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The Nordstrom Project

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Due November 17, 2015
MGMT-4500-004: Business Policy and Strategic Management
Professor Jeffrey Nystrom
Presented By:
C.J....
1 | P a g e
Table of Contents
Section 1: The Case Study......................................................................
2 | P a g e
3.2.2 Internal Environment Analysis: Value Chain Analysis ................................................ 31
...
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The Nordstrom Project

  1. 1. Due November 17, 2015 MGMT-4500-004: Business Policy and Strategic Management Professor Jeffrey Nystrom Presented By: C.J. Dugar| Camron Eidsness |Dane Grashuis | Artem Kukushkin Denicia Luna |Sondra Morris | Sydney Sullivan |Monica Yuan
  2. 2. 1 | P a g e Table of Contents Section 1: The Case Study.............................................................................................................. 4 1.1 Current and Historical Background....................................................................................... 4 1.2 Organization Mission............................................................................................................ 4 1.3 External Environment ........................................................................................................... 5 1.3.2 External Environment: Industry Environment................................................................ 6 1.3.3 External Environment: Operating Environment............................................................. 7 1.4 Internal Environment............................................................................................................. 7 1.4.1 Internal Environment: Current Strengths....................................................................... 7 1.4.2 Internal Environment: Key Weaknesses.......................................................................... 8 1.4.3 Internal Environment: Financial Situation..................................................................... 9 1.5 Generic Strategy.................................................................................................................... 9 1.6 Long-term Objectives.......................................................................................................... 10 1.7 Grand Strategies .................................................................................................................. 11 1.8 Short-Term Objectives and Action Plans............................................................................ 11 1.9 Functional Tactics ............................................................................................................... 12 1.10 Strategy Execution Policies............................................................................................... 14 1.11 Executive Bonus Compensation Plans.............................................................................. 14 1.12 Organizational Structure, Culture, and Leadership ........................................................... 15 1.12.1 Organizational Structure, Culture, and Leadership: Organizational Structure.......... 15 1.12.2 Organizational Structure, Culture, and Leadership: Culture and Leadership ............ 15 1.13 Strategic Control ............................................................................................................... 19 1.14 Entrepreneurship and Innovation ...................................................................................... 19 Section 2: Identification of Key Strategic Issues and Problems ................................................... 22 Section 3: Analysis and Evaluation .............................................................................................. 23 3.1 External Environment Analysis .......................................................................................... 23 3.1.1 External Environment Analysis: Remote Environment................................................ 23 3.1.2 External Environment Analysis: Industry Environment............................................... 24 3.1.3 External Environment Analysis: Operating Environment............................................ 26 3.2 Internal Environment Analysis............................................................................................ 30 3.2.1 Internal Environment Analysis: Resource-Based View................................................ 30
  3. 3. 2 | P a g e 3.2.2 Internal Environment Analysis: Value Chain Analysis ................................................ 31 3.2.3 Internal Environment Analysis: Current vs. Past Performance................................... 32 3.2.4 Internal Environment Analysis: Nordstrom’s Resource Competencies vs. Competitors ............................................................................................................................................... 33 3.2.5 Internal Environment Analysis: Analysis of Industry Success Determinants............... 34 3.2.6 Internal Environment Analysis: Financial Health Analysis......................................... 35 3.3 SWOT Analysis................................................................................................................... 36 3.4 Mission Statement Analysis................................................................................................ 37 3.5 Generic Strategy Analysis................................................................................................... 37 3.6 Long-term Objectives Analysis........................................................................................... 39 3.7 Grand Strategy Analysis...................................................................................................... 40 3.8 Short-Term Objectives Analysis ......................................................................................... 