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Resource Based View

This session analyzes JCPs resources including its image, store network, cost
management system, and cash reserves by determining whether the resources are
valuable (V), rare (R), costly to imitate (I) and organizationally exploited by the company
(O). Based on these components, the study will also provide the resources competitive
consequences (CC) and their performance implications (PI).
Resource
JCPenney's Image
Store Network
Cost Management System
Cash Reserves

V
Y
Y
Y
Y

R
N
N
N
N

I
-

O
N
N
N
Y

CC
CD
CD
CD
CP

PI
BAR
BAR
BAR
AR

JCP possess the second largest store network among all firms in the industry. As
of February 1, 2014, JCP has 1,094 stores in 49 states of the United States. Wide store
network is valuable to JCP because revenue earned in stores from 2011 to 2013 totaled
$38,504 million, contributed 91.44% to total revenue in the same period. The resource is
not rare since other firms in the industry also operate stores nationwide and are
attempting to launch new stores, expanding their store network and reaching to more
areas. However, JCPs store chain has not been well exploited by the firm, as in-store
sales reduced 20.92% from $15,760 million to $10,779 million (CAGR 11-13). In
addition, revenue earned per store square foot also declined 20.09% from 212 million to
147 million (CAGR 11-13). The company also plans to close down 33 unprofitable stores
in 2014 as a step towards cost saving initiative, which is a largest number of stores within
the last five years. This resource, therefore, is JCPs competitive disadvantage and
generate below average returns.

According to JCPs most recent 10Ks, the company is in the progress of reducing
its costs to enhance profitability (JCP, 2012; JCP, 2013). JCP has used first in first out
(FIFO) method in calculating its cost of goods sold, which results in lower cost compared
to the other method. Furthermore, the company has deliberately cut down labor cost,
advertising expenses, as well as spending on technology. From 2011 to 2013, pay for
employees salaries and their benefits reduced 532 million, advertising expenses reduced
120 million, and spending on technology declined 125 million. JCP also stopped offering
free in store Wi-Fi. Such cost management system is not rare as other firms in the
industry also try to minimize their costs to improve net profit. However, despite JCPs
effort to implement cost reduction strategy, the firm still experienced rising net loss due
to failure of control on other costs such as depreciation and amortization and
management reorganization. Hence, JCP has not taken well advantage of its cost
management plan, and as a result, experienced below average returns.
JCP highly values its brand image as it has expected to serve a large portion of
customers of the retail industry and become Americas favorite store. The company not
only offers a variety of its own private labels such as Liz Claiborne, St. Johns Bay,
JCPenney Home Collection, etc. but also engages in partnerships with other famous
companies such as Sephora, Mango, and The ALDO Group to develop and expand instore beauty shops as well as exclusive clothing brands. This resource is not rare as other
firms in the industry also own valuable brands. In 2012, JCP launched a new logo image
that symbolized its new Fair and Square pricing plan, hoping to create a fresh and
strong impression to customers. Unfortunately, this new image could not create the
expected repercussion, driving revenue down by 24.77% within the year. JCP was not

listed is the Most Valuable US Retail Brands 2013 while 3 of its competitors were,
including JWN, KSS, and M. This concludes that JCPs image has not been well
manipulated, causing below average returns.
JCPs current cash and cash equivalents is $1,515 million as of February 1, 2014.
In 2013, JCPs recognized a huge cash inflow of $3,188 million from financing activities,
cash outflow of $1,814 and $789 million from operating activities and investing activities
respectively, increasing total cash and cash equivalents by $585 million compared to the
previous year. Such gain in JCPs cash reserves resulted from $850 million short-term
debt and $2,180 million long-term debt received in 2013, enlarging the companys total
debt to $5,601. The resource is not rare because other firms in the industry also hold cash
reserves to finance their operations. JCPs cash fund helps improve the companys
liquidity. In its 2013 fourth quarter report, JCP announced that it has achieved 2 billion in
liquidity. This resource therefore is the companys competitive parity and produces
average returns.