PRICING & MARKETING PLAN IMPLEMENTATION Required Reading/Resources ( See Attached) Reingold, J., Jones, M., & Kramer, S. (2014). How to fail in business while really, really trying. Fortune, 169 (5), 80. Lublin, J. S., & Mattioli, D. (2013, Apr 09). Pe

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PRICING & MARKETING PLAN IMPLEMENTATION

Required Reading/Resources ( See Attached)

Reingold, J., Jones, M., & Kramer, S. (2014). How to fail in business while really, really trying. Fortune, 169 (5), 80.

Lublin, J. S., & Mattioli, D. (2013, Apr 09). Penney CEO out, old boss back in. Wall Street Journal (Online). Retrieved from ProQuest.

Glazer, E., Lublin, J. S., & Mattioli, D. (2013, Apr 9). Penney backfires on ackman. Wall Street Journal (Online). Retrieved from ProQuest.

D’Innocenzio, A. (2012, January 27). J.C. Penney slashing prices on all merchandise. USA Today. Retrieved from

http://www.usatoday.com/money/industries/retail/st…

Reingold, J. (2012, March 19). Retail’s new radical. Fortune. Retrieved from

http://management.fortune.cnn.com/2012/03/07/jc-penney-ron-johnson/

Mattioli, D. (2012, January 26). J.C. Penney chief thinks different. Wall Street Journal.

Mattioli, D. (2012, January 25). How J.C. Penney was minted. Wall Street Journal.

There’s a lot going on at J.C. Penney in recent years. With a new CEO, J.C. Penney, confronted with pressing competition up, down, and sideways in the department store wars, is reinventing itself in terms of merchandising, supply, and pricing strategies. Here we will concentrate only on the pricing aspects of these new directions. However, this is ultimately about positioning; trying to find a space that is responsive to potential customers as well as differentiating the Penney brand from Target, Kohl’s, Wal-Mart, and Macy’s.

These articles shed additional light on the implications of Penney’s new direction:

Berfield, S. (2012, May 24), Remaking J.C. Penney Without Coupons. Bloomfield Business Week.Retrieved from

http://www.businessweek.com/articles/2012-05-24/re…

Girard, K. (2012, March 5). Is J.C. Penney’s makeover the future of retailing? Harvard Business School Working Knowledge. Retrieved from

http://hbswk.hbs.edu/item/6944.html

Halkias, M. (2011, December 7). J.C. Penney buys stake in Martha Stewart’s company. The Dallas Morning News. Retrieved from

http://www.dallasnews.com/business/retail/20111207…

Timberlake, C., & Townsend, M. (2012, February 28). Macy’s says Martha’s dance card is too full.Business Week. Retrieved from

http://www.businessweek.com/articles/2012-02-28/ma…

Case Assignment

A well-written report should have a brief introduction, headings or subheadings, and a brief concluding comment. Note that you should use some keywords as headings or subheadings such as “Johnson’s pricing strategy,” instead of a sentence or a question. Read and cite article listed above, supplemented with any other articles related to J.C. Penney, and develop a report addressing following issues.

• Briefly describe Johnson’s pricing strategy, also providing background on the company and department store industry.
• Explain why Johnson’s pricing strategy did not work. Support your position in terms of environmental factors such as economy, the competition, and changing consumer behavior.
• What do you think Johnson could have done better? Take into account J.C. Penney’s segmentation, positioning, and branding strategies to explain this issue.
• Compare J.C. Penney’s current pricing strategy and Johnson’s pricing strategy, based on your research on the most recent situation of J.C. Penney. How do you think J.C. Penney would perform in the next five years? Take into consideration the relationships between pricing and other aspects of the marketing effort such as a change in merchandising, logo, atmospherics, use of celebrity spokespersons, and so on.

Assignment Expectations Regarding Your References and Defense of Your Positions

Write clearly, simply, and logically. Your paper should be 750-1500 words long, excluding title pages and references, but quality of writing is more important than length. Use double-spaced, black Verdana or Times Roman font in 12 pt. type size.

Back up your positions or opinions with references to the required reading found in the Module 1-4 Background reading and Ongoing Useful Resources. In using those references, demonstrate your understanding of the concepts presented. Rather than grading on how much information you find, emphasis will be on the defense of the positions you take on the issues. Also remember that:

• The “why” is more important than the “what.”
• The defense of your positions on the issues is more important than the positions you take.

Do not repeat or quote definitions. Your use of the required reading to support your opinions (that is, contentions or positions) should demonstrate that you understand the concepts presented. Do not include definitions or summaries of the readings or simply describe what the company did. Instead, your responses to the questions should be analytical and should demonstrate that (a) you understand the principles from the background reading and (b) you can apply them to this particular case. Vague, general answers will not earn a good grade.

Avoid redundancy and general statements such as “All organizations exist to make a profit.” Make every sentence count.

Paraphrase the facts using your own words and ideas, employing quotes sparingly. Quotes, if absolutely necessary, should rarely exceed five words.

When writing an academically oriented paper, you will uncover many facts about the product. If you paraphrase the facts, cite the sources in your text and link those citations to references at the end of the paper.

Here are some guidelines on how to conduct information search and build critical thinking skills.

Emerald Group Publishing. (n.d.). Searching for information. Retrieved from

http://www.emeraldinsight.com/learning/study_skill…

Emerald Group Publishing. (n.d.). Developing critical thinking. Retrieved from http://www.emeraldinsight.com/learning/study_skill…

Guidelines for handling quoted and paraphrased material are found at:

Purdue Online Writing Lab. (n.d.). Academic writing. Retrieved from

https://owl.english.purdue.edu/owl/section/1/2/

Purdue Online Writing Lab. (n.d.). Quoting, paraphrasing, and summarizing. Retrieved from

https://owl.english.purdue.edu/owl/resource/563/1/

Purdue Online Writing Lab. (n.d.). Is it plagiarism yet? Retrieved from

https://owl.english.purdue.edu/owl/resource/589/02…

Your paper consists of arguments in favor of your opinions or positions on the issues addressed by the guidelines; therefore, avoid the following logical fallacies:

Purdue Online Writing Lab. (n.d.). Logic in argumentative writing. Retrieved from

https://owl.english.purdue.edu/owl/resource/659/01…

• make sure to reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper,(See Attached) including pages 11-14 on in-text citations.
• APA FORMAT
• NO Plagiarism (will check on Turnitin)

Reference credible sources only

Penney CEO Out, Old Boss Back In

Lublin, Joann S

; 

Mattioli, Dana

. 

Wall Street Journal

, Eastern edition; New York, N.Y. [New York, N.Y]09 Apr 2013: A.1.

Abstract

J.C. Penney Co. dumped Ron Johnson, the chief executive it poached from Apple Inc. with great fanfare 17 months ago, replacing him midway through a major overhaul of its stores that has produced a disastrous drop in sales.

In an interview, Mr. Ullman — who will also get a seat on the board — acknowledged the tough job Penney faces to climb back from the drop in sales and profitability, but said he has yet to make any decisions about what to keep and what to replace from Mr. Johnson’s strategy, including the former CEO’s management team.

Full Text

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TranslateFull text

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J.C. Penney Co. dumped Ron Johnson, the chief executive it poached from Apple Inc. with great fanfare 17 months ago, replacing him midway through a major overhaul of its stores that has produced a disastrous drop in sales.

Penney’s board met Monday and agreed to part ways with Mr. Johnson. Sorting out whether to press onward or roll back Mr. Johnson’s changes will fall to his predecessor, Myron Ullman, who is rejoining the company as CEO.

Mr. Johnson’s exit will mollify some increasingly impatient investors and tamp down discontent among some within the company, but it leaves Penney in a tough spot as it is burning through cash and shedding customers.

Mr. Ullman faces long odds. Retailers fight for every percentage point of sales improvement, and few have rebounded from declines as deep as the 25% drop under Mr. Johnson’s first year at the helm. In a sign of investors’ concern, Penney’s shares fell more than 10% in after-hours trading on Monday before bouncing back to $15.50.

In an interview, Mr. Ullman — who will also get a seat on the board — acknowledged the tough job Penney faces to climb back from the drop in sales and profitability, but said he has yet to make any decisions about what to keep and what to replace from Mr. Johnson’s strategy, including the former CEO’s management team.

“I wouldn’t recommend that we go back to the way J.C. Penney was when I left. Things change,” he said. But, he added, “There’s no reason to try and alienate customers who want to try and shop at J.C. Penney.”

Mr. Johnson declined to comment.

The return of Mr. Ullman, 66 years old, shows the challenge of filling the top job at the struggling chain. A number of other retail CEOs have said they would have been unwilling to take on the job given the size of the company’s problems and constraints on its cash.

Penney’s largest shareholder, activist hedge-fund manager William Ackman, was instrumental in establishing the 56-year-old Mr. Johnson as CEO in place of Mr. Ullman. The former CEO’s return means Mr. Ackman “now has to eat crow,” because Mr. Ackman wanted Mr. Ullman to retire and make way for Mr. Johnson, said Jeffrey Sonnenfeld, a senior associate dean at Yale School of Management. “He made a mistake.”

Mr. Ackman didn’t immediately respond to requests for comment.

Penney hailed Mr. Ullman as an accomplished retail executive with proven leadership ability.

Mr. Johnson arrived at Penney to great fanfare in November 2011, but lost the confidence of directors and investors after he rolled out an ambitious plan to reinvent Penney’s stores without following the usual retail practice of testing the changes first.

Penney paid heavily to lure Mr. Johnson from Apple, issuing the new CEO about $50 million in stock to make up for equity awards he left behind at the iPhone maker. But the company isn’t obliged to pay him much to leave. Mr. Johnson opted not to enter into a termination pay agreement, according to the company’s latest proxy, which says the former CEO would be entitled only to any unpaid salary and $143,924 from a savings plan and the value of unused vacation. In a securities filing Monday, Penney didn’t say whether Mr. Johnson would receive any additional severance pay.

Mr. Johnson was unapologetic about his decision not to test. Asked earlier this year if he would do things differently given a chance to start over, he replied, “No, of course not.”

Penney’s revamped stores and new lines of merchandise, such Joe Fresh, won praise from analysts. But shoppers were turned off by Mr. Johnson’s decision to cut back clearance sales and didn’t respond when Penney started to reintroduce markdowns last year.

Sales fell 25% in the year ended Feb. 2, depriving Penney of $4.3 billion in revenue and causing analysts to ask whether it might run out of cash needed to fund its overhaul.

