Case $/$ chapter $5$

WHEN OLD IS NEW AND NEW IS OLD

Late in $2011,$ JCPenney made a dramatic move, ousting CEO Myron Ullman and bringing in Ron Johnson. Johnson was perceived as a change agent who could reinvent the company as a new, hip place to shop, just as he had transformed the Apple Store from a run$-$of$-$the$-$mill mall store to an entertainment destination. $20$ His vision was clear, stating, $$In the United States, the department store has a chance to regain its status as the leader in style, the leader in excitement. It will be a period of true innovation for this company.$$ Johnson proposed offering new products and interesting product lines, such as Martha Stewart and Joe Fresh, to lure in high$-$end customers. He also envisioned JCPenney as a destination, where shoppers would look forward to spending time browsing the store, similar to the excitement one

often finds in an Apple Store. Unfortunately for JCPenney, Johnson$$s new vision was a near complete failure. Penney$$s loyal customer base was unhappy with the new store and pricing strategies. The company failed to attract new customers and sales fell by $25$ percent in one year. Even the major shareholder who championed Johnson$$s recruitment, Bill Ackman, realized that the company had made a new fatal error, lamenting, $$One of the biggest mistakes was perhaps too much change too quickly without adequate testing on what the impact would be$.$ Notre Dame marketing Professor Carol Phillips points out that the company failed to understand

the buyer with its new value pricing, no sale strategy. $$JCP$$s CEO Ron Johnson was $...$ clueless about what makes shopping fun for women. It$$s the thrill of the hunt, not the buying.$$ The new strategy was a mismatch with the company$$s existing managers, product lines, pricing strategies, and customer base. Sadly, the company moved too quickly without carefully analyzing the steps needed to implement the new vision. According to Virgin America CEO David Cush, $$Don$$t destroy your old revenue model before you have proved your new revenue model. That$$s the box that JCPenney has put themselves in$.21$ In April $2013,$ JCPenney$$s board reinstated former CEO Ullman, whose number one priority was reconnecting with the company$$s former customer base. Matthew Boss, an analyst at JPMorgan Chase, reports, $$He talked about having the right product,but more importantly having the price and the value perception, something that he believes was lost over the past year.$$ This means returning to the company$$s prior pricing strategy of marking up prices, then offering heavy discounts and abundant coupons and other promotional offers. Ullman planned to begin a slow process of analyzing the company$$s environment and adjusting the company$$s strategy to increase sales and profitability.

$22$ Many were optimistic that Ullman would be able to restore Penney as a stronger, more diverse company. However, the stock price continued to tumble and investors became concerned. In $2015,$ Ullman resigned and Marvin Ellison stepped into the CEO position. Ellison had joined the company as president in late $2014,$ with prior experience at both Home Depot and Target. But Ellison is facing a heavy lift. Shoppers are flocking away from once stalwart department store chains like Macy$$s and Sears toward alternatives like online sellers and niche retailers. In $2017,$ the company announced plans to close down $130$ to $140$ stores and to offer buyouts to $6,000$ workers, while at the same time offering new product lines, such as toys, beauty products, appliances, and home goods designed to appeal to their identified

customer base that is $70$ percent women and $70$ percent homeowners. Along with shifting product lines, the company added online sales and a mobile app, and is even considering regional pricing. Along with a new business model, the company also adopted a new mission: Help our customer find what she loves for less time, money, and effort. Even though JCPenney turned a profit in $2016$ for the first time since $2010,$ the question still remains: Does Ellison have the secret to turning around JCPenney? Only time will tell.

After raeding the case:$-$

$1)$ Summarize the case.

$2)$ Answer the following questions.

A$.$ As CEOs, both Ullman and Johnson were involved in each of the four management functions. Briefly describe the types of decisions that the CEO of JCPenney must make as they relate to each of the four functions.

B$.$ The text describes a variety of skills that are essential to management. Which two skills do you think will be most important for CEO Ellison?

C$.$ Do you think that Ron Johnson changed the mission of JCPenney or just implemented new strategies? Be sure to support your conclusion.

D$.$ What do you think were Ron Johnson$$s biggest mistakes?

E$.$ Do you think that Ellison will be successful in rescuing JCPenney, or is it too late?

$3)$ give recommendation to improve management of the company.

Note: Please submit you answer before the second of May $2024$