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JC Penny failure in pricing strategy


Introduction

The concept that organizations are in the constant change process is not a new phenomenon in the business environment. In 1947, Kurt Lewin hypothesized that life is never without change. Although the change in organizations may be constant, the nature of it is not always the same, as change comes in proactive or reactive contextual factors. Change may occur and evolve in different ways. It may due to deliberate or planned change, or it may be spontaneous or emergent change. The aim of the planned change is the continuous improvement and focuses on changing parts of an organization (Gupta, 2011).

According to Ackman (2013), one of the greatest mistakes was too much change too quickly without adequate testing on the possible impacts of the change. The company made a strategic mistake regarding its pricing strategy by replacement of sales through coupons with every day low prices. JC Penny pricing strategy failed because it was abrupt. In this essay, JC transformation is examined through the Kotter’s change model.

The process of planned change is often rational and linear, and leaders should provide a pivotal support for the success of the process. As such, planned change is often driven from the top.According to Kotter (1996), the strategic change involved a series of large and small projects that aim at achieving the same objectives but which begin at a different time and managed differently.

Kottler’s Model

Kotter’s 8-step change model is useful for managers and leaders to overcome resistance to change. (Gupta, 2011). According to Kotter’s model, the first step involves motivating the subordinates to own the change process. Secondly, the organization should involve the employees and gather their inputs regarding the entire change process. Thirdly, it is essential to reward employees for their suggestions and contribution to the overall achievement of the organization. Fourthly, the change process should be divided into small phases, and the change process should follow small incremental steps. Fifth, the organization, should highlight the achievements and identify the future path. The last three steps involve demonstrating the success, learning from mistakes and failing and making change an ongoing process.

Organizations often face a period of resistance, followed by chaos, before they start to improve. Organizations can use the model to be better prepared to understand resistance and chaos are integral parts of the change. According to Kotter’s change model an organization goes through change stages as it comes with significant change (Shirey, 2011). These stages include late status quo, chaos, practice and integration. The late status quo us a relatively stable system characterized with predictable, familiar and comfortable concerns. At this stage, systems work reasonably well, and there are familiar solutions to common problems. As such, people knew what to do and how to do it, and they understand where they fit. The attitudes of employees range from general acceptance to boredom to frustration and complaining, as employees find strategies to get things done in a dysfunctional system.

The new pricing strategy may threaten the status quo in an organization often with the desire to improve its market position. As such, people may try numerous strategies to neutralize the impact of the new approach. The new approach may face rejection and employees may ignore it or find ways to avoid the new approach.

The change process is powerful enough to create discomfort, and it disrupts the organization, and the organization goes into a panic. People affected by the new system react differently and may try to revert to the “normal” way of doing things. The introduction of the change instigates a reaction of resistance, accompanied by a drop in performance. Eventually, there is a change in all business processes where performance may be affected negatively. However, the transforming idea may give the company an opportunity to change and improve performance. At this stage, an individual with a transformation or transformational idea leads the organization out of the chaos.

The organization starts to try new situations and solutions. Employees and customers start to embrace the new approach and organization structure. At this stage, productivity may be reduced and organizational performance. The benefits of the new structure or approach need to be clear to all those affected by the strategy.

JC Penny

When Ron Johnson assumed the helm of the company, JC Penny abandoned the traditional discounting model. Roy took away the feel of “small achievements” when he removed the coupon strategy. Penny made a huge mistake by implying to its customers that the old way was ineffective, and the company would reinvent its store. However, Penny did not communicate to its customers effectively. Consequently, there was confusion and potential customers never got the message. It is essential to note that Penny had a strong customer base before the change began, and the new approach undermined the customer base. Although the new vision was sound, the new strategy failed due to the incomplete execution of change. The original strategy included month-long values, daily prices, and best prices. The new strategies eliminated the month-long values. The month-long values were key to Johnson’s approach.

Roy Johnson struggled to implement the new vision to transform JC Penny, which was traditionally dependent on coupons and sales discounts to drive sales. Roy introduced a new three-tiered pricing strategy that intended to simplify the shopping experience and consequently attract more customers. The new pricing strategy was named “fair and square” and moved JC from its high-low pricing strategy. The new strategy also involved a new store layout, several renowned brands, and special lines for well-known designers (Eide, & Allen, 2012). These customers were slow to embrace the new pricing strategy, and they began leaving the company. JC Penny attempted an overall transformation of its brand but failed to integrate every customer’s touch-point such as merchandising, marketing, and customer service and store environment with it a new approach. Additionally, JC Penny did not involve employees who are the main change agents. Consequently, the strategy rolled out in fits and starts and failed to create the urgency and excitement essential to make it acceptable to customers and employees. According to Bashin (2014), the new pricing strategy killed the morale of employees. The company undermined its customers’ urge for deal-seeking making the management to backtrack. According to the ousted CEO, the company failed to understand “how deep some of the customers were into coupons.” Bashin (2014) noted that the constant changes to the pricing system without first testing consumers reaction alienated customers and befuddled investors. According to the new strategy, the company not only changed the prices of products but also terminologies and marketing strategies thus the company had to re-order all the materials. As such, employees had a huge task to comply with these changes.

For JC Penny to pull through, it needs a focused and dedicated change management and leadership. The leadership needs first to inquire whether the change process has the necessary support from employees. Additionally, the company needs to make sure all employees understand the opportunity the change process. It should strive to stir the necessary excitement and commitment to the entire change process.

For example, many customers failed to understand the “Best Price Friday” and as such sales lasted the entire weekend. The senior leadership needs to provide a clear and compelling vision to employees and the public (Anson, 2011).

JC Penny needs to ensure employees focus on future opportunities. It has to ensure employees focus on the compelling vision for the future and working to overcome the current challenges. The strategy may have also failed due to lack of the necessary urgency across the organization. As such, there is a need for efficient communication channels to ensure all employees and stakeholders identify the need to transform the organization. Communication is also essential in creating trust among stakeholders. With employees trained on the new and exciting opportunities, the leadership needs to ensure employees feel the urgency. They need to create a sense of enthusiasm among employees and a sense of expectations.

Conclusion

JC Penny failure to succeed in implementing the new strategy represents a failure in change management. Through Kotter’s change management model, the company would have succeeded to get the right people behind the strategy. However, the planned change failed to integrate inputs from employees and other stakeholders.

References

Anson, J. H. (2011). Leaders are the critical element in the network. Army Communicator, 36(4), 20-27.

Eide, C. K., & Allen, C. D. (2012). The More Things Change, Acquisition Reform Remains the Same. Defense Acquisition Research Journal: A Publication Of The Defense Acquisition University, 19(1), 99-120.

Gupta, P. (2011). Leading Innovation Change – The Kotter Way. International Journal Of Innovation Science, 3(3), 141-150.

Reissner, S. C., Pagan, V., & Smith, C. (2011). ‘Our iceberg is melting’: Story, metaphor and the management of organisational change. Culture & Organization, 17(5), 417-433. doi:10.1080/14759551.2011.622908

Shirey, M. R. (2011). Strategic Leadership for Organizational Change. Establishing a Sense of Urgency for Leading Transformational Change. Journal Of Nursing Administration, 41(4), 145-148. doi:10.1097/NNA.0b013e3182118550

Carolyn Morgan is the author of this paper. A senior editor at MeldaResearch.Com in legitimate essay writing service. If you need a similar paper you can place your order from research paper services.

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