causing a presumed decline in the retail
industry (Popomaronis, 2017).
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Running head: JCPENNEY STRATEGIC PLAN
Another economic factor that plays a vital role in the stability of JCPenney is the company’s stock prices.
While stocks are dipping to record lows, JCPenney is essentially begging investors to stick with them. An
article published by Steve Symington, a technology and consumer goods specialist for The Motley Fool,
provides some insight as to why JCPenney recently experienced a 28.5% stock drop in August
2017(Symington, 2017). Symington says that after JCPenney published its second-quarter financials for 2017,
showing a larger loss than expected, stocks fell (Symington, 2017).
2. Social, Cultural, Demographic, and Natural Environment Forces
Social, cultural, demographic, and natural environment forces that directly affect JCPenney include a shift
in consumer spending toward e-commerce, a diminishing middle class, and a generational shift in spending
from baby boomers to millennials. E-commerce sales grew by 15.6% in 2016 representing 11.7% of total sales
in the US (Zaroban, 2017). This also made up 42% of growth in the retail industry in 2016. These numbers are
expected to continue rising. The vast power the Internet has placed in the hands of the consumer concerning
pricing and location has and will continue to impact JCPenney’s revenue stream. Another major force that
continues to affect JCPenney is the diminishing middle class (McGrath, 2014). JCPenney has always marketed
to this economic class; with the class disappearing, JCPenney will have to either cater to upper or lower-class
consumers. Generational changes also have a significant strategic effect on the retailer. As more baby boomers
retire and make room for millennials starting their careers, a shift in market demographic occurs (Knight, 2016).
This has resulted in tech savvy customers who know how to find the lowest prices in the least amount of time.
3. Political, Governmental, and Legal Forces
Political, governmental, and legal forces that affect current strategic conditions include policies proposed
by our new president, as well as foreign affairs and relations. First, with the election of a new president comes
new policies that have major affects across businesses and industries. Proposed tax cuts could have a positive
impact that supports spending by increasing disposable incomes of customers (Deloitte, 2017). However,
proposed trade restrictions could raise prices on goods, decreasing those disposable incomes, thereby putting
consumers in a position to spend less. With China being the largest manufacturer of apparel to the United
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Running head: JCPENNEY STRATEGIC PLAN
States, any shift in foreign policy, trade regulations, or foreign relations could significantly affect the retail
industry as a whole (Goldmansachs.com, 2017). For that matter, any government, economic, or natural crises in
China could also have a direct impact on JCPenney and other retailers.
4. Technological Forces
Through the use of smartphones, tablets, and even voice controlled devices such as Amazon’s Echo device,
the Internet is essentially at the fingertips of everyone at all times. In essence, technology has shifted the power
from the retailer to the consumer. In a fraction of a second, customers can conduct instantaneous searches that
capture pricing from countless retailers enabling them to demand fair prices. Before the Internet was a
facilitator of goods and services, traditional brick and mortar stores were the only means by which consumers
could shop, other than mail order. For companies to avoid being blindsided, strategists must recognize that the
digital world is real and adapt because this is the new “traditional” way of conducting business.
According to a post by Stuart Lauchlan on diginomica.com (2014), JCPenney recognized they had a
tremendous problem concerning their digital presence (Lauchlan, 2014). Then CEO, Mike Ullman, professed
that omni-channel marketing was the answer to JCPenney’s problems. Ullman went on to say that his goal was
to streamline the digital shopping experience. Lauchlan concluded by saying that JCPenney should have acted
proactively instead of reactively (Lauchlan, 2014). Essentially, JCPenney is trying to perform damage control
while other retailers, who have progressed with technological advances, are constantly stealing their market
share.
To place in quantifiable terms, Brian K. Walker, Senior Vice President for strategy at Hybris Software
(2014), wrote an article for Forbes reporting that holiday foot traffic was down by 50 percent from three years
prior (Walker, 2014). This decline signifies the dawning of a new age, the technological age, where consumers
can shop from geographically anywhere at any time from a multitude of platforms. Walker goes on to say that
shopping via the traditional channels take more time, which is a luxury many consumers don’t have (Walker,
2014). By utilizing technology, consumers can achieve full retail satisfaction in a fraction of the time. Finally,
Walker says that technology has made information readily available to the consumer as opposed to conferring
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Running head: JCPENNEY STRATEGIC PLAN
with a traditional retail associate (Walker, 2014). Often, consumers can become better educated on a product or
service through the use of the Internet. Rating and review sites and customer reviews are just a couple tools that
help educate the consumer.
5. Competitive Forces
According to Dun & Bradstreet’s Hoovers website, JCPenney’s main competitors are Sears, Kohl’s, and
Macy’s. Adrien Nussenbaum, co-founder of SAS Miraki (2017), says that Macy’s, Kohl’s, and Sears are
essentially mirroring the same issues that JCPenney is having (hoovers.com, 2017). He references the
introduction of a new unconventional competitor, Amazon, specifically saying that Amazon has been a leader in
the long-tail of marketing because of their ability to virtually “shelf” an endless number of tailored products.
Consequently, this strategy directly contributed to the diminished foot traffic that JCPenney as well as Macy’s,
Kohl’s, and Sears have experienced. Nussenbaum goes on to reiterate JCPenney’s former CEO, Mike Ullman,
saying that an omni-channel presence is paramount in stopping the demise of traditional brick and mortar.
JCPenney has a chance here if they can strategically revamp their business model accordingly to captivate a
bigger portion of the market share.