The results were diametrically at odds with the high hopes that greeted Mr. Johnson upon his arrival from Apple, where he won praise for helping create a new and lucrative style of retail. But the experience didn’t translate well to Penney’s customer base of bargain hunters.

Mr. Johnson’s fortunes turned a few weeks ago, when the company began looking for management alternatives, one person familiar with the matter said.

Mr. Ackman regularly said last year that he was willing to wait for the turnaround to start getting traction. But by last month he was among the board members who were putting the CEO on a shorter leash, people familiar with the matter said at the time.

Also last month, fellow activist Steven Roth’s Vornado Realty Trust, at the time Penney’s second-largest shareholder, dumped more than 40% of its stake. At Friday’s close, Penney’s shares were down more than 20% so far this year.

Messrs. Ackman and Roth have seen their holdings pummeled by the steep slide in the company’s shares. The stock closed up 2.7% Monday at $15.87. The two investors disclosed their stakes in the fall of 2010 and built their positions at a cost of $25 to $30 a share, according to securities filings and a person familiar with the matter.

Howard Schultz, CEO of Starbucks Corp., believes Mr. Ullman, a longtime director at the coffee company, faces a daunting assignment because Penney is in a crisis.

—

Scott Thurm contributed to this article.

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Credit: By Joann S. Lublin and Dana Mattioli

Word count: 923

(c) 2013 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

Penney Backfires on Ackman

Glazer, Emily; 

Lublin, Joann S

; 

Ma

t

tioli, Dana

. 

Wall Street Journal

, Eastern edition; New York, N.Y. [New York, N.Y]10 Apr 2013: B.1.

Abstract

t

About 100 days after Ron Johnson started as CEO of J.C. Penney Co., hedge-fund manager and board member William Ackman put up a slide at an investor conference that said: “Ron Johnson’s record of retailing success makes him the ideal leader to fix JCP.”

The hedge fund manager recruited Mr. Johnson and was a cheerleader for the executive’s plans to turn Penney’s stores into sellers of name-brand clothes with few discounts.

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About 100 days after Ron Johnson started as CEO of J.C. Penney Co., hedge-fund manager and board member William Ackman put up a slide at an investor conference that said: “Ron Johnson’s record of retailing success makes him the ideal leader to fix JCP.”

Less than a year later, the former Apple Inc. retail executive is out, sales continue to plunge and a new management team is preparing to undo some of Mr. Johnson’s work.

Myron “Mike” Ullman, who preceded Mr. Johnson as CEO and then retook the corner office Monday, is likely to return to calling the company J.C. Penney and do away with the newly minted “JCP” brand, people familiar with the matter said. Coupons — which Mr. Johnson’s team had derided as drugs — are on the way back and should be fully in place around Mother’s Day, one of the people said.

Meanwhile, other Apple veterans at the top of Penney are likely to follow Mr. Johnson out the door, people familiar with the matter said.

The moves are a blow to Mr. Ackman, who set out to change the retailing world by revamping Penney and now is stuck with a large stake in a broken company run by the man he pushed out.

Penney’s shares dropped another 12% Tuesday, pushing his investment further underwater. The stock closed at $13.93. Mr. Ackman paid around $25 a share to build his stake in the company. Mr. Ackman’s Pershing Square Capital Management LP owns 18% of Penney, as well as derivatives that further boost his exposure.

The hedge fund manager recruited Mr. Johnson and was a cheerleader for the executive’s plans to turn Penney’s stores into sellers of name-brand clothes with few discounts. But continuing to support the strategy — and the CEO — became untenable in recent weeks, people familiar with the matter said.

Penney’s same-store sales, which slid throughout last year, are down more than 10% with a month to go in the company’s fiscal first quarter, the people said. That is less than the 18.9% drop in the same period last year, but it was troubling nonetheless.

Concerns about the failure to turn around sales were amplified by the fact that Mr. Johnson never relocated from California when he took the job and frequently wasn’t in the trenches at the Plano, Texas, headquarters, where he worked three days a week, people familiar with the matter said.

The board’s confidence in Mr. Johnson was already waning. In early March, Steven Roth, a board member and one of the company’s biggest shareholders, sold 40% of his company’s stake in J.C. Penney. The sale signaled to Mr. Johnson that the board was growing impatient with the slide in sales and profitability, a person familiar with the matter said. From then on, the board began exercising more control over the CEO, the person said.

Mr. Johnson offered to resign about two weeks ago, but the board didn’t accept it, saying it wanted to meet first, a person familiar with the matter said.

The change came as the board met Monday without Mr. Johnson in attendance. Mr. Ullman was lined up by the weekend and told he would likely replace Mr. Johnson this week, people familiar with the matter said.

Mr. Johnson and a Penney spokeswoman declined to comment.

Several of Mr. Johnson’s top lieutenants are expected to follow the former CEO. The most vulnerable are Mike Kramer, chief operating officer, and Dan Walker, chief talent officer, both Apple veterans, people familiar with the matter said. The department store chain’s chief financial officer, Ken Hannah, is expected to stay, the people said.

Messrs. Kramer, Walker and Hannah didn’t respond to requests for comment.

Wrenching changes and layoffs over the past year have hurt morale. While many Penney employees were eager for Mr. Johnson to work his Apple magic, they say the environment soured for legacy Penney employees as Mr. Johnson filled out his new team.

Many longtime Penney’s employees said they felt that the new hires judged them or felt that they weren’t smart. Apple references were constant.

“If people are saying the culture is becoming much more Appley,” Mr. Kramer said in an interview in January, “I take that as a compliment.”

Mr. Ackman publicly trumpeted the new team and its strategy while disparaging the old Penney, calling it bloated and mismanaged. In the long slide presentation to investors last May, he criticized the headquarters for having been overstaffed with assistants, merchandising staff and managers with few reports.

By contrast, he lauded Mr. Johnson, saying in early 2012 that the former Apple executive’s announcement of his plans for Penney would “be the most important day in retail in the last 25 years.”

Now, Mr. Ackman is relying on Mr. Ullman to save his investment. The new CEO will have to work fast. Analysts at Credit Suisse said the company has until about Memorial Day to firm up many of its holiday orders.

On Tuesday, credit ratings firm Standard & Poor’s warned that Penney’s cash flow is declining and could force the company to seek fresh funds.

—

Karen Talley contributed to this article.

(See related article: “Corporate News: Retail Industry Short on Stars” — WSJ April 10, 2013)

Subscribe to WSJ:

Credit: By Emily Glazer, Joann S. Lublin and Dana Mattioli

Word count: 893

(c) 2013 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

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FORT U N E .COM
8 1

W H E N Y O U F I N D A S AV I O R , Y O U D O N ’ T Q U I B B L E
over details. So it was that J.C. Penney, the long-stag-
nating mid-tier department store chain, announced

in June 2011 that it was hiring Ron Johnson, the man
in charge of Apple’s wildly profitable retail stores and
a Steve Jobs acolyte whose golden halo also included
past triumphs as an executive at Target. The new

s

sparked euphoria, but conspicuously absent from
the media coverage was any mention of how Johnson
planned to save this faltering retailer in a fading in-
dustry. That’s because there were no plans. His man-
date could be reduced to a single word: change. What
that entailed could be figured out later.

That fall Johnson began unveiling his planned strat-
egy to Penney’s board, culminating in a big presentation
on Dec. 7. By then CEO for just a month, Johnson laid
out his vision of a more upscale, more youth-oriented

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FORT U N E .COM
8 2

Penney, weaned of its addiction to price promotions.
Johnson demonstrated that he’d learned a thing or two

about stagecraft from his legendary former boss at Apple. He
had commandeered a large basement studio at Penney’s Plano,
Texas, headquarters and had workers construct two rooms.
(Johnson wanted to go further and install floating stages in the
company cafeteria, but the fire marshal nixed the plan.) After
he had made his presentation, the new CEO brought the direc-
tors downstairs to deliver the coup de grâce in the form of a
sound and light show. In the first room was the taped commo-
tion of shouting voices and visual noise: a profusion of signage,
coupons, offers, and clutter. This was the off-putting ca-
cophony of J.C. Penney at that moment. Johnson then ushered
the directors into the next room, which was white, tastefully
austere, and had a celestial serenity: the new JCP.

Finally Johnson led the board members into the cafeteria,
where 5,000 employees, who had been waiting on their feet
for hours, greeted the group with a raucous ovation. Then
it was party time. Officially the fete was intended to bid
farewell to Johnson’s predecessor, Myron “Mike” Ullman III,
but it felt more like an ecstatic celebration of the company’s
rebirth. With nary a whisper of opposition, the 109-year-old
retailer had decided to abandon not only its strategy of many
decades but arguably its fundamental way of doing business.

Just 16 months later Johnson was out. Penney was hemor-
rhaging cash; it lost $1 billion during his one full year as
CEO. Its shares were hurtling downward. The press had
turned against him. One of the two investors who installed
him had fled. As fast as they had once anointed Johnson a
messiah, Penney’s directors turned their backs on him.

Since his departure the company has behaved as if Johnson’s
entire tenure was a coup rather than a strategy blessed by the
board. The retailer has renounced his philosophy, restored
Johnson’s predecessor, Ullman, as CEO, and reverted to its old
ways. If we’re heading for oblivion, the board seems to be say-
ing, let’s at least try to get there slowly. Some observers think
bankruptcy is a possibility, despite improved results of late (at
least compared with the previous bloodletting).

T H I S E R A H A S S E E N some truly epic corporate conflagrations.
There was the precipitous collapse of Lehman Brothers, which
came to symbolize the greed and corruption of Wall Street, and
the multidecade decline and, finally, bankruptcy of General
Motors, which seemed to embody the slow death of American
manufacturing. But for its stomach-churning mix of earnest
ambition, arrogance, hope, and delusion—along with a series
of comic and tragic miscues—it’s hard to top J.C. Penney.

J . C . P E N N E Y

Bill Ackman was
Ron Johnson’s
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Johnson’s tenure

April 7, 2014

“I came in because they wanted to transform,” the former
CEO told me before his fall. “It wasn’t just to compete or im-
prove.” (Johnson was interviewed for this article but declined
to be quoted beyond saying, “I do not want to interfere with
Penney’s attempts to succeed.”) He and his team did indeed
transform Penney—from a sleepy behemoth known for serving
the needs of Middle America into something quite different:
an ambitious wannabe startup that fancied itself cool, with a
radical pricing and merchandising model that had never been
pulled off before. The outcome was doubly disastrous: Penney
alienated its traditional customers without attracting new ones.