42 3.9 Functional Tactics Analysis ................................................................................................ 43 3.10 Analysis of Policies Aiding Strategy Execution ............................................................... 43 3.11 Structure, Cultural, and Leadership Analysis.................................................................... 46 3.11.1 Structure, Cultural, and Leadership Analysis: Structure, Culture, and the Environment........................................................................................................................... 47 3.11.2 Structure, Cultural, and Leadership Analysis: Strategic Leadership ......................... 48 3.12 Strategic Controls Analysis............................................................................................... 48 3.13 Executive Compensation Analysis.................................................................................... 50 3.14 Innovation and Entrepreneurial Analysis .......................................................................... 51 Section 4: Consulting Report with Recommendations ................................................................. 53 4.1 Summary of the External and Internal Environment’s Analysis......................................... 53 4.1.2 Summary of the External and Internal Environment’s Analysis: Internal Analysis Summary................................................................................................................................ 54 4.2 Mission Statement Recommendations ................................................................................ 54 4.3 Generic Strategy.................................................................................................................. 54 4.4 Long-term Objectives, Grand Strategies, Short-Term Objectives, and Action Plans......... 57 4.5 Policies Aiding Strategy Execution Recommendations...................................................... 62 4.6 Executive Compensation Practice Recommendations ........................................................ 63 4.7 Strategy Implementation: Structure, Culture, and Leadership Recommendations............. 65 4.8 Strategic Control Recommendations................................................................................... 67
  4. 4. 3 | P a g e 4.8.1 Strategic Control Recommendations: Premise Control Assumptions.......................... 67 4.8.2 Strategic Control Recommendations: Implementation Control................................... 68 4.8.3 Strategic Control Recommendations: Strategic Surveillance and Special Alert Control Considerations....................................................................................................................... 69 4.9 Innovation and Entrepreneurship Recommendations ......................................................... 69 Bibliography ................................................................................................................................ 71
  5. 5. 4 | P a g e Section 1: The Case Study 1.1 Current and Historical Background In 1901 John W. Nordstrom partnered with Carl Wallin to open a shoe store, founding what would later be known as the leading customer service fashion retailer, Nordstrom Inc. The duo opened a few “Nordstrom and Wallin” shoe stores, before selling their shares of the company to John Nordstrom’s three sons in 1928. Nordstrom started out with slow but constant growth, which eventually led to its success in becoming a wildly successful west coast shoe store. They ran eight shoe stores in Washington and Oregon by 1960 (Nordstrom, Inc., 2015). In 1963, the company entered its second phase when the brothers purchased a women's apparel store called, “Best Apparel” (Nordstrom, Inc., 2015). This expansion broadened the company market with sales of women’s clothing, but more growth was soon to follow. Three years later, a fashion retail location in Portland was added to the list of purchases. The company then merged their shoe business and apparel store. To ensure they were a one-stop apparel store, the sibling owners also added men's and kid's clothing, and renamed the store “Nordstrom Best” (Lyman, 2014). The three sons then retired in 1968, leaving the company to the heirs’ next generation. This generation of Nordstrom’s leaders made the company public in 1971, renaming the company officially, Nordstrom, Inc. (Nordstrom, Inc., 2015). 1.2 Organization Mission In the words of John W. Nordstrom, the company's overall mission is, “to provide outstanding service every day, one customer at a time” (Rosecrans, 2014). This initial organization mission statement has led Nordstrom to become “one of the nation's leading fashion retailers, offering a wide variety of fine quality apparel, shoes and accessories for men, women
  6. 6. 5 | P a g e and children at stores across the country (Reference For Business, n.d.). Operating 115 full-line Nordstrom retail stores and 167 Nordstrom Rack retail stores in the United States, Nordstrom Inc. has just recently expanded to operate two full-line retail stores in Canada. The company has adapted to rising technological demands with online channels such as: Nordstrom.com, Nordstromrack.com, HauteLook, and TrunkClub.com. Other channels the company operates include the five Trunk Club showrooms, two Jeffrey boutiques, and one Last Chance clearance store. In addition to the retail segment, Nordstrom now has a credit segment, which includes its own federal savings bank through which the company provides its own private label credit card, Nordstrom Visa. Accordingly, “the Company operated 290 United States stores located in 38 states, as well as an e-commerce business through Nordstrom.com, Nordstromrack.com and HauteLook and TrunkClub.com, as of March 16, 2015. It also operates two Nordstrom full-line stores in Canada” (The New York Times, 2015). 1.3 External Environment Services provided Brick and mortar and Online retail of men’s clothing (15% Net Sales), women’s clothing (34% Net Sales), children’s clothing (3% Net Sales), shoes (22% Net Sales), beauty products (11% Net Sales), accessories, home décor, bedding and home accessories (3% Net Sales). Scope Currently, there are 118 full line stores located in the US and Canada, 178 Nordstrom Rack stores, 2 Jeffery boutiques, and one clearance store. They operate online as Nordstrom.com, Nordstromrack.com, and privately as Hautelook.com. Competitors
