After reading chapter 10, read the case in the PDF file blow page 355 onManagement in Action (J C Penney).Consider all of the content in chapter 10 in your analysis of this case. Answer questions 1 and 2 in the book on page 355 as your initial post. Provide one responsive post to comment on another student's post.
JC Penney Case Page 354.355
(PDF File of Case from 8th edition)
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JC Penney Case Page 354-355 Kinicki 8th Edition Page 354 Management in Action J.C. Penney Is Effectively Navigating Strategic and Managerial Change J.C. Penney was founded in 1902. It began as a Wyoming dry goods store and grew to be one of the largest department stores and catalogue retailers. Given the growth of Internet shopping, Penney’s sales, along with those of other big retailers, began to fall in the 2000s. The company hired former Apple retail store executive Ron Johnson as CEO in 2011 to turn things around. Johnson’s vision was to make Penney hipper, and he changed long-held strategies and management practices that defined the company’s culture and identity. One of his first actions was to fire 600 employees at corporate headquarters. He continued to cut costs over the next two years by firing 19,000 store employees. This created a toxic environment in which people feared for their jobs, and morale plunged.138 Johnson replaced most of the company’s top executives with people from Apple, who brought with them a culture that clashed with that of Penney. These executives decided to eliminate Penney’s long-standing strategies regarding discounting and promotional pricing. He then converted stores toward a boutique shop image and dropped many private label brands driving Penney’s past sales.139 Existing employees did not completely buy in to these top down strategies, creating resistance to change. According to Fortune, “The makeover bombed, sales plummeted, and some 40,000 jobs were eliminated” during Johnson’s tenure as CEO. Further, “the chain’s inventory management and e-commerce operations were in chaos, and Penney ended up with some $5 billion in long-term debt.”140 Johnson was fired in 2013, and the company hired former CEO, Myron Ullman, as interim CEO. New Leadership Ullman immediately brought back Penney’s promotional pricing strategy and the private label brands. Cost cutting, however, continued as the company was near bankruptcy. J.C. Penney hired Marvin Ellison as the new CEO in November 2014. He had 12 years of senior management experience at Home Depot and was responsible for Home Depot’s very successful omnichannel strategy. Omnichannel strategies integrate different methods of shopping (e.g., online, in-store, catalogues, phone) into a consolidated sales approach. Penney has adopted an omnichannel growth strategy to fuel sales.141 One condition of Ellison’s hiring was that he would spend a year as president under Ullman. Penney wanted Ellison to learn the business and understand the company’s culture. The two men conducted more than 60 employee town hall meetings and visited https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-138 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-139 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-140 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-141 JC Penney Case Page 354-355 Kinicki 8th Edition 100 stores. They also traveled the world, visiting vendors and partners, so that Ellison could learn more about apparel factories, sourcing, and merchandising. These face-to-face interactions were instrumental to Ellison as he was looking for disconnects between corporate strategy and store operations. One example involved seeing senior management in stores wearing designer clothes that store employees or customers could not afford. Ellison created a policy requiring executives to wear J.C. Penney clothes when visiting stores, along with the same name tags worn by store employees.142 New Strategies and Goals Ellison and his management team established a goal of $1.2 billion in Ebitda, which stands for “earnings before interest, taxes, depreciation, and amortization,” for 2017. This goal is double what the company earned in 2015. To accomplish this goal, Ellison established several strategies and action plans: • Hiring experienced senior executives to lead efforts in e-commerce, supply chain, information technology, and marketing. • Creating internal promotion opportunities for employees and involving them with implementation decisions. • Opening 60 more Sephora cosmetic shops inside the stores. • Redesigning the center court areas of the stores, where the stores experience high traffic volume and sell high-margin products like jewelry, sunglasses, and accessories. • Investing in technology—the company committed 29% of its capital expense budget to technology. • Expanding the number of private label clothing brands. • Reducing the number of out-of-stock items by improving inventory management. • Using data analytics and Big Data to determine products desired by customers. • Reducing the company’s dependence on weather-sensitive categories such as apparel and experimenting with selling appliances—this is a new product line—in 22 stores. • Implement a program that ensures customers can buy online and pick up in the store on the same day.143 Are the Changes Working? Gross margins have increased and general administrative expenses have gone down 10% in each of the Page 355 last two years. Sales increased more than 3% in both 2014 and 2015, but the company is still not making a profit.144 The company also paid off a half billion dollars of debt in 2015, with plans to do the same in 2016.145 A reporter from CNBC asked Ellison if he was worried about the generic decrease in mall traffic. He said, “Mall traffic is down. Our conversion and our point of sale transactions are up. So we’re becoming a destination in the malls we’re in. Although https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-142 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-143 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-144 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-145 JC Penney Case Page 354-355 Kinicki 8th Edition traffic is down, our traffic is up relative to the mall and our point of sale conversion, which is the most important measurement, is actually up versus last year.”146 FOR DISCUSSION 1. Which forces for change are driving the changes at J.C. Penney? Explain. 2. Describe how Marvin Ellison is using Lewin’s change model. Be specific. 3. To what extent is J.C. Penney following the four steps for fostering innovation? Explain. 4. Use the model of resistance to change (Figure 10.5) to explain why employees resisted Ron Johnson’s strategic changes. 5. Do you think that the company’s strategies will help it achieve the 2017 Ebitda goal? Discuss your rationale. https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter_notes/chapter_notes.xhtml#ch10-146 https://jigsaw.vitalsource.com/books/9781259899065/epub/OPS/s9ml/chapter10/chapter10.xhtml?favre=brett#figure10-05