Everyone understands that the Johnson revolution ended
in catastrophe. But the full story has never been told. The re-
ality, it turns out, is even worse than many people imagine—
and in a few respects, very different. What follows is the story
of what actually happened at J.C. Penney, based on months of
interviews with 32 current and former executives and ven-
dors and more than 20 investors, analysts, and competitors.

It’s a saga with a swirl of overlapping forces. It stars a char-
ismatic leader bent on radical change and features a failed
attempt to Apple-ize Penney, a mission that ended up being
every bit as crazy as it sounds. There’s a board of directors
who sometimes seemed more concerned with what they’d be
served for dessert than with the fate of the company. Then
there’s the mistake that cost the company $500 million—
and the fact that Penney actually began retreating from its
controversial pricing strategy even before Johnson left, rais-
ing the question of whether the company can even truly be
said to have tried his approach. Throw in a hedge fund titan
who always knew better—except when he didn’t. The result:
Billions in revenue were vaporized, and more than 20,000
people—many of whom embraced the new Penney—lost
their jobs, seeming to hasten the decline of American brick-
and-mortar retailing. This is a tale with very few heroes.

i n t o t h e c u b e

T
H E Y C A L L E D I T A “ C L E A N S E .” On Feb. 6,
2012, a clear, acrylic 10-by-10-foot cube
was installed in the area between the two
cafeterias in Penney’s headquarters. It was
a three-dimensional version of the
retailer’s new square logo. Johnson told

staffers that he didn’t want to see the old logo anywhere in
the building. He thought it would be a useful ritual to have
employees discard symbols of the stodgy old Penney. In
theory, the cube was a giant time capsule, and the old
Penney would be buried (exactly where, nobody said). In
reality, it was a stylized, transparent dumpster.

For the next week people lined up to shed the evidence of
Penney’s century-old history. Into the cube went T-shirts,
mugs, stationery, pens, and tote bags. A few people even
dumped the Chairman’s Award, the highest honor in the
company, a glass plaque bestowed by former chairman and
CEO Ullman on his most valued employees. As staffers
pitched their corporate junk, they were invited to select a
few replacement items with the new logo in exchange. By
the time the purge was complete, 9,000 pounds of detritus
had filled the cube.

The transformation had started with a single phone call
a bit more than a year before. At 4 p.m. on Oct. 7, 2010, the
phone rang in the office of then-CEO Ullman. The screen
flashed “Vornado,” the name of the $2.8 billion (revenues)
REIT run by investor Steven Roth. Ullman, a veteran of
takeover attempts at Macy’s, had noticed that Penney’s stock
had jumped 10% in the 10 minutes before the call, to $32.
He had a pretty good idea of what was going on. “Do you
come in peace?” he asked Roth, with whom he had worked
on a past deal. Responded Roth: “I’m your new best friend.”
And there was a second best friend: Roth had teamed
with Bill Ackman, the head of hedge fund Pershing Square
Capital, to buy more than 26% of the company’s stock. They
believed Penney could easily be a $60 stock—if, of course,
some changes were made. Could they meet to talk?

Ullman had run Penney since 2004. He had had a fan-
tastic start, driving the stock to an all-time high of $86 in
2007 on innovative ideas such as bringing cosmetics seller
Sephora inside Penney in a “store within a store” and open-
ing some outlets outside traditional, and declining, malls.
But when the Great Recession hit, Penney’s core customer—
the middle-class mom—suffered more than most. Even when
competitors began to pull out of the decline, Penney lagged.

The Way Down J.C. Penney’s revenues and share price have suffered in recent years.

source: s&p capital iq

FORT U N E .COM
8 4

recruited by Apple to create its retail stores. Under Johnson
they became the most profitable stores in the country, mak-
ing him a star at what was then the hottest company on the
planet. Ullman had called Johnson about a director posi-
tion a few years back, but Johnson had rebuffed him. Now,
however, with Steve Jobs ailing, a recruiter told Ullman that
Johnson might be more amenable.

Beginning in March 2011, Johnson met with Ackman
and Roth and separately with Ullman. Soon the conversa-
tion moved from a role as a director to the possibility of
becoming the next CEO. Johnson, who started his career
at Mervyn’s and had always loved the retail business, had
been pondering the lack of innovation in department stores.
He had a vision of a new type of store—a destination rather
than simply a repository for product. Well-liked and relent-
lessly positive, Johnson, then 53, seemed to offer the kind of
can-do Silicon Valley spirit that hadn’t been seen in the retail
world since, well, Apple. “I just believed in the guy,” Ackman
told me at the time. “I had a man crush on him.”

With Ackman as head cheerleader, Penney’s board offered
Johnson the CEO position. When the announcement was
made, on June 14, 2011, the retail world was astounded—
and thrilled. Although Johnson wouldn’t start as CEO until
Nov. 1—he said the cancer-stricken Steve Jobs had asked
him to stay longer—Penney’s stock rose 17% on the news. It
was as if a triple-A team had just signed Babe Ruth.

When Johnson eventually unveiled his strategy, it
centered on a few points. The biggest, perhaps, concerned
Penney’s incessant price-slashing promotions—590 in 2011
alone. The new JCP would have virtually none. There would
be three prices for an item: the original price, which was far
below the typical marked-up price; a month-long value price
for certain items; and a twice-monthly “best” price for things

One reason: Ullman’s massive deal with Ralph Lauren to
launch American Living in 2008, a Polo-lite brand sold only
at Penney. It failed, in part because Penney was not allowed
to use Ralph Lauren’s name or the Polo logo.

Penney was clearly in need of rejuvenation. Revenues had
dropped from $19.9 billion in 2006 to $17.2 billion in 2011,
taking the stock price along with it. Rather than resist Ack-
man, a brash, aggressively charming billionaire who likes
to make huge bets on big companies and doesn’t hesitate
to wage proxy battles against those that rebuff him, Penney
invited Ackman and Roth to join the board. “I said, ‘These are
two of the smartest people in their industries in America,’ ” Ull-
man recalls. “Why wouldn’t we want them in the boardroom?”

In February 2011, Ackman and Roth attended their
first board meeting. At dinner afterward, Ackman gave an
emotional speech, hailing the company’s potential. Almost
instantly, fate intervened. As Ullman’s driver pulled out of the
parking lot after the meal, his car was sideswiped. Ullman, then
64, was knocked unconscious. He had multiple fractures where
his skull attaches to his spine and spent 12 weeks in a neck
brace. Even before that he had battled health issues. For years
Ullman had suffered from nerve damage that makes it hard for
him to walk (he moves around the offices by Segway). He had
endured two major surgeries during his Penney’s tenure.

The accident intensified the board’s concern over Ull-
man’s health—as well as the undercurrent of dissatisfaction
that the new directors felt with his leadership. As director
Geraldine Laybourne told me in 2012, “You know you’ve
done something wrong when you wake up and someone has
bought 26.8% of your stock.”

There were no obvious successors at Penney. Ullman says
he thought instantly of Ron Johnson, the Minneapolis native
who had helped bring great design to Target before he was

Feb.
2012: New
marketing
campaign
featuring
Ellen
DeGeneres
sparks
antigay
backlash.

June 2011:
Penney
announces
that Ron
Johnson
will replace
Mike
Ullman
as CEO in
November.

Oct. 2010: Roth (left)
and Ackman reveal
they’ve acquired 26%
of Penney’s shares. Jan. 2012:Penney takes

over New
York’s Pier 57
for the public
launch of
its new,
younger,
cooler look.

Dec. 2011:
Johnson
presents
his full
trans­
formation
strategy to
Penney’s
board.

2 0 1 0 2 0 1 1 2 0 1 2

Rocky Times
The past three and
a half years have
been tumultuous
for J.C. Penney.

Penney’s
Michael Francis
with the Olsen twins

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April 7, 2014

about the chocolate-chip cookies served at Penney’s board
meetings. Rather than soft, gooey orbs, Ackman grumbled,
these were rock hard. To assuage him, say three people in-
volved, Penney began ordering fresh-baked cookies delivered
from local bakery Tiff ’s Treats. Other Penney directors also
expressed concern about the caliber of cuisine served at their
meetings—so much so that on at least one occasion a senior
executive personally sampled the food before it was served.
(Ackman declined to comment on the company’s baked goods;
Penney denies that an executive served as a food taster.)

t h e r e v o l u t i o n b e g i n s

J
O H N S O N S H O W E D U P in Plano on Nov. 1, 2011,
ready to lead a transformation at the speed
of light. By Jan. 25, 2012—less than three
months later—the new JCP would unveil its
new look. A week later the new pricing
strategy would be revealed. By the fall of

2012, hundreds of stores would be revamped. And by the end
of 2015, if all went according to plan, the transformation would
be complete. The timeline was beyond aggressive, but Johnson
thought speed would be a great motivator and unifying force.

Johnson himself moved with alacrity. In his second week
on the job, he met in San Francisco with Chip Bergh, the
new CEO of Levi Strauss. Penney already sold the company’s
jeans, but Johnson wanted Levi’s to open boutiques within
Penney locations. He asked Bergh where his most innovative
outlet was located, and Bergh said Tustin, in Orange County,
Calif. “I’ve got a plane,” Johnson said, enthused. “Let’s go
right now!” A few hours later Bergh led Penney’s CEO
through the Tustin store. Johnson loved the layout, which
included a “denim bar,” mobile checkout, and dedicated “fit

that needed to move. No more clearance racks, no more
mess, just an honest—or as a later slogan put it, “fair and
square”—relationship between the customer and the store.
In a retail world full of illusory market-share gains based on
which retailer offered the lowest clearance prices, it felt like
a welcome way to stop the madness.

The second component of his strategy was equally radi-
cal. Johnson wanted to remove the “department” from the
department store, recasting each store as a collection of 100
separate boutiques, with a kind of town square in the center.
The product mix would change too. The new JCP would
feature a much higher percentage of branded merchandise—
modern, higher-end, youth-oriented—compared with house
brands. This was a very big move for Penney, which got 50%
of its sales from its own brands and tended to display most
of its products by classification (such as bath mats) rather
than by collection (such as Martha Stewart).

The new strategy made sense if Penney could attract many
top brands, which would lure consumers without the catnip
of frequent sales. Clearly, the approach worked for iPhones.
Would it work for mattress pads and pantyhose?

