Situation Analysis of JCP

Hayley Gray
Strategic Marketing Process: JCP Case 1
Internal Analysis
Mission
J.C. Penney’s mission statement. “‘Do unto others as you would have others do unto
you,’ was established by Penney and followed by the company while he was alive. This does not
provide a very clear mission for the organization as it is not closely linked to what the business
provides. Today, the organization has modified this to “work and win together to achieve
superior performance,” which is still not a direct statement of what their business is hoping to
achieve.
Culture
According to the Annual Report of 2011, the company was shifting its culture to help
associates “to do the best work of their lives.” Their management teams are a combination of
previous and new leaders. This indicates that the internal organizational culture was not healthy,
but that they were trying to implement a new strategy to make it better. There is a guide for
employees that supports the more modernized mission statement through their proposed eight
"Winning Together Principles." However, it seems that the culture fails to adhere to all of these
principles. There is a distinct lack of trust for executives and managers, particularly Ron
Johnson. With Johnson’s mass layovers, many employees became fearful of losing their jobs,
which results in poor performance due to a lack of morale. With fear for both a job and the
company’s health comes a lack of risk-taking, which is necessary for one of the principles, an
innovate environment. Furthermore, many base retail workers are not informed of changes
occurring higher up in the framework, which hinders another one of the principles, teamwork,
which relies on collaboration and open and honest communication. Lastly, integrity is the second
principle, which guides their ethical behavior. After the reveal of false pricing, this principle has

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been jeopardized for the employees, creating an unethical environment. Overall, the culture
seems to be unstable and in need of a transformation that will instill confidence and love for JCP.
Structure
There is a strong, tall, hierarchy in the structure of JCP, with tension between lower and
upper management. There is a Board of Directors, who are over tiers of executives, which
eventually lead down to the base retail workers, which is all very formal, rather than flexible.
Decisions are made in upper management, but they are not communicated quickly to the workers
beneath. This was especially seen when Ron Johnson became CEO. As a result, the structure
does not lend itself to fast action. Employees do not feel empowered, and customers are not
given the best service.
DSI
Overall, it is difficult to determine a specific dominant selling idea. However, the
company’s Annual Report of 2011 said that the store would be for all Americans and offer a
unique experience. The store provides a large variety of brands fair and square at reasonable
prices. The company lacks the main point for a dominant selling idea – it is not superlative, as
other department stores rank higher than they do and offer very similar products. The company
did have a believable reputation of being fair and square with reasonable prices, until the worker
told of the company’s pricing strategy. After that incident, the believability of the brand was
damaged. The brand is memorable, and many people remember it for being priced well as it links
to the Penney part of the name. Being able to afford and have a choice of products for home and
apparel is important to many people. The company does offer tangible products and service that
are consistent in quality.

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Elements of Expression
The name J.C. Penney evokes the thought of being cheaply priced, which the brand does
aim to do. It is not the most fun or creative name, but it is not irrelevant. The company tried to
have a unique specialty in its introduction of small specialty shops within its stores. The DSI tag
was changed multiple times with fair and square being one tagline, and changing to “when it fits,
you feel it.” This inconsistency keeps the tag line from being memorable or being thought of
immediately upon thinking of JCP’s name. The only image that could be a key visual is the box
with JCP in it that looks like the American flag. However, similar to the tagline, JCP
changed its logo three times in three years, causing confusion and lack of memory for the
brand’s key visual. The company does, however, have a consistent reputation for DSI level
performance. Overall, the company failed to express their intentions for their brand consistently
as stated by Sara Rotman in her Forbes article “JC Penney’s Misfire: What Went Wrong” when
she said, “Misfiring and then making so many adjustments to a brand’s relaunch messaging
immediately out of the gate is devastating to consumer confidence – and making so many quick
changes in succession ultimately confuses rather than strengthens a brand’s image.” However,
even if all of these elements were spectacular, without the DSI, they are not doing their intended
job of supporting it.
Performance Metrics
Financials: The % of sales continually fell for JCP from 2011-2014, as well as most of the other
competitors within the industry, with the exception of Dillard’s, who still fell in the last year. In
terms of profitability trends, by looking at the gross profit margin (GPM) and operating profit
margin (OPM) charts listed in the Appendix, it is clear that the industry was decreasing in
profitability. The OPM was declining across all companies, with JCP being the lowest, and the