The plethora of information available echoing the issues that traditional brick and mortar stores are
experiencing is overwhelming. Greg Petro, a contributor for Forbes (2016), wrote an article essentially
condemning excessive brick and mortar (Petro, 2016). Petro makes the reference that 70% of products found at
JCPenney and other brick and mortar stores are sold on Amazon as well (Petro, 2016). Finally, Petro says that
in order for these department stores to see a rise in foot traffic, they need to concentrate on the tailoring their
private brands to a customer driven economy (Petro, 2016).
A recent study conducted by A.T. Kearney (2017), a consulting firm, gives some insight into how
companies can combat a decline in sales (Kearney, 2017). First, the retail experience that groups of people such
as the baby boomers knew is long over. As millennials take the forefront, they also take precedence as to how
retailers need to cater to the consumer (Kearney, 2017). The survey goes on to say that mobile shopping
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Running head: JCPENNEY STRATEGIC PLAN
coupled with social media experiences is one key to success, while providing a more personalized in-store
experience is also vital.
A recent article published by Tonya Garcia (2017), a reporter for MarketWatch, says that Macy’s and
Kohl’s are still not up to par with their omnichannel presence. Even with additional capital from numerous store
closures, Macy’s still cannot seem to captivate a bigger omnichannel presence (Garcia, 2017). Contrarily,
another article published by Sharon Bailey on marketralist.com (2015), places JCPenney ahead of the
competition (Bailey, 2015). Bailey goes on to say since the departure of former CEO Ron Johnson, JCPenney’s
strategy to increase its omnichannel presence by simultaneously integrating brick and mortar customers into it is
promising (Bailey, 2015). Essentially, by mixing the two, JCPenney will reap more store traffic, both online and
offline.
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Running head: JCPENNEY STRATEGIC PLAN
Porters Five-Forces Model
Rivalry among competing firms
•
Intense rivalry among both traditional and non-traditional firms have wreaked havoc on the
department store. Essentially, prices must remain extremely competitive which provides for a small
profit margin. Digital channels that employ a great degree of long-tail niche marketing are also a
culprit in declining department store sales.
Bargaining power of suppliers
•
Prominent suppliers amass bargaining power by threatening to pull their brands. As stores continue
to slash prices in hopes of generating foot traffic, they are, in turn, upsetting their suppliers.
Prominent suppliers do not like to see their brands deeply discounted. Essentially, this forces the
industry to conform and accept standard pricing models or risk alienation from key suppliers
resulting in lost revenues altogether. Moreover, there must be a balance among discounts to keep the
supplier/retailer relationship in harmony.
Potential Development of substitute products
•
The consulting firm, A.T. Kearney (2017), gives advice on the new digital era. Millennials are
searching for a better customer experience where social media platforms and mobile shopping play a
prominent role. Traditional foot traffic is being substituted by digital traffic. The endless shelf space
the Internet offers has provided niche goods to the consumer better, cheaper, and faster. These new
channels have wreaked havoc on department stores.
Potential entry of new competitors
•
With the Internet being a global sales platform, it has paved the way for virtually anyone to enter the
marketplace at any time and from anywhere. With that being said, traditional department stores must
recognize that their omni-channel presence is paramount for their brands survival. Not only are
competitors competing against their normal foes, they are also competing on a global scale where
everyone is in play, from the consumer to the retailer.
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Running head: JCPENNEY STRATEGIC PLAN
Bargaining power of consumers
•
The Internet is an influential tool that has placed a great deal of power into the hands of the
consumer. Social media sites, blogs, rating and review sites, and company websites all are arenas
where customers can post reviews, comments, questions, and complaints. In a fraction of a second,
customers can price shop from a multitude of competitors enabling them to demand fair prices.
Before the Internet was a facilitator of goods and services, traditional brick and mortar stores were
the only means by which consumers could shop. This transfer of power from the supplier to the
consumer has yielded great bargaining power for the consumer.
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Running head: JCPENNEY STRATEGIC PLAN
6. External Factor Evaluation Matrix
External Factor Evaluation Matrix (EFE)
Weight Rating Weighted Score
Opportunities
0.10
2
0.05
Rising disposable income
0.08
1
0.08
Shift in consumer spening toward e-commerce
0.15
3
0.05
Proposed tax cuts by new administration
0.24
3
0.08
Shift in focus to an omni-channel presence
0.10
2
0.05
Implementing a healthy mix of brick & mortar with a digital backbone
Implementing technology in retail sales can eventually save resources
0.05
2
0.10
Main competitors are experiencing similar problems
Tailoring private brands to provide a greater customer experience
Incorporation of social media into marketing mix
Incorporation of mobile sales platforms
0.06
0.06
0.08
0.06
3
2
1
2
0.18
0.12
0.08
0.12
Weight Rating Weighted Score
0.04
1
0.04
0.12
3
0.04
0.04
4
0.01
Threats
Plummeting stock prices
Diminishing middle class
Foreign affairs
Proposed trade regulations
0.02
4
0.08
Reluctancy to spend on items that are not necessities
0.02
3
0.06
The digital era has shifted power from the retailer to the consumer
0.06
3
0.18
Decline in foot traffic due to internet sales
70 % of items are also sold at Amazon
Consumer credit obtainability
Shopping preferences of millennials
TOTALS
0.06
0.06
0.02
0.05
1.00
1
1
2
1
0.06
0.06
0.04
0.05
2.00
…
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