Strategic Plan Presentation

1. Strategic Plan Presentation Group Research PowerPoint ProjectBy: Michelle Captain, Michelle Nash, Renee Narzako, Phillip Baade, Delphine Lim

2. Content Introduction: Issues Affecting JC Penny Organization Marketing Competitors In Retail Industry Customer Connections

3. Introduction In 2013 J.C. Penney was ranked 215th on the Fortune 500 list It has been a successful department store in years past Recently, the retail giant has experienced a drastic drop in revenue and sales This is due to a consecutive decrease in profits/revenue and its foreseeable future is now uncertain For this presentation, we will look at why these problems arose and ways J.C. Penny can stop this downward spiral.

4. History “My name is James Cash Penny and I was born in Sep 16, 1875 in Hamilton Missouri” “I was taught at a young age to value the family's Golden Rule: Honor, Education, Self Discipline, & Self Reliance.” “I was born into a poor farming family & had eleven other siblings” “This Golden Rule would be the basis of my future endeavors.”

5. Golden Rule • In 1898, Penney moved to Colorado and began working for Thomas Callahan and Guy Johnson who owned several dry goods stores called the Golden Rule • Four years later he was approached by the two men and offered a partnership • A year after opening his new store, Penney was successfully managing a total of three stores • Later in 1900’s, Penney bought Callahan and Johnson shares of the Golden Rule chain

6. JCPENNY The Beginning • In 1913, Penney changed the Golden Rule franchise name to J. C. Penney Co. • By then, he owned a total of thirty-four stores • Annual sales exceeded $2 million • Penney’s embraces “Honor, Confidence, Service, and Cooperation” and decides to make it the company motto • This motto is still in place today

7. Current situation J.C. Penney has dropped 62 places from last years stand point on the Forbes 500 list Sales and revenue have steadily declined and hit an all time low Stock prices are plummeting The reasons for the decline started five years ago due to the recession and mismanagement The retail giant is trying to keep up appearances while rumors swirl on Wall Street of bankruptcy

8. His business strategies were deemed as thinking out side of the preverbal box It is called the “Fair & Square Pricing” strategy Ron Johnson, Operation Vice President of Apple, joined J.C. Penny as CEO in Nov. 2011 His goal was to revamp the aging company and attract new customers He was brought in to bring J.C. Penny out of its perpetual slump With new pricing and promotional strategies

9. Which led to……

10. THE MOST spectacular Retail Failure In Our Generation Within the 16 month stay at J.C. Penney, Ron Johnson: • Bypassed market research and put a new pricing strategy into place • Took away all coupons and promotions stating that coupons were comparable to drugs and customers needed to be weaned off of them • His statement enraged and alienated loyal customers • The new changes confused existing and new customers • Insulted customers by stating that they need to be educated on how the new pricing strategy worked • Johnson executed one of the most aggressive and unsuccessful tenures in retail history • He was fired on April 8, 2013

11. Organization • Over the past couple of years, J.C. Penney went through major transformation under the leadership of Ron Johnson • Objective was for J.C. Penney to become America’s favorite store which involve changing all aspects of the store, including upper management structure and employment changes. • The long-term transformation process presented many unforeseeable risks • Declining employee morale • Inadequate management structure

12. Employee Morale • Beginning in April 2012, massive job cuts occurred. • J.C. Penney cut approximately 600 jobs at its headquarters and just three months later, the company cut approximately 350 more jobs at its headquarter location (Smith, 2013, para. 4). • Ron Johnson, CEO and Chairman, of J.C. Penney stated that the job cuts were necessary to move forward. Johnson stated: • “Often in business, companies must streamline in order to leap forward . . . In our case, this has involved some very difficult decisions that have had an impact on many of our associates, but these changes are essential to help us achieve our long-term goals and, ultimately, grow our associate base as we grow our business. (as cited in Moin, 2012, para. 4)

13. Employee Morale • In addition to the massive job cuts, most employees hold entry-level, part-time jobs, thus not receiving sick time, vacation time, insurance benefits, or bonuses. • Additionally, the first year of the transformation process led unexpectedly lower revenue. • Ultimately, this meant employee morale was affected even more because the ability to give bonuses, raises, an or incentive compensation opportunities were decreased.

