ARSHELLE R.

JONSON

BSBA-FM

Case Discussion Questions:

1. What strategy was the new CEO at JCPenney seeking to implement given the generic strategies found
in Chapter 4?

The Strategy that JCPenney's New CEO (Ron Johnson) is trying to implement based is that he's trying to
implement the integrated cost leadership / differentiation strategy in order to turn the tides and
condition of the Business into their favor by using his successful past experience in Apple Retail Store. In
his new strategies, he tried to rebrand JCPenney by implementing the cost leadership strategy through
decreasing the price of goods around 40% instead of offering discounts like before, because he's trying
to aim for the value pricing approach which mostly try to keep the costs low although the discount
approach is the main staple & strategy of JCPenney since the beginning. Then, he's also implementing a
differentiation strategy which will be integrated with the cost leadership where as he shifted the focus
of every store into selling some certain branded products such as Levi’s, etc alongside with some specific
types of goods such as home goods, etc. He implemented this integrated strategy to change JCPenney
into a new high-end retail stores that provide good prices and better deals on their branded goods with
a hope that people could easily affiliate & retain that image because of their worthiness and
differentiation. However, apparently JCPenney isn’t really a company that people can easily affiliate with
like Apple, especially when they decided to implement that strategy because most people will most
likely remember and affiliate JCPenney with discounts instead of the current strategy and if that Image is
gone, people will probably just forget about JCPenney and won’t even gonna shop in a regular basis
because of no discounts.

2. What was the result of change in strategy implemented?

The CEO’s focus of the strategy was to focus on the new customers, but failed to keep the current
customers happy. Because the new strategy caused JCPenny to lose many of its current customers, he
also failed to attract new ones. The implemented strategy resulted in the current customers were being
missed and the new pricing policy caused the old customers to be forgotten. The result change was a
$4.28 Billion loss in sales from the previous year. Their internet sales declined by 48 percent. This
ultimately led to a net loss of approximately $1 Billion. The results of the strategy implemented were a
failure. Mentioned there that the new CEO wanted to gain more customers specifically customers from
their competitors. Unfortunately, they only focused on attracting more customers rather than building
momentum in their current customers at the same time gain more customers. Their sales were
decreasing which resulted in a net loss at the same time losing its customers. The aftereffect of the
adjustment in methodology CEO, Ron Johnson executed is disappointment. His vision was centered
around increasing new clients, yet neglected current client and neglected to keep them upbeat.

3. Why was this strategy a disaster for JCPenney?

When taking over as CEO of JCPenny, Ron Johnson did not deliver a business strategy that caters to the
company’s existing customer base. JCPenny have operated through promotions and discounts that
mimics its competitors, Macy’s, marketing strategy. However, when Ron Johnson took over he adopted
1/3 of the company’s store a new business model that focused on everyday low prices without any
additional discounts or promotions. As a result, the company’s new market segment cannibalized its
own customers because 2/3 of its stores were still promotion based and did not adopt the new business
strategy. Therefore, all stores that adopted the new business strategy increased sales and the old stores
significantly decreased sales.

4. What does is mean to be "stuck in the middle" between two strategies(i.e between low cost and
differentiation strategies)

Differentiation strategy is also known as a marketing strategy in which new and exclusive product is
developed which has some unique characteristics which are valued by the customers these
characteristics are perceived different and unique from the products being offered by the competitive
firms. Firms products may not be the cheapest option, but they are somehow special or different to the
customers making them desirable. Firms must take the time to carefully understand their target market
because if they price these “special” products too high, people may opt for the cheaper options. Tesla
would be a good example of a company who uses this strategy. This kind of marketing strategy is used
where there is a tough competition in the market and all the firms are offering similar kinds of products
and services. The circumstances where the customers are looking "something different" can also result
in the implementation of this strategy. Low-cost strategy can be considered as a marketing strategy by
the firm when they tryattract more customers by reducing the price of their products and services as a
tool for increasing their sales and market share. Low cost strategy is centered on the capability of the
company to produce and deliver products of competitive quality at lower costs. .