Business Studies
Apply: Signature Assignment: Strategic Analysis
In Wk 2, you completed a SWOT analysis on a successful company that demonstrated a sustainable competitive advantage in the marketplace. Now, you will shift your focus to look at a company that is failing or experiencing challenges in the area of financial performance.
Select and research a company that is having financial difficulties or is on the brink of bankruptcy.
Review “Where Can I Find a Company’s Annual Report and Its SEC Filings?” from Investopedia.
Conduct a strategic analysis of the company’s current financial operations. Determine strategies for achieving a sustainable competitive advantage in the marketplace and increasing financial performance.
Write a 1,050- to 1,400-word analysis. When writing your analysis, complete the following:
o Evaluate the company’s current financial plan, including charts and/or graphs showing financial data from the struggling company, and make recommendations for improvement.
o Determine strategies for achieving a sustainable competitive advantage in the marketplace and increasing financial performance.
o Create a plan to implement the strategies you selected.
Include APA-formatted, in-text citations, and a reference page with at least 3 sources.
Submit your assignment.
ANSWER
Signature Assignment: Strategic Analysis
Introduction
J.C. Penney is an American retail firm that was founded in 1902 and engages in home furnishings, marketing apparel, cookware, cosmetics, and jewelry. The main challenge for the company was to build a brand image that will be appealing and satisfy the existing customers as well as attract the consumers. Over the years, the core values of the company have been to recompense and improve the talent of the employees who will work to maximize the productivity of the firm as well as promote innovative ideas to care for the needs of the consumers.
Over the last few years, the 118-year-old J.C Penney is allegedly seeking out bankruptcy financing of about $1bilion due to their $3.7 billion net losses. J.C Penney’s problems are not new. The company has not been profitable since 2010 with a $3.8 million billion debt load (Shaked and Orelowitz, 2017). Most of the new stores are being closed with one of its major revenue channels being completely shut off which means that their cash flow is diminishing. Through strategic planning to improve customer relations, marketing, and increasing their product effectiveness in new markets, J.C Penney will be able to regain its market position and competitive advantage thus increasing its financial performance.
Current Financial Data
J.C reported that their total net sales in 2019 were $10,716 million for the fiscal year 2019. J.C reported 11,664 million net sales for the fiscal year 2018 and $12,554 million in 2017 (Humphrey, Harbin, and Matthews, 2019). The financial data indicates a decrease in financial gain for the last three years. The company revenues have halted due to struggling profits and poor financial performance. The comparable store sales lowered by 7.7% for the year. Adjusted comparable store sales exclude the influence of the company’s exit from the major appliance and instore furniture categories, lowered by 5.6% for the year. The company closed at least six store locations in 2020. Over the past few years, large retailers have been saddled with growing debts due to their focus on physical store locations for sales. They have ended up closing stores and experiencing cash flow problems that have become more acute. In the face of a pandemic, legacy players in the retail industry have focused on strategic decisions that have maximized financial flexibility. J.C problem does is not only in the company’s inability to move stock but also its inability to appeal to consumers.
Recommendations for Improvements
J.C Penney needs a strategy that will improve its cash flow and lower its overhead costs to successfully restore its financial performance. A positive cash flow means that the firm’s liquid assets are increasing. This will successfully enable the company to operate, re-invest in their business, grow, and settle their debts, pay expenses, return shareholder’s money and offer a shield against their future financial performance. Investing in research and development, building new locations, improving technology, renovating infrastructure, and offering training to employees to allow J.C Penney to invest in growth (Taneja, Atinc, and Pryor, 2017). Considerably, to increase the opportunity of good cash flow, the company needs to operate proactively and strategically rather than defensively and reactively.
To lower its overhead cost, the company needs to focus on cutting its operational expenses. They need to take into account their inventory expenses and compare their cost and the value that they offer to the business. For instance, they need to check for cheaper or affordable promotion rates, packages, and other administrative costs. They can also consider operating in stores with less space to reduce rental costs and focus on e-commerce and still offer a premium shopping experience. One of the tangible benefits of the e-commerce model is the reduced costs. The lowered costs can be passed to the consumers through discounted prices that will attract more consumers thus boosting revenue (Kharub, Mor, and Sharma, 2019). Considerably, the current retail market is not about pushing a cart and searching for the desired product, most consumers are interested in e-commerce websites where they can click through for product search immediately.
Strategies for Achieving a Sustainable Competitive Advantage
The store optimization strategy is one of the vital ways through which J.C Penney can emerge stronger with greater financial flexibility. Optimization strategy entails the process of identifying and implementing new methods that will make the business more cost-effective and efficient. To gain a competitive advantage, J.C needs to focus on introducing new practices, methods, and systems that lower the turnaround time as well as reduce costs to improve performance (Holst and Hansen, 2017). One of the greatest challenges for J.C is high competition from low-end stores. Therefore, the J.C should have a vision strategy that focuses on intensive growth, repositioning with a new target market and consumers. J.C needs certain advantages that will enable them to gain against all odds. For instance, they need to focus on outstanding management (people strategy), marketing strategies, product differentiation, and adaptation of a product line.
Strategic Plan
The strategies developed will translate into activities used to achieve the objectives and strategic goals in the implementation process. The strategic plan is the responsibility of the top management which will review the plan and authorize the implementation. To convert the strategies into actions there is a need for feasible corporate strategy and organizational arrangements that will enable the survival of the plan in a dynamic market. The implementation plan will begin with short-term and long terms goals that will be used to guide the strategies. The short-term goals are; introducing new practices and methods, efficient methods, and cost reduction programs. The long-term goals include; restoring financial performance, reducing overhead costs, and winning more customers. The plan will require functional tactics that will be executed to meet the goals. J.C will focus on total quality management and Six Sigma and Lean Processing. The strategic plan will have a team that will review and discuss the development reports and makes any changes in the implementation plan. The strategic management team will focus on the following strategic actions to improve performance.
| Online Channel | To improve focus on online sales. |
| Private Label Focus | To boost focus on Private Label to reap higher profit margins. |
| Customer Service | Focus on customer services to compete effectively with high and low-end stores. |
| Inventory Management | Focus on reducing inventory levels to improve the net income |
| The cost linked to physical stores | Survey and close unprofitable stores, reduce floor space and focus on the store within store shops. |
Conclusion
J.C penny has been experienced a poor financial performance that has almost led to it being declared bankrupt. There is a need for the company to focus on restoring their financial performance through redoing things and be ready to recover from the negative effects of their past strategic moves. After the company has experienced an increasing decline in its revenue figures and high debts, it’s important to decide on a new strategic plan. The strategic plan will focus on operational excellence, product and market leadership, and improved customer services. These strategic actions will play an essential role in boosting the performance of the organization and facilitating long-term survival in the market.
References
Holst, M., & Hansen, S. (2017). Competing for Survival: A Turnaround of Department Store JC Penney.
Humphrey, P., Harbin, J., & Matthews, B. (2019). The Future of JC Penney: Is It Too Little, Too Late?. Journal of Marketing Perspectives, 1, 61-74.
Kharub, M., Mor, R. S., & Sharma, R. (2019). The relationship between cost leadership competitive strategy and firm performance. Journal of Manufacturing Technology Management.
Shaked, I., & Orelowitz, B. (2017). Understanding retail bankruptcy. American Bankruptcy Institute Journal, 36(11), 20-73.
Taneja, S., Atinc, G., & Pryor, M. G. (2017). Strategic Reorientation in Failing Firms: The Ceo Perspective. Journal of Business Strategies, 34(2).
