Evaluation of JC Penneys Business Model Discussion
Evaluation of JC Penneys Business Model Discussion
- Many marketing decisions have multiple implications. For example, while increasing price improves profit per unit, too large a price increase may decrease unit sales, ultimately decreasing profits overall. Keeping this kind of tradeoff in mind, explain how changes to the three factors mentioned in the prior question could potentially conflict with one another in terms of strategy for increasing the profit impact.
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Discussion- DUE WEDNESDAY
For this Discussion, you need only consider the information in the case study Ofek, E., & Avery, J. (2012, September 21). J.C. Penney’s “fair and square” pricing strategy; to respond to the following questions. If you research and find more recent information, do not assume that what J.C. Penney has done is necessarily correct. Be certain to defend your recommendations.
Prepare a your response to the following questions:
- Describe the components of the J.C. Penney new business model.
- Then, evaluate the business model’s overall effectiveness in the following ways:
- How did all of the components work together?
- What components, if any, are missing?
- Explain the relationship between J.C. Penney’s marketing/business model and its pricing strategy. Offer lessons learned about the relationship between marketing/business models and an organization’s pricing strategy.
- Explain whether J.C. Penney’s brand is similar to other retail brands (e.g., Target and Apple) where Johnson has had success in terms of its marketing/business model and its pricing strategy. Explain why or why not.
Assignment – DUE SATURDAY
For this Application, you verify your understanding of several key concepts.
To prepare for the assignment:
- Read the Star, Heskett, and Levitt article found in this week’s readings. At the end of the article, read the “Brand X” scenario contained within the Exercises (but do not answer the questions that follow).
- Review the calculations contained in the Marketing Arithmetic Calculations spreadsheet, which demonstrates how to arrive at the values requested in questions 1 through 4 of the article.
- Experiment with changing initial data values listed at the top of the spreadsheet, paying attention to the effects those changes have on the calculated values listed under each question.
Submit the completed Marketing Arithmetic Exercise Calculations spreadsheet. In addition, submit a separate Word document in which you answer the following questions:
- If the retail price is fixed at $1.00, what effect does increasing the retail and wholesale margins have on the manufacturer’s selling price? Explain why this is the case.
- Define unit contribution in your own words. Is a high or low unit contribution preferable for profitability? Justify your answer.
- How do increases in the retail and wholesale margins (again, with a fixed retail price) affect the unit contribution? Be sure to explain why.
- If you increase any of the fixed cost factors, what happens to 1) the number of units the company needs to sell to break even and 2) the market share necessary to break even? If fixed costs rise, is this good, bad, or of no importance? Explain your answer.
- What change (increase or decrease) to the following factors increases the profit impact and why?
- Retail margin/unit
- Brand market share
- Advertising budget
- Many marketing decisions have multiple implications. For example, while increasing price improves profit per unit, too large a price increase may decrease unit sales, ultimately decreasing profits overall. Keeping this kind of tradeoff in mind, explain how changes to the three factors mentioned in the prior question could potentially conflict with one another in terms of strategy for increasing the profit impact.
REFERENCES
Perreault Jr., W. D., Cannon, J. P., & McCarthy, E. J. (2014). Basic marketing: A marketing strategy planning approach (19th ed.). New York, NY: McGraw-Hill.
- Chapter 17, “Pricing Objectives and Policies”
- Chapter 87, “Price Setting in the Business World”