Mid Term Questions: CASE #3 Ron Johnson - A Career in Retail

CASE QUESTIONS:

How did Ron Johnson attempt to transform J.C. Penny? (35 points)

​Johnson’s first attempt was to augment J.C. Penny’s management. He appointed several retired staff members from Target and Apple companies (Narayandas, Margolis & Raffaelli, 2017, p. 9). For example, Johnson appointed Kristen Blum as the new chief information officer, Michael Kramer as the new chief operating officer, and Michael Francis as the new J.C. Penny’s president. Johnson also discussed his vision to transform the company with the top 160 employees andcommissioned 60 of them to handle specific tasks. For instance, the 60 employees conducted retailing market research across South America, Europe, and Asia (9). 

What did Johnson do poorly at J.C. Penny? 

​Johnson compared the circumstances of J.C. Penney to those of Apple. He thought that all the strategies that worked to revive Apple would work for J.C. Penney. In this regard, Narayandas et al. (2017) note that Johnson invited analysts in New York City, members of the press, suppliers, and shareholders to a two-day conference to discuss his transformation plans (9). Accordingly, he changed almost all the previous company’s ways of operations and organizational culture. For instance, Johnson shifted the company’s focus from older clients to younger customers. He also changed the company’s identity: company motto and logo. Therefore, in my opinion, Johnson drove away loyal customers who had identified themselves with the company’s old image. 

What did he do well there? 

​Foremost, Johnson changed J.C. Penney’s pricing to eliminate inefficiencies like clearance sales. Notably, Narayandas et al. (2017) note that very few products sold at full price before Johnson’s appointment into the company. He also offered customers best prices more frequently than the previous regime (10). Nevertheless, Johnson transformed the company’s traditional store layouts to appear more appealing to new customers. To revive customer service, Johnson appointed a team of specialists to assist customers and align the company’s mission to all employees and store departments. I firmly believe that Johnson did so well to involve stakeholders in his decisions and transform customer service. 

What was the Board’s perspective on his performance? (35 points) 

​The board was disappointed in Johnson’s performance. Foremost, they were saddened by the 20% reduction in share prices and the 163 million USD loss during the company’s first financial year in his leadership (Narayandas et al., 2017, p. 11).The board was not happy with how Johnson tampered with the company’s tradition. For example, the company’s new spokesperson was controversial, and their sexual orientation did not appeal to a bulk of the company’s customers, such as the One Million Moms conservative Christian group (11). According to Narayandas et al. (2017), the management thoughtJohnson’s acts of reconfiguring stores as risky and ambitious(10). Notably, even though marketing research did not support his new pricing plans, Johnson still offered expensive discounts and extravagant promotions. 

How would you assess Johnson as a leader? Please provide arguments to back up your assessment. (30 points)

​I firmly believe that Johnson was overambitious, and he â€œbit more than he could chew.” Foremost, his lack of flexibility made him think that the strategies that worked for Apple would revive J.C. Penney. I think he lacked insight when he hired retired employees from Apple and Target to head J.C. Penney. Even though he may have been right, it was not wrong to choose â€œold talent.” Nevertheless, Johnson failed as a leader when he demolished the company’s long discounting traditions, coupons, strategic promotions, pricing, values, motto, and company logo. In this regard, many customers found value in shopping at rival company stores. Overall, Johnson’s decisions did not match company values, and J.C. Penney lost most of its customers. The company’s share prices dropped, and it incurred huge losses. 

References

Narayandas, D., Margolis, J., & Raffaelli, R. (2017). Ron Johnson: A Career in Retail. Lecture, Harvard Business School.