How did JCPenney get to this position where it appears the company needs to raise capital...

How did JCPenney get to this position where it appears the company needs to raise capital at exactly the wrong time?

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Expert Solution

JC Penny is American departmental store company which is known for selling conventional merchandise.It grew significantly in the first decade of 21st century but in the midst of 2010,It began on the downward journey which relates with Investors Bill Ackman and Steven Roth teaming to buy 26% stake in jc penny stock.They convinced the management to implement a new strategy as they were the major stakeholders .They were also inducted in the board of directors.

Ron johnson was appointed as the director of company and he took major steps to attract new customers by adoption of several strategies like-

1.Reducing the focus on the private level brands even though the brands were generating 50% of overall income.

2.Introduction of boutique filled with branded merchandise in each jc penny store required a lot of investment and was a flawed idea.

3.Ending the reliance over coupons and constant price markdowns which was another flawed idea of Ron johnson.

Roth johnson was fired later on but the brand name was declining and consumers were abondoning the brand .It never recovered as in year 2011, It was exposed with the use of Spamdexing and it lost a significant chunk of customers.

It tried to rebrand but lack of customer base didnot support , It started to close down it's stores and layoff it's employees.It also took up high amount of credit to revive but lack of returns on investment made it lose it's money and soon creditors were also finding it hard to lend money to jc penny as a lot of credit risk was involved while lending to this compny.

Overall a bad market devlpoment strategy, A desire to grow more than the potential and A bad CEO was all it took to JC Penny going Bust.

jeff jeffy answered 1 year ago

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