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GPM was fairly stagnant across all, except for JCP, which declined rapidly between 2012 and
2013. This indicates that JCP was not making enough sales to cover its costs.
The management effectiveness ratio of Return on Assets indicates a decline with all
companies except Dillard’s and Macy’s, which slightly increase. However, it is very clear that
JCP and Sears are doing the worst. This shows that JCP needs more sales without the acquiring
of new assets. The decline could also indicate high fixed costs or the failure to collect accounts
receivable. By looking at the chart for returns on equity is very similar, except that all the
companies except Target, JCP and Sears are increasing, with the latter two far below the others.
This measure indicates that the management of JCP is not using the stockholders’ money they
have invested wisely.
Financial strength, as seen by the current ratio, fluctuated widely across the industry.
However, it is important to note that JCP was the strongest in 2011 and declined more rapidly
than the other companies until 2013-2014, where it picked back up again. This could potentially
be a result of Ron Johnson being CEO from 2011-2013. A decrease in the current ratio indicates
a lack of liquidity. This could be a result of difficulty in selling assets quickly. The quick ratio
showed that JCP was the leader during 2011, but then declined rapidly until the year Johnson
was fired. This indicates that the company was unable to pay off its short-term debt without the
use of sales, perhaps because failure to receive accounts receivable quickly enough or paying too
many bills.
The efficiency of JCP, as seen by asset and inventory turnover has declined steadily over the
years, whereas most companies were fairly stagnant. This shows that the company is failing to
sell its inventory or assets quickly enough. A potential cause could be the pricing strategy not
communicating a good value to possible customers. When Ron Johnson was announced as CEO,

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the company was leading in these ratios. However, after his implementation of stores within the
store, similar to Apple’s structure, and his cutting of price coupons, many customers were
deterred, resulting in sales decreases. After he was fired in 2013, the company was caught up in
all of his plans with no direction. This kept the decline going.
Lastly, JCP did decline during the years of Ron Johnson being CEO in terms of leverage, as
indicated by debt-to-equity ratio. The ratio continually increased throughout the period with the
company heavily taking on debt to finance itself. However, the industry as a whole increased as
well between 2012 and 2014. This could have led to higher returns that would cover the debt, but
this obviously did not occur as the other financials indicate a decline. As a result, the company
could have been bankrupt.
Market-based Metric Assessment: According to the Consumer Reports 2010, customers had a
mediocre attitude towards JCP as indicated by rankings in the middle range overall for perceived
relative product quality, perceived customer value, and relative service quality scoring a 3 on
mostly everything except service which scored a 4. This indicates an average customer
satisfaction. Many customers were loyal to the company due to its long history. However, during
the years in which Ron Johnson was president, the company lost many of its loyal customers as a
result of some of the changes, such as eliminating couponing. Furthermore, the company has
tried to bring in new customers, overlooking its loyal ones, changing their attitudes towards the
company. When loyal customers tried to voice their opinions on social media, the company
failed to address their concerns. Such losses of loyal customers had a negative effect on customer
lifetime value, repurchase, revenue per customer, and overall satisfaction. Not only did the
company lose its loyal customers, but it failed to create new interest and build customer
awareness due to its inconsistency in branding. People are unable to recognize the brand when it

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changes so much. This caused a decline in the percent of new customers. These attitudes and
company failures also influenced the customer retention rate. In 2014, the company had 61.4%
retention rate, which was lower than Target (72.1%), Macy’s (68.2%), Sears (67.8%), and Kohl’s
(64.5%). The company had a 7.7% market share.
Strengths and Weaknesses
JCP’s history gives it a competitive advantage in terms of consumers believing the
company has great value for them in terms of low prices and high quality. This built loyalty
among many customers which will love JCP regardless of its failures. Furthermore, its
introduction of the Big Book, or catalog, in the 1960s became a nostalgic, fun, icon of the brand
for many people. Furthermore, the brand’s strengths include offerings of a variety of private-
label brands that other companies do not offer. Ron Johnson introduced a unique shopping
experience, boutiques, that separate the company. However, JCP also has many weaknesses.
Throughout the past half a decade, the brand has been very inconsistent with its logo, private-
brand offerings, partnerships, pricing strategy, and other aspects. This has created a lot of
confusion and distrust. Furthermore, with the changes in management, there have been tensions
between levels of the company’s structure. Layoffs have created low morale for workers, leading
to poor customer service. Also, the company’s website is inconsistent with its stores’ inventory.
Another weakness is that JCP targets the middle economic segment, which is a diminishing
customer segment market. Lastly, the company suffers from poor communication of strategy and
vision.
Key Success Factors
IBISWorld identified the five most essential key success factors for this industry. The
first is the ability to control stock on hand as supply and demand fluctuate seasonally. By

