Managing Corporate Turnarounds Case Study Solution

About Company

Imperatively, JC Penney is one of the valuable and US based retail Companies, which was established by James Cash Penney in 1902, offering private-label brands. Thecompany was very well known for its merchandise and exceptional customerservices. Today, the company is engaged in jewelry, homefurnishing, cookware, marketing apparel and cosmetics. The company is one of the largest homeretailers and apparel of the nation, combining an expansive footprint of more than 860 storescrosswise the Puerto Rico and the United States, with a powerful ecommerce site, to deliver value and style to all the hard working American families.

Identification of situation

It should be noticed that the company had been experiencing liquidity issues,following a decline in profits and sales forseveral years. With high debt to pay off and declining sales;it is pertinent to note that the company had struggled to establish an effective and consistent pricing strategy, over the period of last 5 years. As the market rivals of the company adopted digital strategies and made considerable amount of investment, in order to improve their customer satisfaction and stores’ experiences;the company’s financial distress gave it a little room to buy the trendy merchandise, spruce up stores as well as hire additional employees.(Nathaniel Meyersohn, 2019). The woes of the company began with the significant change in the retailers’ pricing strategy, i.e. the replacement of the coupon sales with daily low prices of the products.The prior pricing strategy of the company was abandoned after Ron Johnson took over the company’s leadership. The company changed the floor merchandise, eliminated coupon discounts and added streets/boutiques. In addition to this, the company wasconcernedabout controlling inventory overagesand making its layouts and merchandisingup to date with reimaged stores (Mourdoukoutas, 2019). Along with this, the company switched its target market and shifted its focus from older shoppers to trendier and younger shopaholics, due to which the company had lost the track of its direction and had become unsure of the types of brands it needed to offer,without any core considerationover winning the loyalty ofits valuable customer base.

Causes of failures

Despite once being a growing andprofitable organization; the fierce competition in the market had led towards significant changes in the management and strategy that had proven to be insufficient to help the company in getting its consistent andfinancial outcome which it had enjoyed previously. Due to the reduced profits and sales;the company was confronted with liquidity issues since sufficient cash on hand was requiredto cover the daily operating needs. As a result of the inconsistent pricing strategy, customer dissatisfaction and the high debt burden; the company lost majority of its customers, due to which the sales had reduced and so had profitability levels.

After taking the company’s liquidity position under consideration, despite the fact that the sales were increasing on an annual basis; the company was unable to manage its operating expenses efficiently. In addition to this, the company’s strategic mistake came into existence because of the misunderstanding of the significant and considerable difference between Apple stores and retail stores. The buzz marketing machine and word of mouth (WOM) and unique products already hype the customers, but the retailers such as JC Penney did not offer uniqueproducts and did not have same marketing machines either, which means that the company’s customers were yet to be hyped by the traditional sales promotions. Instead of promoting the exclusive brands that had the potential to attract and appeal its loyal customers to its outlets; the company opted to introduce high priced products that didn’t have any connection with its prior value-focused customer base. In addition to the inconsistent pricingstrategy; one of the significant cause of failure includes robust competition between market players. With new market players rising and the old competitors squeezing out the unprofitable; the stock of the company trades much lower than its prime days.(Pendora, 2019)………………………………..

 

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