Johnson wasn’t going to wait around for an answer. When
a director asked when he planned to test the notion, Johnson
scoffed. Never mind that other retailers had tried such pricing
only to see customers vanish. He had made his decision. After
all, his hero, Jobs, disdained tests and instead relied on his gut.
At the same time, Johnson didn’t seem particularly interested
in how Penney operated, according to Ullman. The outgoing
CEO noted in a regular update to the board that the new CEO
had not asked a single question about how the business was
currently running.

Meanwhile, there were hints that the board was not as
focused as it could be. Ackman had consistently complained

Aug. 2012:
Levi’s stores
(left) open at
Penney. New
Martha Stewart
home­goods
boutiques are
delayed as
Macy’s sues
Penney.

Aug. 2013:
Ackman
resigns
from the
board and
sells his
entire stake
soon after
at a loss of
$600 million.

May 2013:
Penney
apologizes
for forgetting
customers.
Johnson’s
renovated
home store
opens in
June.

March
2013:
Roth
suddenly
sells 43%
of his
Penney
shares.

May 2012:
Same­
store
sales
tumble
19%,
worse
than
expected.

Feb./March 2013:
Quarterly results
are grim again,
and more bad
publicity erupts as
Martha Stewart
and Johnson
testify in the
Macy’s trial.

April 2013:
Penney’s directors,
who twice before
rejected Johnson’s
offers to resign,
reverse course
and accept his
resignation. They
select former CEO
Ullman (left) to be
the new CEO.

Feb. 2014:
Penney
reports
improved
same­store
sales—but
also a $1.4
billion loss
for 2013.

Sept. 2013:
Company
issues 84 mil­
lion shares—a
few weeks
after Penney
implies it
doesn’t need
cash.

2 0 1 3 2 0 1 4

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FORT U N E .COM
8 6

to be that bold. There’s only one Steve.” (Comments Drexler
today: “I’m not sure that he heard me.”)

There was a fair amount of eye rolling in the audience. As
Johnson talked about the “six Ps” driving the plan—product,
place, presentation, price, promotion, and personality—
Adrianne Shapira, then a Goldman Sachs analyst, said, “One
‘p’ that seems to be missing is people.” Kramer, the COO,
added to the swagger with his refusal to provide sales projec-
tions because “we don’t want to cap what we think it could
be.” Penney’s stock vaulted from $34 to $41 the next day.

Back in Plano, the employees were excited too. Many
acknowledged that Penney needed an infusion of energy. On
Feb. 1 an ebullient Johnson hosted a $3 million extravaganza
to salute the company’s workers. Stages were constructed
onsite, with four areas meant to conjure a particular season.
In “winter,” set up in the cafeteria, there was a snowmaking
machine. “Summer” boasted grass for a picnic, and “spring”
had a wall of water. There were margarita bars, live bands,
and caramel apples mounted on long poles. Hung on the
walls were photographs of employees that had been taken at
a welcome picnic on Johnson’s first day.

Still, the moment was fraught. The company had an-
nounced $900 million in planned cost cuts, and everybody
knew that meant looming layoffs. Many of the people cel-
ebrated in photos would soon lose their jobs. Some of their
images remained on the walls for months, ghostly reminders
of the human costs of radical change.

t h e c o o l k i d s t a k e o v e r

T
H E E R A O F G O O D F E E L I N G S would be
measured in nanoseconds. Indeed, the only
thing speedier than Johnson’s planned
changes was the velocity with which they
unraveled. Inside Penney, the conflict
started almost instantly. Johnson “wanted

to do this as a mixed marriage,” says former COO Kramer.
“He wanted to prove that we could do this with new people
as well as the older management. But it was very clear that it
was oil and water from day one.”

It was all well and good that Johnson wanted to, as he
frequently proclaimed, run Penney like a startup. But it was
a venerable company with 159,000 employees and 1,100
stores. It already had a culture, for better or worse.

The newcomers distanced themselves from the holdovers,
starting with the fact that a cadre of new top executives
refused to move to Dallas and instead jetted in weekly. The
Ritz-Carlton, where Johnson and some of the most senior
executives stayed, became an unofficial club and meeting
spot for the people at the top. Johnson, Francis, and Walker
each remained in other cities, and several created powerful

specialists.” By the end of the day Johnson and Bergh had
agreed to open 700 similar Levi’s boutiques inside Penneys
in time for the back-to-school season in 2012—less than a
year later. Most of the cost would be borne by Penney.

Money seemed to be no object. It cost Penney some $120
million to build the Levi’s boutiques, according to one person
involved. Johnson was also trumpeting a major new invest-
ment in Martha Stewart Living Omnimedia and an agree-
ment to open Martha Stewart stores within Penney.

Meanwhile, Johnson was recruiting a team of high-priced
all-stars from the outside. He’d hired Michael Francis, the
head of marketing at Target, who was credited with bring-
ing the low-end retailer its signature hip cachet. Francis
became Penney’s president and head of both merchandising
and marketing. Johnson plucked Apple alum Mike Kramer
from apparel-maker Kellwood as COO, and Dan Walker, also
an Apple veteran, as chief talent officer. Francis, Kramer, and
Walker received a total of $24 million in cash signing bonuses,
along with millions of stock options.

It was now Johnson’s show. The board had been stunned
by the breadth of his planned transformation. But nobody
insisted he slow down or test his theory that customers
were sick of price confusion. He had a new team, an adoring
board of directors, and a mission to reinvent his company.

Now it was time for his public debut at the official JCP
launch party, which took place at New York City’s Pier 57 on
Jan. 25 and 26, 2012. The cavernous shipping pier was bathed
in white, with the new JCP logo omnipresent inside giant neon
cubes. The lighting was perfect, the music appropriately ambi-
ent, the food top quality. A bevy of retail cognoscenti, including
Martha Stewart, lent credibility. (She feted Johnson onstage,
despite the fact that Macy’s had just sued her company, claim-
ing that the new deal with Penney violated Stewart’s contract
with Macy’s.) Calvin Klein, Mickey Drexler, Cindy Crawford,
and Mary-Kate and Ashley Olsen were all in attendance.

Johnson presided with a beatific smile. Clad in a V-neck
sweater over a button-down shirt, he waxed eloquent on the
lessons he’d learned from Steve Jobs. Seemingly in perfect
sync, Johnson and Francis—the two looked almost like broth-
ers—rolled stylish, funny clips that featured Ellen DeGeneres,
the company’s new spokesperson, and promised a world of
fresh, compelling Americana. Fusty old J.C. Penney’s was no
more. The company had rebranded itself with a sleek modern
name—JCP—to match its new aesthetic. Ackman and other
directors sat in the front section, beaming.

Many in the audience admired Johnson’s passion and
nerve, even as they doubted that his plan could succeed.
Johnson himself told me that day that J. Crew CEO Mickey
Drexler had cautioned him,“Be very careful. You don’t have

“Be very careful,” J. Crew’s Mickey Drexler warned Johnson

at Penney’s gala relaunch. “You don’t have to be that bold.”

J . C . P E N N E Y

April 7, 2014

when he suggested that Johnson should conduct tests before
eliminating price promotions from one day to the next. When
a decision was made to reduce the top merchants from two
to one at the end of February, it was Lawrence who was cut
rather than Liz Sweney, who publicly supported the new plan.

Some 60 top performers from the old regime did have a
chance to be part of the revolution via a new program called
(naturally) the iTeam. The group brainstormed ways to im-
prove the company and visited famous retailers like Selfridges
and Printemps for inspiration. But when the firings began in
April, many of the iTeam members were purged, causing a
vacuum of talent who understood Penney’s business.

Employees who remained say the new leadership team
seemed to have little respect—in some cases, they had out-
right contempt—for the holdover employees. Michael Fisher,
the chief creative officer and another Apple veteran, lectured
his team that they needed to learn more about fashion, ac-
cording to two employees. Each, he said, should wear at least
one piece of camouflage clothing every day, as he did. Fisher
went so far as to deride the holdovers as DOPES, or dumb
old Penney’s employees, according to six staffers. (Fisher
declined to comment.) Some veterans retaliated by calling
the new team the Bad Apples.

The contempt seemed to extend to customers. As JCP
spent more and more on new collaborations with higher-
end brands such as Vivienne Tam and Nanette Lepore, the
company abandoned previous mainstay labels. Southpole, a
clothing brand that appealed primarily to black and Hispanic
customers, was dropped. The women’s line for St. John’s Bay,
a drab private-label brand—but one that generated $1 billion
in annual revenues—was eliminated.

Johnson was totally absorbed in his quest but, say numer-
ous insiders, relatively removed from many specifics of how
his team was forcing through the change. It’s hard enough for
CEOs to get honest information when they ask for it, since
nobody wants to displease the boss. But when you announce
that you don’t want to hear skepticism, you’re doubly isolat-
ing yourself. In Johnson’s mind, everybody was behind him.

e l l e n a n d t h e w h i t e p i c k e t f e n c e

J
O H N S O N A N D H I S T E A M knew that sales
would slide in the short term. Penney had
internally projected a 10% to 15% drop in
same-store sales for the first quarter after
the relaunch. But when the results were
tallied in May 2012, they were dismaying:

Stores open for at least a year had sold 19% less than in the
previous year’s first quarter. Penney customers were bolting,

satellite operations there; only Kramer moved to Dallas.
Those who were not part of this new team, with a few

exceptions, found themselves out of the loop and, increas-
ingly, out of a job. “You felt like you were back in high school
with the cool kids and the noncool kids,” says one senior old-
guard executive. “I felt slow, dumb, and weak.”

Many of the former Apple-ites looked to implement what
they viewed as streamlined Silicon Valley ways. HR chief
Walker eliminated performance reviews, which he saw as use-
less. That happened to make it that much easier to ax people,
because all decision-making was up to the boss and there was
no need to consult any performance-assessment data. Says
Walker: “I abhor make-work HR bureaucracy that doesn’t
really improve the capabilities of the people and the company.”

Johnson’s character shaped the tone of Penney’s transfor-
mation. As genial as he is—he is the quintessential cheerful
Sunday-school teacher and kids’-little-league-coach kind of
dad—he has the personality of a zealot. Johnson displays the
sort of enthusiasm and unwavering commitment that inspires
followers. (And he showed his belief in his own plan by invest-
ing $50 million in Penney warrants that would pay off only if
the stock rose.) There were only two kinds of people in John-
son’s world—believers and skeptics. “I choose to inspire and
create believers,” he told me at the time. “I don’t like negativ-
ity. Skepticism takes the oxygen out of innovation.”