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efficiently controlling this, the company can maximize its sales. As seen by the inventory
turnover decline charted in the Appendix, JCP clearly was unable to manage its stock efficiently,
even after firing Johnson in 2013. This could have been due to all of the plans Johnson made in
regards to product offerings being cut off abruptly when he was fired, leaving unfinished work
with no direction. Second, the company must have an experienced work force with friendly,
helpful staff that provides excellent customer service. Due to the distrust towards Ron Johnson
and massive layovers, the workers were scared for their job security, leading to low morale, and
poor customer service. Next, the company must have flexible operations to keep up with the
market demand changes. Once again, with the poor inventory turnover and asset turnover, it is
clear this was not being implemented successfully by JCP. Fourth, the stores themselves must be
attractive in nature through their layout and design, shelf management, service, and cleanliness.
The company attempted to create a unique attractive environment through the transformation of
stores into shops, boutiques, and pathways known as streets that surround squares. However, due
to a lack of sales, the shelves were always cluttered with inventory. Lastly, there must be a large
variety of products available to meet the needs of the customers in one place. Out of all of the
industry key success factors, this one is the only one JCP even somewhat succeeds at as it offers
multiple private-line brands and ranges from home goods to clothing to personal care. However,
the company had difficulty meeting the needs of customers due to their declining target market.
Past and Present Strategy
JCP failed to have a good strategy in much of its past. With the instatement of Johnson,
he had many ideas, but failed to have a coherent, organized strategy that aimed to make the
company superlative. Instead, Johnson simply tried to make it better. What he aimed for was to
“build a retail chain that provides customers with reasons to visit a store, instead of buying on the

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web”, according to Rafi Mohammed in “With Ron Johnson Out, What Should J.C. Penney Do
Now?” Mohammed also mentions that this kind of strategy does not work for brick and mortar
stores as the costs are too high to compete with online retailers. With the failure to execute and
communicate a strategy, customers were deterred and lost trust. Employees lost morale and
motivation. Johnson attempted to rebrand and change the position of JCP, but did not define who
he was targeting until later, where it was said that fashion-forward, trendy, younger audiences
were who the company was trying to appeal to. However, they failed in this regard as their
juniors section was very limited. On the positive side, because of the mistakes of Johnson,
feedback was given by employees and customers that helped move JCP towards a current
strategy. Now, JCP has clearly defined a target market with Latinas, as they make up a large
proportion of the sales, which helps to guide the strategy of the company.
External Analysis
Market Analysis
Market Basics: Department stores offer a wide range of products and services, such as
apparel, jewelry, cosmetics, home furnishings, general household products, toys, appliances and
sporting goods. Discount department stores, provide low priced items. The industry does not
include big-box retailers, supercenters with fresh groceries, and warehouse clubs based on
membership. Most of the stores operate internationally across the United States. No major
players operate globally; however, some industry players like Walmart operate worldwide.
Additionally, many products sold by department stores are imported. Overall, the Department
Stores industry exhibits a low level of globalization.
Market Size and Growth: The market currently is producing revenue of $163.6 billion.
The annual growth each year from 2010-2015 was -4.6%. It is anticipated that there will be a -
2.6% annual growth each year between 2015 and 2020.

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JCP has a 7.7% market share.
Market Attractiveness: The market is not attractive to current or potential participants as
the industry is declining as a whole. As e-commerce rises, this decline is accelerated.
Furthermore, due to the shift to supercenters, major buyer power has been moved, resulting in a
decline in profit for the industry. This profit is also affected by e-commerce’s price
competitiveness that hinders price mark-ups in brick and mortar stores.
New Groups: As technology increases, e-commerce becomes a more popular route for
shopping that going to the brick and mortar department stores. As a result, online retailers are
taking market share from department stores. Additionally, specialty retailers and home good
chains have become more competitive in recent years.
Future Markets: The markets in the future will be more online, as it is cheaper to run an
online retail store without having to pay for the physical establishments. Furthermore, there will
be more Warehouse Clubs and Supercenters, as well as outlet stores and discount department
stores. This will cause department stores to become more luxury based.
Market Share Trends: There are a few main department stores that hold most of the
share. The top four hold around 53.3% of the share. Discount department stores are starting to
hold more share than the high-end. Market share concentration is declining, and heavy
competition will force out some, causing a decline in industry operators of 1.8% per year on
average to 62 companies.
Barriers to Entry: Barriers to entry are medium and steady. High saturation and competition
in the industry will limit new entrants. There are not many operational costs, but paying for rent
in high population areas where department stores typically are is expensive.

