Question

Explain how JCPenny's attempted to use the Blue Ocean Strategy and was not successful. What do you think JCPenny could have changed or done differently to avoid being "Stuck in the Middle"?

Answer 1

His biggest move — ending coupons and clearance sales — backfired, alienating Penney's shoppers en masse.
Johnson declined to comment for this story.
Penney burned through cash under Johnson and got bogged down in an expensive and public legal fight with Macy's over selling Martha Stewart's kitchen line. In 2012, sales plunged $4.3 billion, a 25% fall from the previous year.
With its stock in the dumps and its balance sheet damaged, Penney ousted Johnson in mid-2013, just 17 months after he took over.
"A lot of trust between customers and JCPenney was destroyed during the Johnson era," Saunders said. "Penney ended up a much weaker company."

Stuck in mediocrity:

Penney turned back to Ullman, the former CEO, for help. He slammed the brakes on Johnson's strategy, and reinstated coupons and old brands.
Although Ullman stabilized sales and stopped the stock from declining further — it had dropped from more than $140 a share in 2011 to around $20 — Penney found it difficult to dig out from its mistakes.
As rivals adopted digital strategies and invested to improve their store experiences, Penney's financial distress gave it little room to spruce up stores, buy trendy merchandise, and hire more employees."We are still trying to fully recover from the self-inflicted wounds of the previous strategy," Ullman said in early 2015, before he stepped down as CEO.
Although Penney is known best for selling clothes, it turned to Marvin Ellison, a former top executive at Home Depot, to lead it into the appliance business.
Ellison believed the shift would position Penney to take advantage of Sears' collapse, but customers shrugged. Washers, dryers, dishwashers, and fridges are not major traffic drivers because shoppers only buy them once in a while, and they're expensive to make.
Sales fell flat, and Penney's stock slumped further. In May, Ellison abruptly left Penney to head up Lowe's, spooking Wall Street.
Ellison also exited Penney with a fashion unit lacking direction and unsure of the type of brands it needed to offer to win over Millennials and moms. Ellison declined to comment.
Penney, which had switched its focus from older shoppers to younger, trendier ones, is now moving back toward middle-aged women, with brands like Liz Claiborne. Jeffrey Davis, the chief financial officer, said the core customer is women over 45.
"We were no longer necessarily having the broad array of merchandise silhouettes that was most important for her," he told analysts earlier this month.

What now?

To escape its debt load, Penney would need to regain a chunk of the sales volume it has lost over the years, and do it at a profit.
It is searching for a CEO to replace Ellison and focusing on women's clothing as it works to clear its inventory of brands that have gone out of fashion.
Joseph Thomas, a Penney spokesperson, pointed to same-store sales growth last quarter as proof the brand still resonates with shoppers.
The company has changed its merchandising strategy, too. It used to buy as much stuff it needed to fill up its stores, but now it's chasing proven sales trends.
"We believe JCPenney can and will be a clear winner in the retail environment," CFO Davis told analysts earlier this month.
Cohen, however, isn't counting on a comeback. He argues Penney has failed to offer shoppers the right merchandise or a defined identity, and is carrying too much inventory after years of bad purchasing choices.
"JCPenney is nowhere," he said. "A retailer who's nowhere is dead because the business is always hyper-competitive and typically a zero-sum game."