Criticism, valid or otherwise, marked you as a skeptic.
Executive vice president Steve Lawrence joined that category

Johnson in a renovated store in 2012, and with then–marketing
chief Michael Francis, preparing for Penney’s relaunch gala

m
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—

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(

2
)

FORT U N E .COM
8 8

warned that the transition would be painful, and the board
had greenlighted his plan. There was little it could do at that
point besides acquiesce.

Penney’s spending continued to mount. Johnson wanted
to make checkout easy for customers by deploying Apple-
style roving clerks who could take customer payments on
iPads. To do that, Johnson spent millions to equip stores
with Wi-Fi and mandated that every item have an RFID tag
by early 2013. (As money grew scarce, the plan was shelved.)
At Fortune’s Brainstorm Tech conference in July 2012, John-
son was calm and blithely confident, despite growing nega-
tive press and a stock price that had halved since the New
York show. He reminded everyone that it had taken several
years for the Apple retail stores to succeed.

Yet oddly for a former executive of a tech company, Johnson
also made a crucial mistake relating to the Internet. He decid-
ed to separate JCP.com’s buying groups from the store buying
groups—the way Apple did it—severing coordination between
what was stocked for the website and what was available for
stores. The dotcom decision-making team was based in Sili-
con Valley, while the store buyers were in Plano. As a result, a
customer could no longer find, say, four colors of underpants
in the women’s department and be confident that the four col-
ors would also be available online. Ullman had consolidated
the teams. All of a sudden the website found itself stripped of
support and leadership. Johnson was focused on getting the
right look and feel into the physical store. “The first thing is to
fix the store,” he said at the time, though he added, “It doesn’t
mean online isn’t an equally big opportunity.”

But by the quarter ending in October 2012, dotcom sales
had plunged 37% compared with the previous year’s quarter.
Just as the rest of the retail world was scrambling to boost
mobile and online buying, the Silicon Valley executive was
going in the other direction. Penney lost $500 million on
that one decision, according to Ullman.

Other Johnson initiatives backfired. In his well-in-
tentioned desire to build trust with customers, the CEO
loosened Penney’s exchange policy, allowing customers to
return merchandise—without a receipt—and receive cash.
Almost instantly, some people began to abuse the policy,
grabbing items off Penney’s shelves, bringing them to the
register, and then trading them in for cash. At least one
popular item was “returned” so frequently that its total
sales turned negative for a time.

A second component of Johnson’s strategy—the
headline-generating plans to put Martha Stewart stores
inside Penney’s—also blew up. In August 2012, Macy’s
followed through on its threat and sued Penney. Already
Macy’s had managed to temporarily block the new stores.
Stock speculators began licking their chops, with short
interest that month hitting 40% of the total float.

with no sign of replacements, despite millions spent on new
marketing that depicted white-picket-fence Americana with
great prices and gorgeous products.

Instead of resonating, the ads sparked a firestorm. The
company had named Ellen DeGeneres—a popular celeb-
rity and an out and proud lesbian—as its spokesperson. A
conservative group, One Million Moms, threatened a boycott.
“DeGeneres is not a true representation of the type of families
that shop at their store,” the group claimed. “The majority
of J.C. Penney shoppers will be offended and choose to no
longer shop there.” The company was deluged with enraged
letters after a Mother’s Day circular included a photograph
of two moms. Johnson, who had supported the marketing as
inclusive, began to fret.

When Johnson found out that a Father’s Day ad featuring
two dads was also in the works, he decided the messaging
had gone from inclusive to political. Too late, Francis told
him. The photos had already been printed. Johnson went
to the board, which supported going ahead with the ads.
He then told Francis he wanted more say over marketing—
much of which happened in Minneapolis, where Francis had
built a large communications and advertising operation.

Quickly the mood shifted. “Do we need two cooks in the
kitchen?” Francis asked. Within days of the meeting he was
gone. DeGeneres stopped appearing in most Penney ads. (A
source in her camp says the relationship ended amicably.)
Says Francis: “I will forever be proud of the remarkable body
of work, and I believe it delivered on the mandate.” Johnson
himself decided to take on Francis’s duties. So hands-off in
many realms, the CEO would become intensely hands-on
when it came to marketing. “Ron read every single line of
copy,” says Greg Clark, a former senior vice president in the
marketing group. “He wrote half of it. He reviewed every
single page, every single photograph.”

Internally the changes were hitting hard. The first round
of layoffs had begun in April, with 19,000 employees losing
their jobs over several months. Soon afterward, Johnson
held a Q&A session. The mood was somber. People knew
that the company’s results had been worse than expected,
and they’d anticipated some cuts. Were more layoffs com-
ing? Johnson remained unruffled. He joked that he had
worn his Nikes “in case they chase me out of here.”

By May, less than four months after JCP’s gala launch,
a few directors were already getting nervous. Debates over
pricing policy began erupting. (On the plus side, the menu
options at a board meeting that month—including New
Mexican rubbed beef tenderloin with bourbon-ancho sauce
and saffron poached sea bass—didn’t seem to rile the direc-
tors.) For the moment, they were boxed in. Johnson had

J . C . P E N N E Y

April 7, 2014

Martha Stewart, Johnson wrote to his team, “is to make our
offensive so strong they simply pick up their toys and go
home.” After the announcement, he gloated in an email to
Ackman: “I’m inclined to let the press run and let [Lund-
gren] stew for a bit. The more this is seen as brilliant for JCP
and Martha, the more he won’t want to interfere.”

The bad news was cresting. And almost simultaneously
came the stiletto in Johnson’s back—from the very investor
who had paved the way for Johnson’s accession. In March
2013, Penney director Steve Roth, the CEO of Vornado,
suddenly sold 43% of his Penney shares at a loss of nearly
$100 million. It was a long way from the email he wrote
Johnson on Dec. 7, 2011: “Amazing to me how much you’ve
gotten done in such a short time, not to mention the quality
of the work and genius of the ideas.” Penney CFO Ken Han-
nah couldn’t make sense of it. “Steve was as supportive and
as constructive in [the most recent] board meeting as he had
ever been,” he explained at an investors’ conference. “There
was not one indication coming out of that meeting that he
was going to do anything with his position.”

Why did Roth bail out? The investor declined to be inter-
viewed, but he was facing myriad pressures of his own. The
CEO of Vornado had stepped down abruptly, and Roth, al-
ready the chairman, had re-assumed the position. Vornado’s
shareholders were unhappy with the stock’s performance
and questioned why the REIT had invested in retail compa-
nies at all. No matter the particulars, the message was clear:
Roth had lost faith.

The noose was tightening around Johnson’s neck. Once
again he offered to step down, and once again the board told
him to stay. (The latter meeting occurred in Ackman’s confer-
ence room, which ironically is equipped with a vintage nuclear
bomber’s ejector seat.)

In the midst of the turmoil, Johnson embarked on a family
vacation in the South of France. When he returned, he got a
call from Engibous, according to two executives. The chair-
man told Johnson that the board would, in fact, be accepting
his resignation on Monday, April 8. Less than a year and a half
after embracing Johnson’s vision, the board had renounced it.
Penney quickly announced that Johnson was “stepping down.”

Most startling was the man chosen to replace him: Mike
Ullman, the chief of the J.C. Penney that presumably had been
left behind. Previously portrayed as infirm and on the point
of retirement, Ullman was now Schwarzenegger on a Segway,
back with a vengeance. Johnson never returned to the Plano
office. Within weeks, all but one of his disciples were gone too.

The grand experiment was over—just as much of John-
son’s new merchandise was beginning to appear. On May 1,
the company ran an apology ad for misleading the customer.

Quietly, an even more fundamental part of Johnson’s
strategy—the moratorium on sales promotions—began to
be pared back. Between the rising resistance from the board
and the terrible customer response, Johnson had gotten the
message. He authorized a return to limited sales and promo-
tions like free haircuts for kids, for example, which weren’t
called sales but were certainly promotional. The word “clear-
ance” began trickling back into use.

By Thanksgiving, Johnson—who had always said the
transformation would take four years—had started to sound
as if he were bargaining for more time. He claimed, on
CBS This Morning, that Penney’s benchmark would come
in February 2013. “It’s going to take a year to teach people
how to respond to the new pricing,” he said. “We will return
to growth next year.” He laughed off a question about the
increasing pressure. “I’m trying to position JCP for the next
100 years,” he said, “not this year.”

t h e o v e r t h r o w

D
E S P I T E J O H N S O N ’ S P U B L I C O P T I M I S M , the
ground was quickly shifting beneath him.
Penney’s board had begun splintering into
two factions: a pro-Ackman “New York”
contingent and a larger cohort led by
chairman Tom Engibous, the former CEO

of Texas Instruments. Johnson “is still the right man for the
job,” Ackman proclaimed publicly. “We don’t walk away.”
Still, he was so worried about JCP’s accelerating cash burn
that he threatened the board that he would sell all his shares
if he was not made the head of the finance committee.
Ackman got the appointment—and hired investment bank
Blackstone and AlixPartners, a firm best known for advising
distressed companies, to explore ways to raise cash.

When 2012 results came out in February, they were atro-
cious. The company’s revenues had plunged by $4.3 billion,
with same-store sales falling 25%. Penney recorded a $1 bil-
lion loss. The stock tumbled to $18—less than half its value
a year earlier, even as the overall stock market continued to
surge. Cash fell from $1.5 billion to $930 million, and Stan-
dard & Poor’s cut the company’s debt rating to CCC+, deep
in junk territory, based on concerns about Penney’s liquidity.

Johnson’s job was clearly in jeopardy. He offered to resign.
But Engibous assured him of the board’s support.

Amid this turmoil the Martha Stewart case went to trial,
and Johnson was forced to take the stand. He looked naive
at best, arrogant at worst, as his emails revealed his belief
that he could intimidate Macy’s CEO, Terry Lundgren. The
best way to stop Macy’s from renewing its agreement with

“Amazing to me how much you’ve gotten done in such a short time,” investor Steve Roth

wrote to Johnson. Sixteen months later Roth bailed out, helping doom the CEO’s tenure.

FEEDBACK jreingold@fortune.com

FORT U N E .COM
9 0

“We learned a very simple thing,” an earnest female voice
said, “to listen to you.” In June, Johnson’s baby—the renovated
home department—finally opened, with quirky Jonathan
Adler lamps, mod Conran tables, and Pantone sheets. It was
gorgeous, but the items were far beyond the budget of the
traditional Penney’s customer. It bombed.