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Competitive Analysis
Competitors: The direct competitors are Kohl’s, Target, Sears, Dillard’s, and Macy’s. The
indirect competitors are specialty retail stores, such as home goods or boutiques. This could
include Bed, Bath, & Beyond, as well as stores like Gap. Outlet malls, discount stores, and
overstock are also competitors as they provide a large variety of low priced products in one place
such as department stores do. Furthermore, supermarkets such as Walmart are indirect
competitors. With the DIY trend, Pinterest could even potentially thought of as a competitor as
people begin to learn how to make things themselves rather than going to buy them. The trends
indicate that e-commerce is becoming more of a competitor now, so as to make it both a current
and future competitor.
Individual Analysis: From looking at table 2 in the Appendix, Kohl’s maintains a few
competitive advantages through its strong financials, brand reputation, and management. The
environment is conducive to innovation, allowing for growth. Also, Kohl’s has a strong customer
segment market due to the increase in lower economic population, in contrast to JCP’s declining
target market. Additionally, the company has effective communication between its levels of
employees, as well as with its customers about the company. The last strength is the company’s
efforts to be sustainable are perceived positively. However, the store layouts of Kohl’s are
cluttered. Furthermore, the company fails to train properly, which then leads to poor customer
service. This is only heightened by its complicated inventory system. Lastly, Kohl’s has a small
market segment, targeting mostly women and teens, which limits its potential sales, similar to
that of JCP.
Target is known for holding a competitive advantage through its high profile partnerships
that give them access to different products, as well as its large market share. They have a strong

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customer segment in the growing lower economic class, whereas JCP’s target market is declining
in growth. The company offers a unique shopping experience through its various types of stores,
such as PFresh Target, SuperTarget, CityTarget, Urban stores, and Small-format Target.
Products range within each type of stores, giving customers what they best need. Additionally,
Target’s sponsorships of many types of programs boosts its brand awareness. Lastly, the
company has a safe environment and a niche market. However, Target claims to have high
quality products, which are not perceived as high quality, similarly to its pricing strategy.
Furthermore, there is poor stocking of the shelves with many customers’ needs not being
fulfilled in stores. Lastly, the company suffers from legal cases and hacks into their systems that
have damaged the trust of its customers.
Sears holds competitive advantages in its specialties and history. The company specializes in
hardware, which goes with their segment for men that many other department stores fail to
address, such as JCP. This hardware is known for being of excellent quality and includes many
well-known trademarks. It also is the longest standing department store, which leads to loyal
customers that other companies could fail to gain. Another strength is the company’s low
problems that have been reported during customers store experiences, ranging from service to
layout. However, due to the company’s age, it is resistant to change, which has resulted in a lack
of innovation and change with trends. This could be the reason for its declining financials.
Dillard’s holds a competitive advantage through its strong financials, indicating that the
management knows how to manage the company’s money well. Furthermore, the company is
known for its outstanding merchandise quality in its large variety of products. The service is high
quality, and there are short lines, which leads to a good customer experience. Additionally, the

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company has competitive pricing and a strong website. However, Dillard’s has a limited market
as it is only located in half of the United States and is not very active on social media.
Macy’s holds one of the largest market shares and strongest brand name as its
competitive advantages. The company has outstanding merchandise quality in home décor and
personal-care items. Additionally, there is a large target market due to its multiple types of
stores, Bloomingdale’s, Bloomingdale’s Outlet, and Macy’s. If the brick-and-mortar stores were
to do poorly, the company has a strength in its strong e-commerce. Lastly, the company keeps its
brand awareness level high with its sponsorship of huge events such as the Thanksgiving Parade.
However, the company does have a weakness in its large expense from high employee turnover
as it has many physical stores. Additionally, it has low asset and inventory turnover. Each of
these indicates that there is a weakness is management of financials.
Online retailers are gaining market share with the development and spread of access to
technology. The strengths include being available to customers in their households very easily.
Furthermore, they are available to a larger range of customers who have access to a computer but
not the physical location of the store. For instance, it is easier to reach a global audience with
online retail, which JCP fails to reach. Online retailers can also price products much lower
because they do not have as high of costs as traditional brick-and-mortar retailers like JCP who
have to pay for buildings, more workers, air conditioning, property taxes, etc. However, e-
commerce also involves shipping products, which relies on a strong supply chain. Furthermore,
customers do not have instant gratification and cannot see or try on products, which can lead to
more returns than JCP would have. There is also a safety concern with e-commerce as more
threats for hacking increase. Also, companies heavily invested online must keep their reputation
high even more so than those not online. Online retailers also have to keep up with new

