Turnaround of JC Penny

Turnaround of JC Penny

To understand why companies bring in outsiders at senior management levels at times of crises.

The case looks into the problems faced by J C Penney in the late 1990s and the changes brought about by the company in the early 2000s. J C Penney, which used to be a leading retailer in the US, was not able to adapt itself to the changing business environment of the late 1990s. 

The growth strategy, which had made the company successful, became a barrier for its effective functioning in the late 1990s. To turn around the company, J C Penney moved from a decentralized merchandising system to a centralized merchandising system, revamped its HR practices by aligning the HR practices with the business goals, sold off its drugstore Eckerd in order to focus on its core business, and repositioned itself as a trendy, yet value offering retailer.

These restructuring initiatives resulted in increased revenues for the company and improved stock values from $10 in 2000 to almost $50 in 2005.

Issues:

» To understand why companies bring in outsiders at senior management levels at times of crises.

» To understand why companies need to change with changes in the external business environment.

» To understand how changes in the external environment force companies to undertake organisational changes.

» To understand the need for companies to adapt to the changes in the technological environment.

» To understand the need for aligning people practices like compensation plans with the business goal of the company.

» To understand how ‘focus’ on core business can be used as a strategy to improve the performance of the company.

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