ON SLIDE
Cons:

Losing key customers

Brand Image

Cost

Very Risky
IN NOTES

Trying to reach younger customers by introducing Joe fresh brand, while also trying to convert
old JCP shoppers to the new style means they have to shy away from existing customers to really
focus on the new younger market they are trying to penetrate

If Joe Fresh doesn’t work out it could severely impact JCPenneys brand image as they are
currently recovering from a brutal couple of quarters. In the fourth quarter of fiscal 2012 JC
Penney recorded a net loss of $552 million (2.51 per share). Restructuring and
management charges excluded, it was adjusted $427 million (1.95 per share).
.(http://business.financialpost.com/2013/03/16/can-canadas-joe-fresh-save-jcpenney/).

It also may take longer and cost more money than investor’s hope as it is difficult to get brand
loyalty with such a new brand. It was mentioned that the customer transition is taking a little
longer than expected
ON SLIDE
Pros:

Store Volume

Potential Sales Increase

New Unique Idea
IN NOTES

Volume allows the firm to pay very low costs for the space when compared to other retailers and
if it were to remove all J.C. Penney branding from about 300 of the most strategically located
stores and sublet them to other retailers, the Texas-based department store company could clear
$1.2 billion annually in rental income, the report states
(http://www.omaha.com/article/20130129/MONEY/701299977/1697).

If JC Penney can penetrate the market and get customer loyalty for this new product than there is
potential for an increase in sales. Though this may take some time.

This whole business strategy is unique and brand new so it is difficult to say how it will turn out.
But, Joe Fresh is a Canadian clothes retailer and it is not very common for these stores to export
to the United States. It can be seen as a step in the right direction for globalization. If the idea is
successful then they will be a market leader. http://www.cnbc.com/id/100558417)
ON SLIDE
ThreOat of New Entrants LoE
Rivalry Among Existing Firms
High
Threat of New Entrants
Low
Threat of Substitutes
High
Buyer Power
High
Supplier Power
Medium
IN NOTES
Rivalry- Department store are extremely competitive in the United States as companies such as WalMart and Target enforce low pricing strategies making it a vicious market to compete in. Because the
Growth of the Department and discount retailers slow top companies are continuously wrestling back
and forth for market share.
Threat of New Entrants- It is low because the department store industry is a highly concentrated market
at the top. The majority of these companies have been around for many years and have efficiently
maximized their supply chain and focus aggressively on merchandising. JC Penney has been around for
over 100 years and their strategic positioning as well as other top companies makes it difficult for new
entrants
Threat of Substitutes - Substitutes are easy to find in the retailing industry and this poses the
largest threat for JC Penney. Companies have a constant concern with creating an environment
focused on customer satisfaction. With low switching costs in the industry, firms must focus on
maintaining their customer base while trying to steal new customers from their competitors.
Retailers are able to do
this in many ways, like creating a friendly environment where product pricing is relative to the
experience, or like JC Penney/ Joe fresh is attempting to accomplish with their new line.
Buyer Power- This is high because the market is so concentrated JC Penney has to compete in
pricing. This means price sensitivity is part of the consumers purchasing decision. Switching
costs are extremely low in this industry and if a customer can find a similar product cheaper
somewhere else , there is nothing stopping them from going there.
Supplier Power- It is low when based on things such as price sensitivity because competition is
so fierce, promotions and sales are used to attract customers. This is hard to sustain and prices
will rise, losing the advantage of low pricing that brings traffic.
However, JC Penney is attempting to differentiate the entire department retailing business
concept so in this sense the supplier power is moderate to high. By carrying and differentiating
products in their store such as incorporating the Joe Fresh brand they create a uniqueness in
the market that can only be found at their stores.