  7. 7. 6 | P a g e Nordstrom falls under a mid-range affordable luxury department store category. This particular industry category includes direct competitors such as: Macy’s, Dillard’s, and Neiman Marcus. Customer Demographics Traditionally, Nordstrom attracts customers between the ages of 25 – 54 with an average household income of >$100,000. Nordstrom has recognized that targeting millennials’ will definitely increase revenues for the long-term. Due to this they are now starting to target customers between the ages of 16 – 30. Department stores typically are more attractive to women but have a fine line of menswear. 1.3.2 External Environment: Industry Environment Entry Barriers Nordstrom is a large and a well-established organization, and in two countries it operates in, the firm does not have any entry barriers. That said, the industry itself does have significant entry barriers due to economies of scale that stores like Nordstrom, Macy’s, Neiman Marcus can offer. Supplier Power Certain suppliers are powerful in the clothing industry, and may be able to dictate prices with smaller stores. Brands like Michael Kors, or Coach, are desirable to many women, thus it becomes a necessity for stores large and small to carry certain brands. Buyer power Although consumers of the retail industry typically do not buy in bulk, they do possess buyer power due to availability of the same product elsewhere. For example, Nordstrom is
  8. 8. 7 | P a g e typically located in the malls, like Cherry Creek mall. If a customer is shopping for Hugo Boss shoes, he can buy that brand at Nordstrom, Neiman Marcus, or the Hugo Boss store, all located within the mall. 1.3.3 External Environment: Operating Environment Substitute availability This industry has plenty of substitute products. In most cases, a shopper is paying for the brand. Competitive rivalry Because price wise, Nordstrom is somewhat geared toward middle class, it competes with luxury retailers, such as Lord & Taylor, Neiman Marcus, Saks Fifth Avenue, and Bloomingdale’s, as well as middle class retailers like Macy’s. 1.4 Internal Environment 1.4.1 Internal Environment: Current Strengths Nordstrom’s current state of affairs appears to be mostly on the right track with only some challenges in sight. Concerning industry, it appears there could be some trending toward the need for department store luxury retail diminishing. Internally, Nordstrom is addressing this concern with off-price retailing and increasing their Nordstrom Rack presence by both physical locations as well as the launch of nordstromrack.com. Even with this concern on the horizon Nordstrom’s continues to do well on paper. Their end of quarter two in 2015 suggests positive reporting. Sales increased by 9% and net income climbed 15%. Related to their efforts of their
  9. 9. 8 | P a g e off-priced brand they see business increasing by 16%. Now that Nordstrom has been successful in their luxury brand and now leveraging that skill in their branch off into their bargain line it appears that they will continue to have success in the future (Caplinger, 2015). Figure 1.4.1: Strengths  Brand equity  Typical customer base is moderately affluent  Good penetration in the market through multiple online entities  Product portfolio  Outstanding customer service  Current has over 300 stores (including Nordstrom Rack and full-line stores) o Nordstrom.com, Nordstromrack.com, HauteLook, Jeffrey Boutiques and Trunk Club (Weishaar, 2015)  Strong Management  Digitally savvy o Providing customers with a strong mobile platform to shop and buy and continuance of providing customers with new features faster 1.4.2 Internal Environment: Key Weaknesses Figure 1.4.2: Weaknesses  Perceived as outdated  Perceived to be for more affluent target markets  Nordstrom Rack, a lower cost alternative, could compromise Nordstrom's brand equity
  10. 10. 9 | P a g e 1.4.3 Internal Environment: Financial Situation Currently Nordstrom’s financial condition continues to maintain a steady pace in the positive direction. At the end of their second quarter, August 1, 2015, they achieved 9.2% sales growth, which makes this the fourth consecutive quarter they maintained high single-digit increases. Key successful contributors to their most recent successful quarter are:  The Anniversary Sale – as their largest event of the year  Growth investments such as entry into Canada, the acquisition of Truck Club, and the Nordstromrack.com launch, which drove over one-third of their net sales growth  Nordstrom Rack generated a net sales increase of 13% - this being their 26th consecutive quarter of double-digit growth  Full-line and Nordstrom.com business delivered 4.8% comparable sales increase (Nordstrom Inc., 2015) 1.5 Generic Strategy Nordstrom’s generic, or competitive strategy, is to be the best in customer service when it comes to fashion retailers in the market. This is to be accomplished by providing the best selection, quality, value and service (Nordstrom, Inc., 2015). To accomplish this they have provided their customers with a wide variety of clothing, shoes, and accessories for women, men and children. They strive to not only be on the cutting edge of fashion but want their customers to possess style (Nordstrom, 2015). One key element to this is providing great quality along with their variety so their customers can rely their brand. Nordstrom also always provides free shipping and returns to meet their customer’s requests and needs when other competitors do not consistently have the same offerings, which helps with making them competitive in the market.