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technological advancements and constantly improve their customer service to ensure a smooth
experience, as website compatibility often is difficult to ensure.
Discount stores combine the low prices of e-commerce and the ability to have instant
gratification from traditional brick-and-mortar stores. Furthermore, shopping at a discount store
gives customers the feeling that they have saved money, similar to the effect of couponing that
JCP has as a main strength. As a result, this could pose a major threat to JCP’s low prices and
confidence boost for customers who use coupons like “drugs” as Johnson stated. Furthermore,
discount prices draw in customers of lower economic segments, which is a growing target
market. However, discount stores also must face the perception of quality as cheap prices can
often lead consumers to believe the products have poor quality. They could potentially question
why a product is priced so low, believing there is a malfunction. Often times, discount stores
offer products that are no longer trending or were not bought when they first came out. This
could limit the amount of consumers interested if the products are no longer considered trendy.
Furthermore, a company must be careful as to not price products too low so they can make a
profit.
Overstock stores such as T.J. Maxx and Ross has a competitive advantage in low prices.
This, like discount stores, appeals to the growing lower class market segment. Furthermore, these
stores offer a wide range of products. In contrast to JCP and other department stores, overstock
stores like T.J. Maxx have become international, increasing their potential market. However,
there is a lack of online presence for these stores as it is difficult to update the inventory to match
stores. Once again, like discount stores, the product offerings can lose their trendiness, resulting
in lower sales. Furthermore, offering low price products means that a low cost is needed for the
company to make a profit.

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Customer Analysis
Needs: One of the main needs being met is the desire to look good, whether it be through
fashion, making a home look good, or one’s body at a reasonable price. This overarching image
need could stem from a need for pride in oneself or home, power, creativeness, or status. Another
need is purely utilitarian in that people need clothes to wear or sheets to sleep under. People need
safety and security in the things they buy as well, expecting high quality lasting products that
will not harm them. Multicultural families need multilingual services, labels, and signage. Lastly,
the need could be for entertainment as shopping provides entertainment for many people.
Market Segments: JCP, for most of its history, focused on middle class families on a
budget. These families expected to be able to satisfy their needs at a low price for long-lasting
products. Some of these segments include Multi-Culti Mosaic families which are a lower to
middle economic class family mix made up of multicultural members. These families require
different trends and services that will accommodate their culture. They need low prices and high
quality products that will last, so they do not have to spend more money on replacing the
products. They begin their journey with becoming aware of a brand through television and
sponsorship of sporting events. They evaluate the company based on their prices and product
offerings. If the evaluation is favorable, they will make a purchase through online ordering or in
store. Their post-purchase behavior relies on the quality of the product and on how the service
accommodated their multi-lingual needs. Their unmet needs could include such services and the
lowest prices providing them with high quality. They are completely different than those of the
typical conservative, American, couple such as the “Red, White & Blues” segment which has no
kids and has a passion for American chain brands. These customers need reasonable prices and
gain awareness from television and internet. They evaluate the brand on its reputation amongst

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other Americans. Then they purchase either online or in store. The unmet needs could be if a
company imports from other countries.
JCP also targets older retired customers with no children in the household in the middle
class. These segments, such as the “57 Old Milltowns” and the “38 Simple Pleasures” aren’t
interested in trends, but in a wide range of product types. Their motives includes buying for
others, such as their children and grandchildren that do not live with them. Both segments enjoy
the J.C. Penney catalog and couponing. They gain awareness through television advertisements,
magazines/catalogs, and recommendations from friends. They evaluate based on the prices and
variety of product offerings. Purchases are made through the catalog or in store. Post-purchase
decisions and behavior are based on the service and usability of the products in their lives. Often
times, companies update their technology, advertising and products to current trends and
advancements, which leaves these customers behind. As a result, primitive advertising such as
with the catalog are unmet needs.
When Johnson was hired, he geared the company towards younger, fashion-forward
trendy customers. One segment that falls into this is called the “Modern Spenders” who are
young and consume rapidly as they have dual income and no children. They are more focused on
themselves with more expendable money. The want to get all of their products in one store very
easily, with efficient service and up-to-date technology. Awareness for this segment comes from
online advertisements and television. They evaluate a company based on online reviews and
currency of trends and technology. They will make their purchase online or in store. Their post-
purchase decision is based on quality. Constant innovation and change is an unmet need for this
group. Johnson’s focus could also lend itself to another segment called the “Starting Outs” who
are typically single or young couples that are establishing their spending patterns. They need a

