JC Penney & Joe Fresh Strategic Alliance:
A good fit?
G.W SHWARTZ CONSULTING GROUP:
Donisha Young, Kent Nunn, Ryan Sloan, Caroline Gilbert
Agenda
1.
2.
Description of Article
Internal Analysis: J.C. Penney
a)
b)
c)
d)
e)
3.
External Analysis: J.C. Penney
a)
b)
c)
d)
4.
5.
Positioning analysis
Competitive positioning map
Gross profit comparison vs. competitors
Porter’s Five Forces Analysis
Analysis of New Retail Strategy
Analysis of Partnership with Joe Fresh
a)
b)
c)
6.
Company overview
Target market analysis
Financial analysis
Retail strategy mix analysis
Strengths and weaknesses
Pros and cons
Implications of partnership
Expected results
Conclusions
Analysis of Article
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Partnership with Joe Fresh
700 stores
4-year deal
March 2013: Store openings
J.C. Penney Company Overview
Mission statement:
"To be our customer's first choice for affordable fashion and quality as we
enhance the quality of her life by being Bigger, and Bolder.“
Core Values:
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Associates - We value, develop and reward the contributions and talents of
all associates.
Integrity - We act only with the highest ethical standards.
Performance - We provide coaching and feedback to perform at the
highest level.
Recognition - We celebrate the achievements of others.
Teamwork - We win together through leadership, collaboration, open and
honest communication, and respect.
Quality - We strive for excellence in our work, products, and services.
Innovation - We encourage creative thinking and intelligent risk taking.
Community - We care about and are involved in our communities.
J.C. Penney Company Overview
• Mass merchandiser
• Operates 1,104 department stores in 49 states and
Puerto Rico.
• Sells variety of products and product lines
• Owns over 100 private brands
• Objective:
– Continue to focus on customer satisfaction and
gaining customer loyalty by remaining first in its
class in terms of customer service.
J.C. Penney Target Market
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Middle class/middle income
Women (age 30-50) with dependents
Visit store about once every 2-3 weeks
Savvy shoppers
J.C. Penney Strengths/Weaknesses
Strengths
Well diversified supplier base
Compelling private and national
brands
Weaknesses
Falling sales
Losing market share to competing
customers
Successful marketing campaigns;
high brand awareness
Old/dreary image
Innovative point-of-sale initiatives
Old customer base; perceived to
be old ladies
Lack of real brand identity
Variable assortment - inconsistent
throughout stores
Positive in-store experience
Effective cost and inventory
management; terminates
unprofitable areas of company
Successful new online store
Moving into food offerings
Rising costs put pressure on store
economics basics
Weak perishable offerings
Financial Analysis
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Once the go-to place for home products
13% drop in customer traffic in fiscal year 2012
25% fall in revenues in fiscal year 2012
Fewer customers are coming into stores and when
they come purchases are smaller
• Has not participated in the economic recovery as well
competitors
• The financial position of JC Penney shows the
urgency to incorporate Joe Fresh in their company.
They need to move forward , and Joe fresh is a
good fit.
Retail Strategy Mix
• Location: Urban shopping centres
• Merchandise: Extensive width and depth of
assortment
• Competitive Pricing: JC Penney is price oriented, and
working toward attracting cost-efficient customers
• New pricing strategy, consisting of "fair and square”
pricing. It includes three types: everyday, regular prices;
month long values
• Atmosphere: Good to excellent
• Promotion: Heavy ad commercials, also using
catalog use; direct mail, personal selling.
• Customer Service: medium levels
J.C. Penney’s Position in the Marketplace
• Indistinct middle-American value-priced
merchandise
• Neglected building a brand
• Focused on pricing strategies to drive traffic
• Perceived as value retailer offering mid-quality
products and product lines
J.C. Penney’s Position in the Marketplace
J.C. Penney
J.C. Penney’s Competitors
J.C. Penney
J.C PENNEY’S MAJOR COMPETITORS GROSS PROFIT (2012)
(*USD in Millions)
Porter’s Five Forces Analysis
Porter’s Force
Rating
Threat of Substitutes
High
Buyer Power
High
Supplier Power
Medium
Rivalry Among Existing Firms High
Threat of New Entrants
Low
New Retail Strategy
• Improve declining sales
• Salvage a brand that has flopped
• Three elements:
1. Pricing changes
2. New logo/spokesperson/marketing
3. Reinvented shopping experience
1. Pricing changes
• Moving away from frequent and deep
discounts
• Three tiered pricing structure:
1. Everyday prices
2 . Month long value
3. Best prices
Analysis of Partnership
Pros
Cons
Attracts new shoppers
Losing key customers
Potential sales increase
Changing brand image
Highly unique; inimitability
High cost
Increase store volume
High risk
Implications of Partnership
• Overlapping Target Market
• JC Penney financial record is risky
• Could revamp entire department store
business model
Expected Results
• Other fashion boutiques report promising
early results
• Industry experts expects Partnership
won’t gain traction until the second half
of the year
Conclusions
• Action was necessary ( history,
declining market share)
• Fits well with marketing strategy
• Gives the company a unique
position