J. C. Penney Company, Inc. Equity Valuation and Analysis As of ...

Firm Competitive Advantage AnalysisJ. C. Penney has just finished a five-year turnaround plan to increaseprofits and gain market share. This could only have been done by focusing onthe competitive strategies within the departmental retail industry. J. C. Penneyhas focused on strategies such as economies of scale and scope, low input costs,and tight cost control system to remain price competitive. In addition to this, ithas also invested in product quality and variety, in brand image, and in researchdevelopment to differentiate itself from the rest of the industry.Economies of Scale and ScopeJ. C. Penney has achieved economies of scale by becoming a centralizedunit holding the same inventory. Now, J. C. Penney is in a large campaign ofexpansion by expecting to open approximately 50 new stores per year from 2007through 2009. This will give them an even larger advantage with such a highgrowth from its already large retail size of 1,033 department stores in 49 states.In addition, its Direct channel holds its internet and catalog information. J. C.Penney’s competitors such as Kohl’s, Dillard’s, Stage Stores Inc., and Stein Martare much smaller. This is a huge advantage for J. C. Penney because it enablesit to purchase large quantities from its suppliers and receive it at a bargain pricein order to produce a larger profit after sales. J. C. Penney has taken advantageof economies of scope by launching private and exclusive brands. This hashelped J. C. Penney position itself as a provider of high quality products andservices at affordable prices. In addition, the consistency of merchandise withinthe stores, internet, and catalog drives costs down, while high advertisingexposure is already in place.34