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wide range of children’s products as they are beginning their families. Due to their chaotic
schedules, their motives are based on efficiency and ease of shopping. As a result, good service
is a huge requirement. Awareness is spread through online reviews of products and
recommendations from friends and family. They evaluate a company based on their variety of
current trending products and technology efficiency. Purchases are made online to save money,
as these prices are often lower and it is more accessible. Post-purchase behavior is based on the
quality of products. Their unmet needs may be lowest prices and large selection of children’s
products.
Today, JCP targets mostly the Latina target market as Hispanics make up a large portion
of their sales. These customers, like the “Multi-Culti” families require different products and
service to meet their needs, such as bilingual employees and signs. They tend to like sports such
as soccer, and they love to stay current with trends. Most of the women do the shopping in this
segment. As a result, fashion offerings must be very trendy and have a large selection.
Awareness is spread through the Spanish channel and sponsorship of sporting events,
particularly soccer. They evaluate brands based on friend recommendations and reputation. They
mainly purchase in store, and their post-purchase behavior is based on the multi-lingual services
offered. They tend to be the most loyal if this need is met. However, in many geographic regions,
this is an unmet need.
Environmental Analysis
Socio-cultural: Consumers are more concerned with businesses being actively involved
in their communities, whether it be by featuring local products or hosting events. The company is
also expected to adhere to any values and beliefs about products that customers have, such as
creating Green products or only using local supplies. Also, diversification of the United States

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markets in terms of culture is increasing. More immigrants are coming, particularly Mexican and
Latino. This changes the potential target markets, as well as what to offer based on cultural
preferences. With the baby boomer generation living longer, this changes the product offerings
necessary. Furthermore, birth rates have fallen, leading to less need for baby products. Family
structure is also changing with later marriage ages. Lastly, the millennial generation is known to
engage in impulse spending.
Economic: The economy is becoming an hourglass type in which there is no middle
class, but companies must instead cater to the lowest and highest class customers. Furthermore,
bad economic conditions and high unemployment rates are causing a decrease in spending.
Customers are very price-oriented and expect discounts and savings, or they will change to
another company. Retail as a whole has been impacted by this. More companies are having to
employ part-time workers as minimum wage has increased. Lastly, companies are becoming
more global by moving overseas. With this movement, companies must be aware of cultural
preference differences.
Ecological: There is a growing Green movement in which companies must now invest
more in sustainability so their products are eco-friendly as well as their production methods, such
as with the Clean Water Act. In fact, if a company does not comply with certain Green practices,
legal ramifications may arise. This is especially true with pollution standards, as companies are
fined once they release a certain amount of pollution. By not complying, a company’s reputation
may be harmed as many customers care about the environment. Due to this growing concern,
there is now a huge market for Green products, which could lend itself to more product offerings
for companies. Product stewardship involves external stakeholders helping the company with
product designs and development that will be Green, which is a growing trend for companies.

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Green methods are also being incorporated into advertising, with less paper advertisements being
given out such as JCP’s catalogs, and more technological advertising, such as social media
campaigns. Lastly, there is a growth in alternate energy source use, such as solar, wind, and
nuclear. Walmart, for example, has been working to improve their energy use with the
implementation of solar panels on the roofs of their stores.
Technological: More retail is becoming e-commerce rather than traditional brick-and-
mortar stores. This makes pricing difficult in physical stores as online stores are cheaper to
operate, thus allowing cheaper pricing strategies. On the positive side, with the growth of
internet use and social media, feedback from customers and engagement with them is much
easier. Companies are expected to have a social media presence now. However, this also means
information is more readily available to consumers, and a company must keep a good reputation.
In addition to social media, location-based marketing has evolved with the growth in smartphone
usage. Also, technological advancements in computerized systems, for example, RFID have
helped companies with inventory management and supply chain management. Point of sale
systems have also become of use to companies with processing payments.
Political-legal: Many legal measures have been implemented in terms of making
companies more environmentally friendly. They must comply with certain standards of
production and waste management. Minimum wage has been changed, affecting the employment
methods utilized by companies. The changes in sales tax also affect stores in their pricing
strategies as consumers are less inclined to shop with taxes are high. Taxation rates on local,
regional, and state levels affect bottom lines for companies. Trade policies, such as Tariffs,
influence who companies do business with and pricing strategies. Lastly, governmental
regulations have increased to protect workers’ rights and safety standards have made certification

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more extensive for companies, and required that money be set aside for matters dealing with
these issues.
Opportunities and Threats
The department store industry is localized to the United States, and JCP could expand to
global markets in order to gain more market share. However, physical expansion may be a bad
idea with the threat of e-commerce taking more of the market share. This growth in e-commerce
represents an opportunity for JCP to engage younger audiences. With the growth of discount
stores, supermarkets, and outlet malls, companies have the opportunity to widen their product
offerings by introducing new lines. However, for JCP, these growing types of competition
represent a threat. The company must decide whether it would benefit them strategically to try
competing directly with these types of stores, or if they should focus on a different niche.
Advancements in technology in general are a threat, as well as an opportunity, for JCP. Without
updating systems and means of advertising, it will remain a threat. If the company utilizes it for
their benefit, it is an opportunity.