With Penney stuck in limbo by the court case, the compa-
ny’s Martha Stewart stores were reduced to displaying things
that didn’t compete with Macy’s, such as a few party supplies
and window treatments. And in what seemed like a cruel joke,
a new billboard erected in Culver City, Calif., to announce
the Michael Graves home collection featured a teakettle that,
viewed from on its side, inexplicably evoked Adolf Hitler,
moustache and all, his arm in Nazi salute. The topic “This
kettle looks like Hitler” trended quickly on social media site
Reddit. There was at least one upside. Unlike Graves’ other
wares, the Hitler teakettle immediately sold out.

t h e u n w i n d i n g

W
I T H U L L M A N B A C K , it was only a matter of
time before Ackman was gone. The investor
initially resisted, demanding that the board
quickly find a replacement for Ullman.
When he was rebuffed, Ackman dispatched
two caustic letters to the board, which

found their way to the Wall Street Journal. “Sometimes being
‘disruptive’ is exactly what a company and board needs at a
critical time,” he wrote. But by now the other directors were
aligned. On Aug. 12, 2013, Ackman resigned from the board.
He sold his Penney stake at a loss of $470 million.

For his part, Ullman took a giant eraser to just about every
plan of Johnson’s. The new home store was jettisoned; by
summer I saw 50% to 70% markdowns on newly introduced
products. They ended up piled toward the back of stores.
Many of the brands that were promised prominent place-
ment found their wares tossed on clearance tables, prices
slashed. That in itself caused headaches for Penney. One
such brand, Bodum, sued for breach of contract in Decem-
ber. (Penney declined to comment.) Once again, customers’
mailboxes filled with “the noise” of multiple promotions.

Ullman began shoring up Penney’s finances, but not
without a stumble: The company stated that it was “comfort-
able” with its liquidity—and then, only a few weeks later,
announced an 84-million-share offering. (The news of the
highly dilutive offering walloped Penney’s shares yet again.)
The Securities and Exchange Commission briefly investigated
Ullman’s U-turn before closing the inquiry with no action.

The company website, reintegrated with the stores, again
became a major contributor and helped make up for still-
anemic in-store sales. Finally, on Feb. 26, 2014, Penney
reported its first glimmer of good news: increases in same-
store sales for the first time in two years, up 2% over the prior
year’s fourth quarter (which, let’s not forget, was down 32%).

Earnings, however, were even worse than the previous
year. The company lost $1.4 billion. Still, Ullman has stabi-
lized the business, slowed the sales skid, and hired a market-
ing executive who at least seems to be matching the products
to customers’ desires. But if Penney has pulled back from the
brink of extinction, it remains a long, long way from thriving.

Returning to the pre-Johnson status quo is not a solution.
Brick-and-mortar retail remains in deep trouble. During the
recent holiday season industrywide in-store traffic slumped by
6.5%, according to RetailNext, even as spending surged online.

Was Johnson’s plan doomed to fail? It’s easy to say virtu-
ally nothing would work. For starters, there are far too many
stores in America. In early March alone, Radio Shack an-
nounced plans to close as many as 1,100 stores, and Staples
said it would shutter 225, or 12% of its total. And there are no
obvious giant candidates to take over the mall spaces, dimin-
ishing the value of real estate for companies like Penney.

Of course, much of Penney’s failure was self-inflicted: the
bold attempt—blessed by an impulsive board—to wave a
magic wand and make a deeply embedded culture disap-
pear, not to mention the rejection of its own customers. Says
one executive brought in by Johnson: “It’s akin to people
who try to remodel a house when their family is living in it.
What we did was try to remodel 80% of the house and, by
the way, try to host Thanksgiving and Christmas and a wed-
ding in the backyard.”

Some acolytes fiercely defend Johnson and maintain that
his plans would have worked if given enough time. “I think the
strategy was right on the money,” says former HR head Walker.
“We’ll never know what the results would’ve been if we’d got-
ten to the point where the stores had been largely transformed.
Then it becomes a different store. We don’t get to replay that.”

Indeed, several Johnson initiatives have paid off. The Levi’s
stores have had healthy sales (as have similar Disney bou-
tiques). Penney is also holding on to another Johnson favorite,
Joe Fresh. And Penney’s wider aisles and polished concrete
floors do make the stores look and feel more contemporary.

What Johnson hoped to do was laudable. He wanted to
conjure the elusive magic that delights customers at Apple
stores, or at a handful of brick-and-mortar retailers such as
Burberry, H&M, Target, J. Crew, Lululemon, and a few others
devoted to the art and design of the product and the space.
Says analyst Brian Sozzi of Belus Capital Advisors: “I will
give Johnson this: He did things too quickly, but at least he
was trying to set up a company to thrive in terms of where
the future of retail was going. He just didn’t go about it the
right way.” It’s impossible to know whether Johnson’s reforms
could have succeeded, but he does leave one legacy: Nobody
will be attempting something similar for a very long time.

reporter associates: Marty Jones and Susan Kramer

J . C . P E N N E Y

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Corporate News: How J.C. Penney Was Minted — James Cash Penney Eschewed Haggling and Had a Nose for the Right Locations

Mattioli, Dana

. 

Wall Street Journal

, Eastern edition; New York, N.Y. [New York, N.Y]26 Jan 2012: B.2.

Abstract

TranslateAbstract

Unlike most retailers of the time, Mr. Penney priced items low and didn’t permit haggling, according to the J.C. Penney Museum.

Full Text

·

TranslateFull text

·

Before Ron Johnson could reinvent the 20th-century department store, James Cash Penney had to help invent it. And even though their efforts are separated by 110 years, they’ve got a few tricks in common, including trying to set prices low and hold to them.

Mr. Penney founded his eponymous chain of stores in 1902 at age 26. As lore has it, he was a religious man disenchanted by a retail environment overrun by snake-oil salesmen, saloons and murky pricing.

Unlike most retailers of the time, Mr. Penney priced items low and didn’t permit haggling, according to the J.C. Penney Museum. Now, Mr. Johnson, alarmed by J.C. Penney Co.’s heavy reliance on discounting, is making a similar move to low, steadier prices, beginning in February.

Born on a farm near Hamilton, Mo., in 1875, Mr. Penney later moved out West on the advice of his doctor, seeking a drier climate. In Wyoming in 1898, he took a part-time job as a sales clerk at a store called Golden Rule during the holiday rush and stayed on after Christmas. Its credo was “only doing unto others as you would have them do unto you.” The owners became impressed by his work and made him a partner.

Mr. Penney began scouting locations for the small but growing West Coast chain.

His first pick was an unlikely location — Kemmerer, Wy. — a coal-mining town brimming with saloons and brothels, says Joan Gosnell, an archivist at the J.C. Penney Collection at DeGolyer Library at Southern Methodist University. His partners tried to dissuade him, but on the store’s first day it brought in $466, a formidable sum for the time, Ms. Gosnell says.

By 1906, Mr. Penney had bought out his original partners. In 1913, he changed the chain’s name to J.C. Penney. Penney’s grew to 175 stores in 22 states and registered sales of $14 million in 1917, according to papers compiled by the DeGolyer Library.

Penney incorporated in Delaware in 1924. Americans looking for bargains flocked to its stores during the Great Depression.

The J.C. Penney Museum still stands in his hometown of Hamilton, which celebrates Mr. Penney’s life each year in June.

Says Ms. Gosnell, “He’s squeaky clean.”

Credit: By Dana Mattioli

Word count: 380

(c) 2012 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

J.C. Penney Chief Thinks Different — With Apple in His Head, New CEO Swears Off Constant Markdowns and Jumble of Private Labels

Mattioli, Dana

. 

Wall Street Journal

, Eastern edition; New York, N.Y. [New York, N.Y]26 Jan 2012: B.1.

Abstract

TranslateAbstract

[…] three months into his job, the new chief executive is hoping to turn things around with a far-reaching but risky overhaul of the department store format in an effort to lure consumers back to a chain that’s often criticized as dowdy.

Mr. Johnson, who won plaudits for reinventing the retail experience with Apple stores’ clean lines and empty space, laid out an ambitious plan Wednesday that involves carving stores into a warren of specialty shops, turning the high-traffic center selling space into an entertainment and hang-out area, and eschewing constant “sales” in favor of lower prices every day.

Full Text

·

TranslateFull text

·

Shortly after taking the top job at J.C. Penney Co. last fall, Chief Executive Ron Johnson signed up for the company’s email alerts. He was shocked by what landed in his inbox.

The former Apple Inc. retail executive was deluged by sales announcements, sometimes two a day. He and his team counted 590 separate sales last year. They didn’t bring in shoppers — Mr. Johnson’s team found the average customer purchased only four times a year — but they did crush prices. Alarmingly, he learned nearly three-quarters of Penney’s products sold at discounts of 50% or more.

“I thought to myself, ‘This is desperation,'” Mr. Johnson said.

Now three months into his job, the new chief executive is hoping to turn things around with a far-reaching but risky overhaul of the department store format in an effort to lure consumers back to a chain that’s often criticized as dowdy.

Mr. Johnson, who won plaudits for reinventing the retail experience with Apple stores’ clean lines and empty space, laid out an ambitious plan Wednesday that involves carving stores into a warren of specialty shops, turning the high-traffic center selling space into an entertainment and hang-out area, and eschewing constant “sales” in favor of lower prices every day.

The idea is to make stores more inviting, highlight brand names and gain more control over pricing.

“Some may call it crazy, but I don’t think there is an alternative,” Mr. Johnson said in an interview. “In an Internet age where you can have exactly what you want with one keyword, people won’t tolerate big stores. You have to break it down for them.”

But overhauling the chain’s fleet of 1,100 stores will pose costly challenges, and consumers have been reluctant to spend without the incentive of big markdowns.

Penney has been battered in recent years by competition from rivals like Macy’s Inc. and Kohl’s Corp. Under former Chief Executive Myron Ullman, Penney shed its catalog business and invested in exclusive brands and partnerships with hot sellers like fast-fashion line Mango and Sephora cosmetics. But it continued to struggle with lackluster sales and the need to discount heavily to clear merchandise.

At an interview at the Plano, Texas, headquarters last week, Mr. Johnson said he determined that the store’s initial prices needed to be realigned with what customers feel comfortable paying. Beginning in February, Penney will lower the initial price for items by about 40% from where they start now.

