Joe Fresh is an upscale Canadian retail chain that appeals to a younger demographic. JC Penny is an struggling US retailer not know for being at the forefront of fashion. As widely reported, they have struck a deal in which Joe Fresh would obtain floor space with JPC stores.
The deal's exploitation of economies of scope stem from economies of scale in different complementary assets owned by each firm. Due to its successes, Joe Fresh has a hot brand that could be leveraged into more retail outlets. It is experiencing economies of scale marketing which the deal exploits very quickly. Due to its failures, JCP has plenty of underutilized floor space in its stores throughout the US. It has economies of scale in distribution which the deal could exploit very quickly. If done well, this moves these assets to a higher-valued use. Many of the news analyses focus on whether this is enough to save JCP (generate positive profits). This misses the point that JCP will almost surely be better off (higher profits even if still negative).
This is a good solution for JCP, though maybe not good enough to completely pull them out of trouble. When one gets seriously wounded, better try to stop or slow down bleeding, then to seek professional treatment. It is not reasonable to argue that, maybe no any treatment can recover the wound completely, there would be no need to stop bleeding.
ReplyDeleteI like the the fact that this is a Canadian store that is new in our American market. If Joe Fresh has an economies of scale that is headed into a positive direction then this what JCP will need in order to leverage out some of the losses. These two major firms will collaborate and manage overhead costs together to make an economic profit and work within the economies of scope. The golden opportunity that lies here is the chance to take Joe Fresh along with JCP to the global market after they rise back economically here in America. I can see a relevant benefit with these two corporations working together to overcome risks. JCP needs a change and a new strategy while Joe Fresh is granted the opportunity to help JCP and themselves as they grow here in the American market.
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