Hayley Gray
Appendix:
Financial Tables and Graphs
Industry 2011 2012 2013 2014 JCP 2011 2012 2013 2014
GPM 39.4 36.6 38.9 41.9 GPM 39.2 36 31.3 29.4
OPM 5.3 4.6 2.9 2 OPM 4.7 - -10.1 -12
Current 1.9 2.2 1.7 1.9 ROA 3.04 -1.24 -9.29 -12.86
Inv. T/O 3.4 4.6 4.1 3.2 ROE 7.6 -3.21 -27.43 -44.36
D-E 1.5 1.1 1.3 2.1 Current 2.41 1.84 1.43 1.7
Quick 1.12 0.7 0.38 0.53
Macy’s 2011 2012 2013 2014 Inv. T/O 3.46 3.6 3.39 3.17
GPM 40.7 40.4 40.3 40.1
Asset
T/O
1.39 1.41 1.22 1.1
OPM 7.6 9.1 9.6 9.6 D-E 0.57 0.72 0.93 1.59
ROA 4.04 5.88 6.2 6.97
ROE 16.56 21.91 22.28 24.16 Target 2011 2012 2013 2014
Current 1.36 1.4 1.55 1.52 GPM 30.9 30.9 30.9 30.4
Quick 0.37 0.51 0.43 0.47 OPM 7.8 7.6 7.3 5.8
Inv. T/O 3.16 3.19 3.17 3.08 ROA 6.62 6.48 6.33 4.25
Asset
T/O
1.19 1.24 1.29 1.31 ROE 18.94 18.71 18.52 12.02
D-E 1.26 1.12 1.12 1.08 Current 1.71 1.15 1.17 0.91
Quick 0.78 0.47 0.06 0.16
Kohl’s 2011 2012 2013 2014 Inv. T/O 6.31 6.23 6.45 6.14
GPM 38.2 38.2 36.3 36.5
Asset
T/O
1.53 1.55 1.55 1.57
OPM 10.4 11.5 9.8 9.2 D-E 1.01 0.85 0.89 0.78
ROA 8.34 8.44 7.04 6.29
ROE 13.96 15.98 15.71 14.78 Sears 2011 2012 2013 2014
Current 2.08 1.84 1.86 1.93 GPM 27.4 25.5 26.4 24.2
Quick 0.84 0.47 0.21 0.35 OPM 1.1 -3.6 -2.1 -2.6
Inv. T/O 3.81 3.73 3.54 3.17 ROA 0.54 -13.76 -4.57 -7.26
Asset
T/O
1.38 1.36 1.38 1.35 ROE 1.51 -49.09 -26.44 -60.75
D-E 0.21 0.64 0.74 0.79 Current 1.34 1.11 1.1 1.09
Quick 0.24 0.16 0.15 0.19
Dillards 2011 2012 2013 2014 Inv. T/O 3.53 3.53 3.53 3.68
GPM 36.4 36.8 37.1 36.9
Asset
T/O
1.77 1.82 1.96 1.92
OPM 4.3 6.2 8 8.3 D-E 0.24 0.49 0.71 1.63
ROA 4 10.69 8.04 7.99
ROE 8.18 22.42 16.71 16.34
Current 2.05 1.83 1.94 2.13
Quick 0.44 0.29 0.2 0.34
Inv. T/O 3.07 3.12 3.27 3.2
Asset
T/O
1.39 1.47 1.62 1.65
D-E 0.44 0.4 0.42 0.41

