JCPenney Company is an American store chain found in the United States and Puerto Rico. It deals with furniture, bedding, window, and home décor. Additionally, the company has enjoyed being an internet retailer for a long time. Due to the slow decline of the American department chain store in more recent years, Bill Ackman bought a more significant part of the company and decided to appoint a new CEO to run the company. He hired Ron Johnson and gave him the responsibility of making the company great again by bringing positive changes that would attract more customers.
The strategy that the new CEO at the JCPenney Company was trying to implement includes redesigning of the JCPenney retail stores to create shops that concentrate on specific products. Among these brands are Levi’s, IZOD, and Liz Claiborne. Besides, the new CEO implemented a new system of pricing. A different client value pricing method was introduced to assist in reducing the cost of products across the country to replace the approach from the past which involved giving out discounts every day of the year (Macke, 2013). This approach was adopted to better prices on trademarked products and to give all the customers a better deal on all the goods. The change in strategy implemented resulted in the decline of the total sales. For instance, the total sales in 2012 were less than the total transactions in 2011. Also, the changes led to a drop in the firm’s stock by 55%. Besides, internet sales in JCPenney declined by 34% when the new strategy was implemented. All these results led to a net loss, and the company had to dismiss many workers at the aim of reducing the cost.
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The main reason for over-diversification is industrial policies such as taxes and antitrust regulation. Industrial systems is the primary purpose because it enhances the value of a company by making its general performance better by helping the firm increase its revenue at a minimum cost. Besides, industrial policies are essential because some of the leaders in different organizations may use the company’s returns for self-interest through increasing compensation and reducing the risks of them losing a job. Hence, every company should diversify to avoid issues such as inflation rates, interest rates, and exchange rates because they are all included in the industrial policies and thus will be able to increase the returns (Patrisia, & Dastgir 2017). By 2019, large firms will be more diversified than they are today because through diversification they will be able to produce more capacity in the universal markets which is necessary for providing capital in an economy and increasing the ability to be able to take a risk. Besides, diversification help many investors to benefit from the increases in value that come along with adopting new industrial policies and hence large firms will seek to diversify by the year 2019 to enjoy the increasing revenues (Nazarova, 2015).
From the above discussion, it is clear that the trends regarding diversification in Mexico, the United States, and Japan will not be similar in every detail because certain factors can influence diversification and these factors may affect every country differently. For instance, government regulatory policy may cause different trends regarding diversification in Mexico, the United States, and Japan because each of these countries has different government policies. Besides, Mexico, the United States, and Japan have different economic levels, and hence the availability of resources may not be similar thus causing different trends regarding diversification.
References
Hurwitz, C., Chou, W. H., Chang, C. H., & Prakash, A. (2019). The determinants of firms’ global diversification decisions. Applied Economics , 1-19.
Macke, J. (2013). Ron Johnson’s JCPenney: Anatomy of a Retail Failure. Yahoo! Breakout Blog , 13 .
Nazarova, V. (2015). Corporate Diversification Effect on Firm Value (Unilever Group Case Study). Annals of Economics and Finance , 16 (1), 173-198.
Patrisia, D., & Dastgir, S. (2017). Diversification and corporate social performance in manufacturing companies. Eurasian Business Review , 7 (1), 121-139.
Weisstein, F. L., Kukar-Kinney, M., & Monroe, K. B. (2016). Determinants of consumers' response to pay-what-you-want pricing strategy on the Internet. Journal of Business Research , 69 (10), 4313-4320.