14. Inadequate management • Reducing company costs was a major goal of the transformation process. • e.g., massive job cuts employees faced • Job cuts also took place in the upper management structure of J.C. Penney. • The significant reduction resulted in the company operating with fewer individuals and increased job responsibilities (J.C. Penney Annual Form 10-K Filing, 2013, p. 8).

15. Inadequate management • The upper management restructuring resulted in J.C. Penney having a decentralized management structure, which ultimately has potential risks for all levels of the company. • The decentralized management structure, “distributes significant control and decision-making powers among our senior management team and other key employees, some of whom are located in satellite offices” (J.C. Penney Annual Form 10-K Filing, 2013, p. 8). • As a result, communication, morale, management cohesiveness, and effective decision-making are negatively affected.

16. Solutions • To increase employee morale: • make sure employees on all levels are aware of the company’s long-term goals for transformation and success. • Provide to employees all information that does not violate legal restrictions. • This way, employees would be more likely to have the mindset to jump on board and be a team member with the company’s transformation process.

17. Solutions • Focus on hiring talents that will ensure long-term success for the transformation. • Talents in management, sales, marketing sourcing, and human resources • Make sure that employees know that the long-term goal is for company growth, meaning more jobs will be needed once growth begins to occur.

18. Solutions • Shift away from the decentralized management structureto: • Remove communication barriers • Improve decision-making • Increase employee morale • Look at the management methods used by their competitors to compare management structures. • Macy’s is ranked 109 (previously 110) on the 2013 Fortune 500 List • Kohl’s is ranked 148 (previously 146) on the 2013 Fortune 500 List • J.C. Penney’s is ranked 215 (previously 153) on the 2013 Fortune 500 List

19. marketing • Ron Johnson failed to understand the customer’s needs and he believed J.C. Penny needed to update its image by: • Selling higher priced items • Selling more brand name merchandise • Totally making over some of the store’s departments

20. marketing • Ron Johnson adopted the wrong marketing strategies which became a total disaster • Totally eliminating sales coupons and sales circulars • Adopting a 40% off “all the time” pricing policy • Eliminating special sales events • Pursuing a younger sales demographic • Eliminated popular store brands • Implementing strategy quickly

21. Marketing Debacle • Johnson’s plan left behind J.C. Penney’s core customer base • Customers miss coupons and sales • Customers miss the brands that were eliminated • Younger customers never bought into the new concepts • Redesigned departments left customers feeling alienated from the sales experience • Sales dropped by over 60 to 70% • Stock price fell to almost “junk status” • J.C. Penney is teetering on bankruptcy • No sales clerks to help with shopping experience • J.C. Penney’s online sales system was basically ignored

22. Solutions • Bring back sales coupons and special sales events • Bring back popular store brands • Bring back sales clerks • Remodel some store departments • Shore up home goods and furniture departments • Reemphasize center store cosmetic counter • Invest in commercial advertising • Commit to stronger online presence and inventories

23. Competitors In the retail industry • Department stores overall have had a tough time amid stiff competition from specialty and online retailers. • The closest competition of J.C. Penney have all had sales growth for 2013, yet J.C. Penney has had a significant decrease. • 2013 - a 24.77% decrease

24. Competitors • 2.53% Growth in Sales/Revenue for 2013 • Special Buying Incentives: • Kohl’s cash which gives customers reason to return and spend more money • Large discounts of up to 30% can be used in conjunction with sale prices and Kohl’s cash • Display Sale Prices – on everyday prices

25. Competitors • 4.92% Growth in Sales/Revenue for 2013 • Advertise like no other • Brand’s product and advertisements are aesthetically pleasing • Focus on creating fun and intuitive shopping experience that considers customers

26. Competitors • 4.97% Growth in Sales/Revenue for 2013 • Convenience of in-stock merchandise • They have massive buying power • Try to cut costs out of operations such as distribution centers, home office, fleet, etc.

