J.C. Penney Corporation, Inc. History
J.C. Penney Corporation, Inc. is a retail company in America, which was founded by James Cash Penney in 1902. The company is currently dealing with cosmetics, cookware, marketing apparel, jewelry, and home furnishings. Initially, the group was referred to as J.C. Penny Stores Company between 1913 and 1924 then incorporated to J.C. Penney Co. in 1968. Within the 21st century, it was operating approximately 1,000 stores in Puerto Rico and the United States with their headquarters in Plano, Texas (Hoffman, 2017). The company began its operations in April 1902 when Penney (Founder) partnered with other two colleagues to open a Golden-Rule store housing dry-goods in a small town of Kemmerer, Wyoming. They later extended their business by opening other two stations stores in the same city. Penney acquired his original partners in 1907 and adopted other new ones, starting with Earl Corder Sams when he was the president of the corporation in 1914 to 1946 (Costello, Ryan, & O'Rourke, 2017).
The firm had 34 stores in the American West after being incorporated and moved its headquarters to New York City in the following year. It became the publicly traded corporation among the Ney York Stock Exchange in 1927 and increased its stores to 1,392. The retirement of Penney in 1946 did not affect the policies that he put in place, and it led to the birth of other strategies. For example, the traditional system of cash-carry, which was meant to give security to the customers from debt, initiated the use of credit cards through sells on credit (Castagna & Newcomen Society of the United States, 2002). Moreover, the firm broadened the apparel and notions to more complete levels of soft and hard goods with more fashionable merchandise. The advancements gave a competitive advantage to J.C. Penney with other companies such as Montgomery Ward & Co. and Sears, Roebuck, and Co. (Costello, Ryan, & O'Rourke, 2017). J.C. Penney ventured to overseas markets in 1968-69 through the acquisition of Sarma, SA, in Belgium and other stores in Italy. The relocation of its headquarters was done in 1988 from New York City to Plano, Texas. Additionally, it opened other stores in Chile and Mexico in 1995. Nonetheless, it closed its international merchandising section in 2003 (Hoffman, 2017).
The company announced its partnership with a cosmetics chain called Sephora to include its outlets inside particular stores of J.C. Penney in 2006. It was followed by the initiation of American Living brand, which dealt with accessories, clothing, and a home decor facilitated by Ralph Lauren who was a fashion designer. Other names adopted by the firm are Linden Street home furnishings with cloth lines for young men and children and were particularly Fabulosity designed by Kimora Lee Simmons (Easterling, 2013). In 2010, significant financial earnings of the company stemmed from online purchases, and it ends its catalog sales. It encountered $17+ billion in sales with 160,000 employees. The company was struggling in its stages in 2000 within the retail apparel industry trying to overcome the competition from both brick and mortar retailers due to the uprising of the internet sector. J.C. Penney was being fixed by the Macys, and Kohls who were focusing on affluent shoppers and Wal-Mart and Target were taking more shoppers because of their discount (Costello, Ryan, & O'Rourke, 2017).
Reports showed that their sales and stocks were no longer beneficial thus disappointing its stakeholders. The company began by strategizing on increasing the discounts to attract customers, which showed a success. For instance, it realized revenue of 75% on their merchandise after applying a discount of 50%. The sale of the company was its backbone because it was used to further the performance of the stores since they were making purchases of up to 600 in every year. Its management had been working but could not figure out how to maintain their customers in steady sales. The famous brand of J.C. Pennys market brands, which accounted for half of its sales, was Worthington, Acbin Creek, and St. Johns Bay (Hoffman, 2017). The analysis of the annual financial assets of the company demonstrates that it has been experiencing frequent fluctuations from 2013 to 2017. However, the trend has been recording notable changes and shows that in 2014, the assets were higher ($11.8B) compared to other years and for 2017, which was $9.31B. Additionally, the liabilities recorded the same trend as the assets demonstrating 2014 had a higher value than other years getting $8.71B and declined to $7.96B in 2017. The total liabilities and shareholders equity showed the same pattern towards the previous year (Saloner, Shepard, & Podolny, 2011).
Business situation JC Penny before the introduction of the turnaround strategy
During the late 1990s, most of the retail companies in the U.S were venturing towards the decentralization of the merchandising business. On the contrary, JCP was still focusing on its merchandising strategies on the local store management on the decisions of how much and what to purchase (Singh, 2012). The plan adopted by the firm demonstrated that it rests its belief on the notion that those closest to they do a good performance on the customers. This option relegated the duties of the company, which include an assortment of merchandise, selection, and buying at the store level. The items available in the firms stores were communicated from the headquarters with its details to the store managers. Therefore, it gives the managers the go-ahead to decide on their needs with free purchases as described by the CFO, JCP Robert Cavanaugh (O'Kane & Cunningham, 2014).