He also plans to sharply reduce the number of promotions. Penney will pick a number of in-season items that will be on sale for an entire month. It will have two clearance sales, on the first and third Fridays of the month, called “Best Price Fridays,” an idea he picked up while working at Mervyn’s, a now-defunct regional department store. Prices will be expressed in flat dollar amounts without cents.

Penney plans to spend $80 million a month on the program.

The move is risky, as shoppers have become rabid bargain hunters. But the old strategy wasn’t working. Sales at stores open at least a year, a key measure of a retailer’s strength, rose a thin 0.7% in the 11 months through December, down from a 2.7% increase the year before and well behind Macy’s 5.4% gain.

A poor holiday showing led Penney to sharply cut its profit outlook for the fourth quarter. Its shares are up about 6.7% in the past year, but that’s compared with Macy’s gain of nearly 47%. On Wednesday, Penney’s shares fell 1%. Macy’s fell 3.1%.

Department stores increasingly are setting up “stores in a store” and carving out areas for specific brands. Mr. Johnson, however, wants to set up as many as 100 of them — including branded spaces like a new Nanette Lepore shop and “Martha Stewart’s Kitchen,” private-label stores for the company’s Liz Claiborne line, and themed areas for seasons and trends.

The new CEO also plans to replace the “center core” — the highest traffic middle area where stores typically concentrate cosmetics, accessories and other high-margin impulse buys — with what he calls “Town Square.”

The section will be a minimum of 10,000 square feet and rotate monthly attractions and services, such as free back-to-school haircuts or free hot dogs and ice cream in July.

Mr. Johnson equates Town Square with Apple’s “Genius Bar,” where customers have their products serviced. “Just like in the Apple store, you have to walk through the products to get to the Town Square,” he says.

Two things Mr. Johnson isn’t interested in are celebrity lines and private-label apparel. Mr. Johnson, a believer in brands, says in-house labels lack distinctiveness and pricing power.

As a result, Penney is slashing the number of private-label lines it has from hundreds to a few strong ones, Chief Operating Officer Mike Kramer said.

The company acknowledges that the changes will require investments, but Mr. Johnson says cost cutting and the elimination of sales have been “engineered to pay for it.”

“It’s going to be funded internally from our own cash flow from operations, but it’s going to be on steroids, because we’re becoming more efficient and cutting out a lot of cost,” says Mr. Kramer, whose major task is funding the changes.

For instance, Penney will cut the number of promotional packs it sends to stores to just one a month from three a week. It also will eliminate jobs related to retagging merchandise for perpetual sales.

Mr. Kramer, who reported to Mr. Johnson at Apple, recalls phone conversations the two men had years ago when Mr. Kramer was at the helm of Kellwood Co., an apparel manufacturer. Mr. Kramer says he’d vent his frustrations about working with department stores, and the two would mull ideas for transforming them, Mr. Kramer says.

Mr. Johnson says he became intrigued by the decline of department stores during his Apple days, noting on mall trips he could park easily near department stores while spots were taken near specialty stores.

“I kept going, ‘Department stores have all the competitive advantages: low real estate, big marketing budgets, lots of space, he said. “Something is fundamentally wrong here.”

Credit: By Dana Mattioli

Word count: 1032

(c) 2012 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.

Module 4 – Case

PRICING & MARKETING PLAN IMPLEMENTATION

Required Reading/Resources

Reingold, J., Jones, M., & Kramer, S. (2014). How to fail in business while really, really trying. Fortune, 169 (5), 80.

Lublin, J. S., & Mattioli, D. (2013, Apr 09). Penney CEO out, old boss back in. Wall Street Journal (Online). Retrieved from ProQuest.

Glazer, E., Lublin, J. S., & Mattioli, D. (2013, Apr 9). Penney backfires on ackman. Wall Street Journal (Online). Retrieved from ProQuest.

D’Innocenzio, A. (2012, January 27). J.C. Penney slashing prices on all merchandise. USA Today. Retrieved from 

http://www.usatoday.com/money/industries/retail/story/2012-01-25/penneys-price-overhaul/52787388/1

Reingold, J. (2012, March 19). Retail’s new radical. Fortune. Retrieved from

http://management.fortune.cnn.com/2012/03/07/jc-penney-ron-johnson/

Mattioli, D. (2012, January 26). J.C. Penney chief thinks different. Wall Street Journal.

Mattioli, D. (2012, January 25). How J.C. Penney was minted. Wall Street Journal.

There’s a lot going on at J.C. Penney in recent years. With a new CEO, J.C. Penney, confronted with pressing competition up, down, and sideways in the department store wars, is reinventing itself in terms of merchandising, supply, and pricing strategies. Here we will concentrate only on the pricing aspects of these new directions. However, this is ultimately about positioning; trying to find a space that is responsive to potential customers as well as differentiating the Penney brand from Target, Kohl’s, Wal-Mart, and Macy’s.

These articles shed additional light on the implications of Penney’s new direction:

Berfield, S. (2012, May 24), Remaking J.C. Penney Without Coupons. Bloomfield Business Week.Retrieved from 

http://www.businessweek.com/articles/2012-05-24/remaking-j-dot-c-dot-penney-without-coupons

 

Girard, K. (2012, March 5). Is J.C. Penney’s makeover the future of retailing? Harvard Business School Working Knowledge. Retrieved from 

http://hbswk.hbs.edu/item/6944.html

Halkias, M. (2011, December 7). J.C. Penney buys stake in Martha Stewart’s company. The Dallas Morning News. Retrieved from 

http://www.dallasnews.com/business/retail/20111207-j.c.-penney-buys-stake-in-martha-stewarts-company.ece

Timberlake, C., & Townsend, M. (2012, February 28). Macy’s says Martha’s dance card is too full.Business Week. Retrieved from 

http://www.businessweek.com/articles/2012-02-28/macys-says-martha-stewarts-dance-card-is-too-full

Case Assignment

A well-written report should have a brief introduction, headings or subheadings, and a brief concluding comment. Note that you should use some keywords as headings or subheadings such as “Johnson’s pricing strategy,” instead of a sentence or a question. Read and cite article listed above, supplemented with any other articles related to J.C. Penney, and develop a report addressing following issues.

1. Briefly describe Johnson’s pricing strategy, also providing background on the company and department store industry.

2. Explain why Johnson’s pricing strategy did not work. Support your position in terms of environmental factors such as economy, the competition, and changing consumer behavior.

3. What do you think Johnson could have done better? Take into account J.C. Penney’s segmentation, positioning, and branding strategies to explain this issue.

4. Compare J.C. Penney’s current pricing strategy and Johnson’s pricing strategy, based on your research on the most recent situation of J.C. Penney. How do you think J.C. Penney would perform in the next five years? Take into consideration the relationships between pricing and other aspects of the marketing effort such as a change in merchandising, logo, atmospherics, use of celebrity spokespersons, and so on.

Assignment Expectations Regarding Your References and Defense of Your Positions

Write clearly, simply, and logically. Your paper should be 750-1500 words long, excluding title pages and references, but quality of writing is more important than length. Use double-spaced, black Verdana or Times Roman font in 12 pt. type size.

Back up your positions or opinions with references to the required reading found in the Module 1-4 Background reading and Ongoing Useful Resources. In using those references, demonstrate your understanding of the concepts presented. Rather than grading on how much information you find, emphasis will be on the defense of the positions you take on the issues. Also remember that:

1. The “why” is more important than the “what.”

2. The defense of your positions on the issues is more important than the positions you take.

Do not repeat or quote definitions. Your use of the required reading to support your opinions (that is, contentions or positions) should demonstrate that you understand the concepts presented. Do not include definitions or summaries of the readings or simply describe what the company did. Instead, your responses to the questions should be analytical and should demonstrate that (a) you understand the principles from the background reading and (b) you can apply them to this particular case. Vague, general answers will not earn a good grade.

Avoid redundancy and general statements such as “All organizations exist to make a profit.” Make every sentence count.

Paraphrase the facts using your own words and ideas, employing quotes sparingly. Quotes, if absolutely necessary, should rarely exceed five words.

When writing an academically oriented paper, you will uncover many facts about the product. If you paraphrase the facts, cite the sources in your text and link those citations to references at the end of the paper.

Here are some guidelines on how to conduct information search and build critical thinking skills.

Emerald Group Publishing. (n.d.). Searching for information. Retrieved from 

http://www.emeraldinsight.com/learning/study_skills/skills/searching.htm

Emerald Group Publishing. (n.d.). Developing critical thinking. Retrieved from 

http://www.emeraldinsight.com/learning/study_skills/skills/critical_thinking.htm

Guidelines for handling quoted and paraphrased material are found at:

Purdue Online Writing Lab. (n.d.). Academic writing. Retrieved from 

https://owl.english.purdue.edu/owl/section/1/2/

Purdue Online Writing Lab. (n.d.). Quoting, paraphrasing, and summarizing. Retrieved from 

https://owl.english.purdue.edu/owl/resource/563/1/

Purdue Online Writing Lab. (n.d.). Is it plagiarism yet? Retrieved from 

https://owl.english.purdue.edu/owl/resource/589/02/

Your paper consists of arguments in favor of your opinions or positions on the issues addressed by the guidelines; therefore, avoid the following logical fallacies:

Purdue Online Writing Lab. (n.d.). Logic in argumentative writing. Retrieved from 

https://owl.english.purdue.edu/owl/resource/659/01/

· make sure to reference your sources of information with both a bibliography and in-text citations. See the 
Student Guide to Writing a High-Quality Academic Paper
,(See Attached) including pages 11-14 on in-text citations. 

· APA FORMAT

· NO Plagiarism (will check on Turnitin)

Reference credible sources only

The following resources are not
 
acceptable for this course, keep in mind, there are many others:

· Wikipedia.com

· Ehow.com

· About.com

·

Smallbusiness.chron.com

· Diffen.com

·

Yourbusiness.azcentral.com

· Investopedia.com

· Boundless.com and Lumen

· Course hero

· Studypool

· Chegg

Top of Form

Rubric Name: MBA/MSHRM/MSL Case Grading Rubric -Timeliness v1

Criteria

Level 4 – Excellent

Level 3 – Proficient

Level 2 – Developing

Level 1 – Emerging

Assignment-Driven Criteria

23 points
Demonstrates mastery covering all key elements of the assignment in a substantive way.

20 points
Demonstrates considerable proficiency covering all key elements of the assignment in a substantive way.

18 points
Demonstrates partial proficiency covering all key elements of the assignment in a substantive way.

14 points
Demonstrates limited or poor proficiency covering all key elements of the assignment in a substantive way.