27. Competitors • 4.85% Growth in Sales/Revenue for 2013 • Fierce competitor – especially during holidays with exciting merchandise and promotions • Always looking for ways to surprise and delight the consumer - newness and quality • Logistics and Operations - constant push to improve, raise the bar, challenge assumptions, and deliver value to stores, consumers and shareholders

28. Competitors • 22% Growth in Sales/Revenue for 2013 • Innovative and lots of selection • Platform for sellers from all over the world, therefore prices are competitive • Offer promotions like 2-day free shipping during festive season e.g. Christmas

29. Solutions • Stand out among their customers • Work with suppliers to develop exclusive product for J.C. Penny only • Loyalty Points • Price match • Improve e-commerce site and allow more suppliers from all over the world to participate

30. CustomerConnections Took away their most popular cheap and good quality home brand. E.g. St John's Bay Gloria Vanderbilt in attempted to upscale the retailer by bringing in well-known brands like Martha Steward Living and dedicating floor space to boutique like Levi’s and Liz Claiborne How did J.C. Penny lose touch with our customers? Stop listening to what our customers want Took away sales and coupons Customers feel alienated and never come back

31. Customer Connections J.C. Penny ex CEO, Ron Johnson, arrogantly commented that “customers needed to be educated as to how the pricing strategy work” when shoppers were not reacting positively to the no more coupon marketing strategy How did J.C. Penny lose touch with their customers? Insensitive to customers Johnson also compared their customer’s usage of coupons to addictive drugs which insulted their most loyal customers that used coupons for many years.

32. Solutions • Public campaigns to gain trust and build loyalty among customers and investors • Help customers and investors understand J.C. Penny’s future plans • Efficient communication with customers and investors • Consider writing a sincere publication to tell their customers that we have changed and are here to listen to them.

33. Solutions • Engage with our customers • Using social media like Facebook, twitter, and Instagram to: • Show appreciation • Create Facebook or Instagram Contest • Update customers on deals and promotion • Have surveys to find out how we can improve to please our customers • Bring back the coupons and brands that customers like

34. References • J.C. Penney Company, Inc. (2013).  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for fiscal year ended February 2, 2013. Retrieved from http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-sec • Moin, D. (2012).  Penney’s cuts 900 jobs.  WWD, 203.71, n. pag.http://go.galegroup.com/ps/i.do?id=GALE%7CA286522386&v=2.1&u=lom_lansingcc&it=r&p=ITOF&sw=w&asid=f3d1149c916d26b7a3cc2fd7f69871ee • Smith, K. (2013).  US: JC Penney coy on potential job losses.  Just-style.com. n. pag.http://go.galegroup.com/ps/i.do?id=GALE%7CA317973981&v=2.1&u=lom_lansingcc&it=r&p=ITOF&sw=w&asid=0ecd9b862f84c7a36b3db8baef5d3ba5 • "Business & Money." Business Money The 5 Big Mistakes That Led to Ron Johnsons Ouster at JC Penney Comments. N.p., n.d. Web. 10 Nov. 2013. Retrieved from http://business.time.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnsons-ouster-at-jc-penney/

35. References "Fired - Google Search." Fired - Google Search. N.p., n.d. Web. 10 Nov. 2013. "J. C. PENNEY COMPANY, INC. PROVIDES UPDATE ON PROGRESS OF TURNAROUND." MarketWatch. N.p., n.d. Web. 10 Nov. 2013. Retrieved fromhttps://www.google.com/search?q=fired "JCPenney's Senior Management Team Knows There's Only One Way Out Of This Mess." Business Insider. N.p., n.d. Web. 10 Nov. 2013. Retrieved from http://www.businessinsider.com/jcpenney-must-regain-consumers-trust-2013-3