The competitors of JCP resorted for centralized merchandising and inventory systems, which involved daily updates of sales of each item in the stores while it was a different case for the firm since it had no updates of what was available in the shops (Costello, Ryan, & O'Rourke, 2017). The method of decentralization in the company proves hard, for instance, it was a hindrance where there were dynamic changes in the prices of fashions. The mode of operation in JCP was the assurance of maximum stocks in their stores compared to their competing partners who stocked their shelves with highly preferred items (Barulina & Barulin, 2016). Consequently, the inventory of the things not sold increased with a decrease on those which got sold quickly thus resulting in inconsistencies in the JCP stores (Hoffman, 2017).
The issue made it impossible for the company to improve the benefits of its spread and size. It was comfortable on the revenues generated from the stores hence described the operational independence of the shops as a non-issue. Between 1965 and 1995, the firm recorded a 16% return on equity (Easterling, 2013). There was a drastic change in the local patterns in the U.S towards the end of the 1990s. For example, the retail market was dominated by the Wal-Mart with other competing companies in the U.S like Dillards offering their customers exceptional prices and store retailers like Kohls lowering their costs compared to JCP services. The period was marked by massive deterioration regarding the financial capability of the company thus reducing its stock to junk. It forces them to utilize cash to purchase merchandise when the prices were high (Saloner, Shepard, & Podolny, 2011).
Furthermore, specific customers realized that the firm was displaying out-dated merchandise that was not in fashion hence making them shift focus to other stores like Kohls, target, and Old Navy. Research done by Zandl Group showed that the popularity index of the firm had dropped by 40% between 1997 and 2001 (Singh, 2012). Few individuals regarded JCP still valid for shopping since the external and in-house brands were out-dated despite being present on the shelves. The stores bear cluttered picture due to the number of the products in the allocated place calling for the realignment of the company. The exhibition of fashionable merchandises by JCPs competitors made the differences between them to narrow (Hoffman, 2017). The retail prices of the unique items in the market were then adopted by nearly every company and were not bearing any much uniqueness again. The competitors in the market including JCP had no other choice of displaying as original to their customers since the retail market in the U.S had matured. Compared to companies like Target and Wal-Mart, JCP was not recording any significant sales since it was not offering the same discounts to the upper middle consumers as they were (Costello, Ryan, & O'Rourke, 2017).
Therefore, there was the need for JCP to improve on the contents of its fashions radically. The firm saw it fit to attempt to fix and expand the fashion programs for the men, children, and women with dividing its stores in two. First and foremost was the metropolitan, which was based in regional shopping centers and the geographic that was focused on smaller communities (Purkayastha, 2007). The decision of the company to refocus its strategies was seen to be difficult by a section of analysts. According to the research in the business, it showed that $1.5 billion of the annual sales were recorded out of the stores of JCP but hindered them from positioning itself to be an actual department store. Another hindrance that was preventing the company from making more profits is the low-margin goods (Easterling, 2013).
New strategic approach/focus and strategic options to turn around the company
JCP started by installing communications network from its headquarters to its stores using satellite transmissions. It enables merchandise buyers in the home office to demonstrate the available merchandise in their shop to the salespeople, local buyers, and store managers. Additionally, the local persons help to sort out items that were likely to be sold faster in their stores. The activities enable the company to achieve cost-saving advantages toward centralization and also initiate their sensitivity to fashions and seasonal preference locally (O'Kane & Cunningham, 2014). During the company restructuring, it acquired other units, which participated in the sales of knitwear thus pushing the company towards achieving the goals it set in 1982. They also narrow down the regional operations to four in 1988 to facilitate more comfortable communications in the merchandising divisions. It was followed by the launch of massive leveraged employee stock ownership plan (LESOP). Its focus on apparel boosted the firm to be the most preferred space of the retailers in the U.S. it attracted buyers from regional malls to acquire clothes and accessories, washing machines and paint (Costello, Ryan, & O'Rourke, 2017).
J.C. Penney utilized the opportunity thus improving its earnings from $4.11 per share to $5.92 recording total sales of $ 14.8 billion. It led to the naming of the company as the U.Ss exclusive Olympic apparel distributor. Nonetheless, it was faced with stiff competition and the environment of promotions thus making the earnings to reduce to $5.86 (O'Kane & Cunningham, 2014). When Gill assumed the chairmanship of the company, they relocated the headquarters to Plano, Texas and decreased its stores to 1,328 through the closure of underperforming outlets. Moreover, it moved from private labels and eye on notable brand names such as Jockey, Levi Strauss & Company, Ocean Pacific, Van Heusen, Warners, and Reebok. The earnings decreased owing to the uncertainty of the Persian Gulf with the incoming vocation. Compared to the present strategies, the initial presence of many stores...
Cite this page
Brief History of J.C. Penney - Case Study Example. (2021, Sep 02). Retrieved from https://proessays.net/essays/brief-history-of-j-c-penney-case-study-example
If you are the original author of this essay and no longer wish to have it published on the ProEssays website, please click below to request its removal:
- The Leader in Nelson Mandela Essay
- Organizational Communication in the LMM Company
- Case Study on Domtar
- Comparative Government and Politics - China
- Islamic Financial Institutions, Stock Markets, and Stock Indices
- Research Proposal on Online Services Affecting Customer Satisfaction in the Banking Industry
- Organizations in Strategic Context - Paper Example