Hayley Gray

Hayley Gray
Table 2: Competitive Analysis (Retail Apparel)
Company Strengths Weaknesses Competitive
Advantages
J.C.
Penney
Variety of private-label brands. Product
differentiation. Unique shopping
experience (boutiques). The Big Book
(catalog). Coupons draw in customers.
Promotional events held draw in
customers.
Brand inconsistency. Management tensions.
Lack of trust (employees and customers).
Poor customer service. Website inconsistent
with inventory. Diminishing customer
segment market (middle economic). Poor
communication of strategy and vision. Pricing
strategy.
Historically good value
for consumers with low
prices. Historical
reputation that built
loyalty among some
customers.
Kohl’s Strong customer segment (lower
economic). Sustainability. Effective
communication to employees and
customers.
Poor layout of store (cluttered). Poor
employee training leading to poor customer
service. Small market segment (Women and
teens). Complicated inventory system.
Strong financials. Strong
brand reputation. Strong
management. Innovative
culture.
Target Strong customer segment (lower
economic). Unique shopping
experience (different types of stores).
Larger variety of products. Sponsorship
of many programs boosts brand
knowledge. Niche market. Safe
environment.
Below average to average quality of products.
Poor stocking of shelves. Trust issues from
legal cases and hacks. Pricing perception.
High profile
partnerships.
Sears Outstanding merchandise quality in
hardware. Few store problems for
customers. Well-known trademarks.
Declining financials. Resistant to change. Specialty in hardware.
Specialty segment of
men. Large market
share. Longest standing
department store leading
to loyal customers.
Dillard’s Outstanding merchandise quality in
multiple product types. High quality
service. Short lines. Strong website.
Competitive pricing.
Limited target market (half of the states).
Limited social media.
Strong financials.
Macy’s Outstanding merchandise quality in
home décor and personal-care items.
Large target market from multiple store
types (Bloomingdale’s). Strong e-
commerce. Strong private brands.
Sponsorships such as Thanksgiving
Parade increase brand awareness.
Large expense from high employee turnover.
Low asset and inventory turnover.
Holds largest market
share. Strong brand
name.
Online Growing in market share. Strong
potential for development. Easily
global/international. Niche
specialization.
No instant gratification. Can result in returns.
Safety concerns. Website compatibility
Accessible from
anywhere. Lowest
prices. Lowest
operational costs.
Discount Instant gratification. Appeal to growing
lower class.
Cheap prices can = poor quality perception.
Declining trends. Low prices could lead to
low profit.
Low prices for a
traditional brick-and-
mortar store.
Overstock Appeals to growing lower class market.
Large variety of products including
designer brands. Growing trend.
International presence.
Unattractive stores. Perception of poor
quality. Saturated market. Difficult to
establish online presence. Trends change
quickly. Lower prices can lead to low profit.
Low prices for designer
brands.

Hayley Gray
Table 3: Customer Analysis (Retail Apparel)
Customer Segments Motives/Needs Decision Journeys Unmet Needs
Latinas Fashion-forward Latina women.
Trendy fashion. New offerings.
Low prices. Bilingual service.
Latin music in stores. Bilingual
signage. Soccer/sports products.
Awareness and exposure through media
and sponsorships of sporting events,
Hispanic FB page, and Hispanic
television channels. Evaluate JCP based
on friend recommendations and
reputation. Make purchase in store.
Post-purchase experience based on
product bought and multi-lingual
service. Loyalty.
Multi-lingual service
and product
descriptions.
The “Modern
Spender”
Dual-earner households needed
moderate prices. Consumption
oriented. Trends important.
Updated product lines.
Technological advancements.
Learn about company through online
advertisements and television. Evaluate
based on current trends and technology
efficiency. Make purchase in store or
online. Post-purchase based on quality.
Adapting products
lines. Up-to-date
technology in store.
The “Starting Outs” Single or young family
establishing shopping patterns.
Accessibility. Needs children’s
products. Consistent service.
Need current trends.
Awareness and exposure online. Read
reviews of products. Rely on friend
recommendations. Evaluate based on
service and variety of trending products.
Make purchase online many times to
save money and time.
Lowest prices. Variety
of children’s products.
The “57 Old
Milltowns”
Middle-class/lower economic
retired singles and couples enjoy
gardening, sewing, socializing.
Love the JCPenney catalog.
Need low prices and variety of
home products. Like couponing.
Awareness from television ads and
friend recommendation. Evaluate based
on service and product offerings. Make
purchase through catalog and in store.
Post-purchase based on quality.
Primitive advertising.
Lowest prices.
“Multi-Culti Mosaic” Immigrant community families
with lower to middle economic.
Need high quality and moderate
to low prices. Need multilingual
service and signage.
Awareness from television and
sponsorships of sporting events.
Evaluate based on low prices and
quality to last. Make purchase online or
in store. Post-purchase based on service
and quality.
Multi-lingual services.
Lowest prices.
“38 Simple
Pleasures”
Older, retired, often veterans.
Need cheap prices and variety of
home products. Order from
catalogs. Enjoy couponing.
magazines/catalogs. Evaluate based on
low prices. Make purchase from catalog
or in store. Post-purchase based on
usability and quality.
Primitive advertising.
Lowest prices.
“Red, White, &
Blues”
Support American brands.
Typical life. Need reasonable
prices.
internet/social media. Evaluate based on
low prices and reputation amongst other
Americans. Purchase in store or online.
Lowest prices.
American-made
products.

Situation Analysis of JCP

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