JC Penney SWOT analysis – Assignment Example
JC PENNEY SWOT ANALYSIS affiliation THREATS The SWOT analysis looks at the strengths, weaknesses, opportunities, and threats in a company (Griffin, 2012). In this paper, it is crucial to look at the threats that are likely to prevent the company from performing well in the future and also to look at the opportunities which the company can take advantage of in order to improve on its performance and also in order to strengthen its company strengths that are seen eroding.
The company faces a number of threats, including high competition from other companies in the market. The two main competitors are Kohl’s Corp. and Macy Inc who have excellent marketing strategy. For example, Kohl’s give good deals and coupons as a way of attracting customers (J. C. Penney Company, Inc, 2013). On the other hand Macy markets its store around its celebrity name. These strategies have helped these companies grow. This threat may also be because the company does not have enough trained employees in its stores to serve its customers. Its untrained personnel engage the customers in a friendly way, but fail to build a professional relationship with them. This makes it difficult for the company to learn about what the customers’ expects. The online method of purchase provided by the company also does not give a chance for the client representative and the customer to interact and build a relationship. This has also limited the company’s ability to identify customer needs or emerging needs. This company needs to apply aggressive sales and marketing that will help the company achieve its goals and be able to deal with the increased competition from Kohl’s Corp. and Macy Inc who have excellent marketing strategy.
JC Penney also has faced the threat of getting a lower rating because of the negative factors that affect the company and which have a greater impact that any strength that the company has. This in turn makes it difficult for investors to achieve any positive result, and thus, raising another threat of the company losing its investors. Negative factors come as a result of weak operating cash flows, high debt management risk, litigations, and a disappointing past performance in the profit margins and its stock (Stout, 2014). For example, the company’s quick ratio is at 0.53 which indicates that it does not have the ability to cover short term liquidity needs (Meola, 2014). According to Meola, the current level of debt to equity in this company is high at 1.81 when compared to the industrial average, which shows that the company needs to evaluate its current management of its debt level.
The company also faces a threat in its brand reputation because of the negativity surrounding the company. For example, in the year 2013, the stocks of the company had bottomed out. On top of this, the CEO Ron Johnson had been fired earlier in the year for brief but very disastrous tenure. In the same year, the company’s revenues declined by $4 billion, which was approximately 25% decline. This kind of negative outcome in the performance of the company is a threat to the reputation of the company. Even though there has been some improvement in 2014, the store still needs to do a lot in order to maintain and improve its brand reputation.
The company also faces potential threat of continuously making bad business strategies that would negatively affect the performance of the company. This had happened in the past when Ron Johnson became the CEO of JC penny, there was a slow erosion in the sales of the company. In a bid to save the company, he tried to change the strategy that in the past used to help the company. The company for long relied on coupons to attract its customers, but Ron aimed at educating the customers into accepting a full but fair pricing. He also included hipper designer brands in the stores. In this decision making process, he did not consider the existing customers, and just tried to implement radical changes. He did not even consider how his decisions will affect the cash flows. This strategy did not work and instead, customers ended up feeling frustrated (Anderson, 2014). This organization needs to study the inherent business practices and structures while making major business decisions.
The company is also facing threats of increased competition in its online market. The sales in most of its retail segments are shifting towards the online segment. However, it is struggling to maintain its sales level because of competition from Wal-Mart and Amazon.com which are offering the same services. This online competition is expected to stronger with time. Much of the goods found at JC Penney are not of its own proprietary, this means that a lot of its merchandise can be purchased from its competing retailers’ websites. Getting customers to the company’s stores is expected to be one of the biggest challenges which the company will face in future.
Finally, JC Penny faces the threat of bankruptcy because it does not have the financial health to handle long negative performance. It has weak operating cash flows, high debt management risk, litigations, and a disappointing past performance in the profit margins and its stock (STOUT, 2014). For example, the company’s quick ratio is at 0.53 which indicates that it does not have the ability to cover short term liquidity needs (Meola, 2014).
Anderson, J. (2014, 09 04). The Fall and Rise of J.C. Penney (JCP) . Retrieved 10 07, 2014, from equities: http://www.equities.com/editors-desk/stocks/consumer-discretionary/the-fall-and-rise-of-jcpenney-jcp
Griffin, R. W. (2012). Fundamentals of management. Mason, OH: South-Western Cengage Learning.
J. C. Penney Company, Inc. (2013). About Us. Retrieved 10 05, 2014, from J. C. Penney : http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-homeprofile
Meola, A. (2014, 04 03). Why J.C. Penney (JCP) Is Up Today. Retrieved 10 05, 2014, from The Street: http://www.thestreet.com/story/12495003/1/why-jc-penney-jcp-is-up-today.html
STOUT, H. (2014, 06 16). Ruling Against J.C. Penney in Dispute With Macy’s Over Martha Stewart Products. Retrieved 10 05, 2014, from New York Times: http://www.nytimes.com/2014/06/17/business/ruling-against-jc-penney-in-dispute-with-macys-over-martha-stewart-products.html?_r=0