JC Penney & Joe Fresh Strategic Alliance: A good fit?

G.W SHWARTZ CONSULTING GROUP:

Donisha Young, Kent Nunn, Ryan Sloan, Caroline Gilbert

Agenda1. Description of Article2. Internal Analysis: J.C. Penney

a) Company overviewb) Target market analysisc) Financial analysisd) Retail strategy mix analysise) Strengths and weaknesses

3. External Analysis: J.C. Penneya) Positioning analysisb) Competitive positioning mapc) Gross profit comparison vs. competitorsd) Porter’s Five Forces Analysis

4. Analysis of New Retail Strategy5. Analysis of Partnership with Joe Fresh

a) Pros and consb) Implications of partnershipc) Expected results

6. Conclusions

Analysis of Article

• 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:• 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• Middle class/middle income• Women (age 30-50) with dependents • Visit store about once every 2-3 weeks• Savvy shoppers

J.C. Penney Strengths/WeaknessesStrengths Weaknesses

Well diversified supplier base Falling salesCompelling private and national brands

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

Positive in-store experience Lack of real brand identityEffective cost and inventory management; terminates unprofitable areas of company

Variable assortment - inconsistent throughout stores

Successful new online store Rising costs put pressure on store economics basics

Moving into food offerings Weak perishable offerings

Financial Analysis• 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 MAJOR COMPETITORS GROSS PROFIT (2012)(*USD in Millions)

J.C. Penney’s Competitors

J.C. Penney

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 changes2. New logo/spokesperson/marketing3. Reinvented shopping experience

1. Pricing changes

• Moving away from frequent and deep discounts

• Three tiered pricing structure:1. Everyday prices2 . Month long value

3. Best prices

Analysis of PartnershipPros Cons

Attracts new shoppers Losing key customersPotential sales increase Changing brand imageHighly 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