Critical Thinking

9 points
Demonstrates mastery conceptualizing the problem. Multiple information sources, expert opinion, and assumptions are analyzed, synthesized, and critically evaluated. Logically consistent conclusions are presented with appropriate rationale.

8 points
Demonstrates considerable proficiency conceptualizing the problem. Information sources and viewpoints of experts are proficiently analyzed and evaluated. Assumptions are clearly stated and supported, but may not be questioned.  Conclusions are logical, but may be somewhat disconnected from the analysis.

7 points
Demonstrates partial proficiency conceptualizing the problem. Information sources and viewpoints of experts are stated, but not necessarily synthesized, or critically evaluated. Assumptions are stated but not supported. Conclusions may be logical, but are not connected to or supported by the preceding analysis.

6 points
Demonstrates limited or poor proficiency conceptualizing the problem. Information sources and viewpoints of experts are either absent or poorly analyzed, synthesized, and evaluated. Assumptions are implied, but not clearly stated. Conclusions are either absent or poorly conceived and unsupported.

Business Writing

4 points
Demonstrates mastery in written communication and a skilled, knowledgeable, and error-free presentation to an appropriately specialized audience. 

3 points
Demonstrates considerable proficiency in written communication with a well-organized presentation to an appropriately specialized audience.

2 points
Demonstrate partial proficiency in written communication with few grammatical or syntax errors, but may lack headings or be pitched at the wrong audience.

1 point
Demonstrates limited or poor ability to write clearly, and uses poor grammar and syntax. Text may be disorganized and rambling.

Effective Use of Information

6 points
Demonstrates mastery in locating relevant and quality sources of information, using strong and compelling content to support ideas, convey understanding of the topic, and shape the whole work.

5 points
Demonstrates considerable proficiency in retrieving information, and in using appropriate and relevant content to support ideas, and convey understanding of the topic. Few arguments left unsupported.

4 points
Demonstrates partial proficiency to retrieve information, but may not be able to discriminate quality. Uses relevant content to partially support ideas, but leaves many arguments unsupported.  May use immaterial or disparate content in an attempt to support arguments.

3 points
Demonstrates inability to retrieve information, or use appropriate or relevant content to support ideas, convey understanding of the topic and shape the whole work.  Makes unsupported arguments and assertions.

Citing Sources

3 points
Demonstrates mastery using in-text citations of sources, proper format for quotations, and correctly format full source information in the reference list using APA style (bibliography).

2 points
Demonstrates considerable proficiency using of in-text citations of sources, proper format for quotations, and provides sufficient source information in the reference list, though not in APA format (bibliography).

1 point
Demonstrates occasional use of in-text citations of sources and provides partial reference information, such as a URL or web link
(bibliography).

0 points
Demonstrates inability to cite sources or provide a reference list (bibliography).

Timeliness

5 points
Assignment submitted on time or collaborated with professor for an approved extension on due date.

3 points
Assignment submitted 1-2 days after module due date.

2 points
Assignment submitted 3-4 days after module due date.

0 points
Assignment submitted 5 or more days after module due date.

Overall Score

Level 4
45 or more

Level 3
40 or more

Level 2
35 or more

Level 1
0 or more

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Module 4 – Background

PRICING & MARKETING PLAN IMPLEMENTATION

This module introduces the subject of pricing and finalizes the marketing audit project, stressing the importance of an integrated marketing program.

Required Reading/Resources

The following reading list provides background information on pricing and price management in marketing.

Pricing. (2014). Pearson Learning Solutions, New York, NY. Retrieved from 

http://www.pearsoncustom.com/mct-comprehensive/asset.php?isbn=1269879944&id=11388

Pricing (Audio). (2014). Pearson Learning Solutions, New York, NY. Retrieved from 

http://www.pearsoncustom.com/mct-comprehensive/asset.php?isbn=1269879944&id=11953

Lavinsky, D. (2013). Three steps to a solid marketing budget. Retrieved from 

http://www.forbes.com/sites/davelavinsky/2013/06/07/three-steps-to-a-solid-marketing-budget/

Responding to a price transparent world: A paradigm shift for retailers. (2012). Retrieved from 

http://www.cognizant.com/InsightsWhitepapers/Responding-to-a-Price-Transparent-World-A-Paradigm-Shift-for-Retailers

Burnsed, B. (2009, July 23). In luxury sector, discounting can be dangerous. Businessweek.

Catan, T., & Trachtenberg, J.A. (2012). US warns Apple, publishers. Wall Street Journal,259:55(March 9):A1.

Marketing arithmetic. McGraw Hill. Retrieved from 

http://highered.mcgraw-hill.com/sites/dl/free/0074712292/98071/appendix_d_marketing_arithmetic

Christ, P. (n.d.). Factors affecting pricing decisions. KnowThis. Retrieved from 

http://www.knowthis.com/principles-of-marketing-tutorials/pricing-decisions/factors-affecting-pricing-decision/

Cochran, C. (2006). Building a balanced scorecard. Quality Digest. Retrieved from

http://www.qualitydigest.com/sept05/articles/05_article.shtml

Petro, G. (2013). Retail CEO perspectives on avoiding the “Race To The Bottom”. Retrieved from 

http://www.firstinsight.com/blog/bid/266394/Retail-CEO-Perspectives-on-Avoiding-The-Race-To-The-Bottom

Henricks, M. (2010). Price-Cutting Peril: Do You Know What You’re Doing — Really?CBSMoneyWatch (November 19). Retrieved from 

http://www.bnet.com/blog/business-myths/price-cutting-peril-do-you-know-what-you-8217re-doing-8212-really/477?promo=857&tag=nl.e857

Hess, M. (2011). 5 Ways a Business Plan Can Come Back to Bite You. CBS MoneyWatch(December 8). Retrieved from 

http://www.cbsnews.com/8301-505143_162-57338800/5-ways-a-business-plan-can-come-back-to-bite-you/?tag=nl.e857

Hirsch, J. (2011). Honda in fight with TrueCar over prices displayed online. Los Angeles Times(December 15). Martin, A. (2011). TV prices fall, squeezing most makers and sellers. New York Times (December 26).

Mattioli, D. (2012). Nordstrom lowers price of rewards. The Wall Street Journal (January 10).

Perner, Lars (n.d.). Pricing. Consumer Psychologist. Marshall School. USC. Retrieved from 

http://www.consumerpsychologist.com/intro_Pricing.html

Pricing decisions (n.d.). KnowThis. Retrieved from 

http://www.knowthis.com/principles-of-marketing-tutorials/pricing-decisions/

Rafi, M. (2011). Ditch the discounts. Harvard Business Review; 89 (1/2), 23-5.

Ramsey, M. (2012). Glut of small cars tests Ford resolve. Wall Street Journal (January 11), B1. 

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Rubric Name: MBA/MSHRM/MSL Case Grading Rubric -Timeliness v1

Criteria

Level 4 – Excellent

Level 3 – Proficient

Level 2 – Developing

Level 1 – Emerging

Assignment-Driven Criteria

23 points
Demonstrates mastery covering all key elements of the assignment in a substantive way.

20 points
Demonstrates considerable proficiency covering all key elements of the assignment in a substantive way.

18 points
Demonstrates partial proficiency covering all key elements of the assignment in a substantive way.

14 points
Demonstrates limited or poor proficiency covering all key elements of the assignment in a substantive way.

Critical Thinking

9 points
Demonstrates mastery conceptualizing the problem. Multiple information sources, expert opinion, and assumptions are analyzed, synthesized, and critically evaluated. Logically consistent conclusions are presented with appropriate rationale.

8 points
Demonstrates considerable proficiency conceptualizing the problem. Information sources and viewpoints of experts are proficiently analyzed and evaluated. Assumptions are clearly stated and supported, but may not be questioned.  Conclusions are logical, but may be somewhat disconnected from the analysis.

7 points
Demonstrates partial proficiency conceptualizing the problem. Information sources and viewpoints of experts are stated, but not necessarily synthesized, or critically evaluated. Assumptions are stated but not supported. Conclusions may be logical, but are not connected to or supported by the preceding analysis.

6 points
Demonstrates limited or poor proficiency conceptualizing the problem. Information sources and viewpoints of experts are either absent or poorly analyzed, synthesized, and evaluated. Assumptions are implied, but not clearly stated. Conclusions are either absent or poorly conceived and unsupported.

Business Writing

4 points
Demonstrates mastery in written communication and a skilled, knowledgeable, and error-free presentation to an appropriately specialized audience. 

3 points
Demonstrates considerable proficiency in written communication with a well-organized presentation to an appropriately specialized audience.

2 points
Demonstrate partial proficiency in written communication with few grammatical or syntax errors, but may lack headings or be pitched at the wrong audience.

1 point
Demonstrates limited or poor ability to write clearly, and uses poor grammar and syntax. Text may be disorganized and rambling.

Effective Use of Information

6 points
Demonstrates mastery in locating relevant and quality sources of information, using strong and compelling content to support ideas, convey understanding of the topic, and shape the whole work.

5 points
Demonstrates considerable proficiency in retrieving information, and in using appropriate and relevant content to support ideas, and convey understanding of the topic. Few arguments left unsupported.

4 points
Demonstrates partial proficiency to retrieve information, but may not be able to discriminate quality. Uses relevant content to partially support ideas, but leaves many arguments unsupported.  May use immaterial or disparate content in an attempt to support arguments.

3 points
Demonstrates inability to retrieve information, or use appropriate or relevant content to support ideas, convey understanding of the topic and shape the whole work.  Makes unsupported arguments and assertions.

Citing Sources

3 points
Demonstrates mastery using in-text citations of sources, proper format for quotations, and correctly format full source information in the reference list using APA style (bibliography).

2 points
Demonstrates considerable proficiency using of in-text citations of sources, proper format for quotations, and provides sufficient source information in the reference list, though not in APA format (bibliography).

1 point
Demonstrates occasional use of in-text citations of sources and provides partial reference information, such as a URL or web link
(bibliography).

0 points
Demonstrates inability to cite sources or provide a reference list (bibliography).

Timeliness

5 points
Assignment submitted on time or collaborated with professor for an approved extension on due date.

3 points
Assignment submitted 1-2 days after module due date.

2 points
Assignment submitted 3-4 days after module due date.

0 points
Assignment submitted 5 or more days after module due date.

Overall Score

Level 4
45 or more

Level 3
40 or more

Level 2
35 or more

Level 1
0 or more

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