Jcpenney vs Macy's

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JCPenney: Every Day Low Prices
Versus
Macy’s: Differentiated and Localized

11/29/12

Executive Summary
The industry we have chosen is the department store-retail industry. Within this industry, we have chosen the department stores of JCPenney and Macy’s. We find this industry, as well as these two companies, interesting from a strategic perspective. JCPenney has recently undergone a massive strategic restructuring in regards to its pricing, brand offerings, and store layout, pushing it away from the typical department store strategy of discounts and coupons. Its new strategy has become much closer to Wal-Mart’s strategy of every day low prices. Macy’s, on the other hand, has restructured with a push from the economic environment to offer higher-end, localized products that you cannot find anywhere else. Our team has come to realize through internal and external analyses that Macy’s has come up the stronger of the two models. They have created competitive advantage through strong relationships with suppliers, differentiating their new product lines, and localizing for consumer needs. Though every day low cost is a great idea and could be catchy with consumers, JCPenney has failed to convey their new objective correctly. They lost touch with the end consumer and will have to catch up in that sense to gain back some ground. It was interesting to analyze and evaluate the new differences between the two department store’s strategies, as well as establishing which has gained the competitive advantage.

Introduction
Given increasing competitiveness in their marketplace, JCPenney and Macy’s have both recently changed their strategies in order to increase penetration and profitability. As they currently stand, Macy’s strategy when quantified, is the most effective of the two. Both companies are part of the department store-retail industry and sell goods ranging from men, women, and children’s clothing, cosmetics, jewelry, all the way to home furnishings. JCPenney went from doing many sales events per year - nearly 600 - to an every day low price strategy in which they build out highly-branded “stores within a store” including Sephora, Martha Stewart boutiques, etc. They have 1,102 stores with 159,000 employees and show decreasing in-house and online sales with their new strategy. Problems they have or will face include: inability to convey the correct message about their new strategy, significant decrease in traffic, lack of incentive to come in to the store with no more customer discounts, confusion about low price/high-end “stores within the store”, abrupt resignation of CEO Francis. Macy’s on the other hand, has retrained their supply chain to produce for them higher value, localized, differentiated goods that you can only find in their stores. (Thompson, 2005) They have 850 stores with 166,000 employees and show increased Internet and in-house revenues since their restructuring. Macy’s also has some problems to tend to: though they have differentiated products, they must not price at a premium as their clientele is middle class, they are still a cheap stock in this weak economy, disruption of renovations, their sales waiver with higher fuel prices and decreased international tourism. Analysis of Industry Environment

Broad Environment

To assess the major challenges and opportunities in the broad environment in future years, a PESTEL analysis will be conducted on the department store-retail industry.

Political/Legal: There are several political/legal factors that can potentially influence the department store-retail industry in future years due to instability in the political environment. Firstly, there is the risk of increased taxes for the industry; not only does this include federal taxes, but also local, state, and sales taxes as well. Secondly, the risk of an increase in the minimum wage would be a potential threat to the industry. Lastly, there are several other government regulations...
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