  11. 11. 10 | P a g e Nordstrom, Inc. continues to strive to be competitive in the market by attempting to emerge into other markets like smaller boutiques and attracting the clientele of those type of establishments. Nordstrom is currently trying a new strategy with their Director of Creative Projects, Olivia Kim. On August 20, 2015 Nordstrom unveiled their latest project with Space, a boutique style standout in select Nordstrom stores; Seattle, Chicago, and San Francisco currently). Space is decorated with eye-catching colors; “The effect of stumbling into one of the Space camps should be similar to going from black-and-white Kansas to Technicolor Oz.” This project also opens up doors to create new relationships with smaller labels so they can operate like their boutique counterparts. The Space project will continue to grow into stores in Vancouver, British Columbia and Nordstrom’s first New York store in 2018 (Schnier, 2015). This falls within their generic strategy because by evaluating the market and recognizing what is currently up and coming Nordstrom can provide a fresh outlook to their brand. This provides their current, lost, and new customers with what is currently trendy and they can match their current customer service strategy with new, appealing projects. 1.6 Long-term Objectives Nordstrom has many long-term objectives, or improvements the company is seeking to achieve within a multi-year period of 5-10 years. While specific, these long-term objectives are still flexible given the multi-year period and other execution specifics. Thus, we summarize the company’s current long-term objectives into three categories: technological improvement, national expansion, and international expansion (Zacks Equity Research, 2013).
  12. 12. 11 | P a g e 1.7 Grand Strategies Nordstrom's Grand strategies, or the firms central ideas on how to achieve its long-term objectives, consist of a series of web developments and improvements, acquiring a series of online businesses, and new store openings across the nation, and (for the first time) new Nordstrom and Nordstrom Rack store openings in Canada. Specifically, to achieve technological advancement Nordstrom plans to improve upon current Nordstrom online shopping platforms on nordstrom.com, nordstromrack.com, and Hautlook.com. “Striding ahead with its store expansion strategy," to achieve national expansion, Nordstrom plans to open many more stores across the U.S. within the next five years (Zacks Equity Research, 2013). Among these will be the grand opening of the company’s highly anticipated, Manhattan location, along with locations in Austin, TX; Los Angeles, CA; Norwalk, CT; and San Diego, CA. Finally, to achieve international expansion, Nordstrom plans to open the following stores in Canada: Canadian flagship store in Vancouver 2015; Toronto, ON, Canada (Toronto Eaton Centre, Yorkdale Centre) 2016; Toronto, ON, Canada (Sherway Gardens) 2017. 1.8 Short-Term Objectives and Action Plans Short-term objectives are the current activities an entity implements in order to achieve their long-term objectives. Short-term objectives generally represents an activity or project that can be completed within a year or less. Objectives must be measurable and have a time frame to be completed. Nordstrom plans on expanding and maintaining customers by meeting their needs with excellent customer service. As Blake Nordstrom stated in an earnings call in 2015, “Our customer strategy is guided by customer expectations around speed, convenience, and personalization” (Seeking Alpha, 2015). In light of this initiative, Nordstrom Racks are offering
  13. 13. 12 | P a g e 47 out of the 50 brands offered in full line stores including store exclusive brands. Nordstrom has also acquired HauteLook.com in order to expand in ecommerce, creating more ways for customers to shop in store and online. Specific, measurable objective plans are the company’s plans to expand through the openings of its most iconic, Nordstrom retail stores. Nordstrom plans on opening 19 full-line stores within 2016. The locations of these new full-line stores will include: Arizona, Colorado, Florida, Hawaii, Louisiana, Minnesota, New Mexico, New York, Texas, Utah, Virginia, as well as three store openings in the state of California. The final two openings will cross-borders, with grand openings in Canada. 1.9 Functional Tactics Functional tactics are used to achieve short-term objectives. These tactics give Nordstrom a unique advantage over their competitors in areas such as financial needs, operational improvements, research and development, marketing, and human resources. Figure 1.9 : Functional Tactics Financial  Nordstrom will spend a 15% of its capital expenditure on expanding in ecommerce and technology, about $375 million (Brohan, 2011).  Expansion on Nordstrom Racks have proved to be more profitable per square foot than full line stores. These store generate $553 in revenue compared to $372 per square foot in full line stores. Plan to have 230 Nordstrom Racks by 2016 (Bailey, 2015).  Nordstrom have their own credit union for store credit cards. This creates a more personalized relationship for customer financing. Operations and Sustainability  Stores have cut down on energy use by using LED lights with HVAC systems that remotely control when lighting is needed.  Decreasing water usage include a normal toilet flow and waterless urinals.  Truck drivers use compressed natural gas when they can and are given rewards for improving mileage.
  14. 14. 13 | P a g e  Teamed up with Forterra to offset 50% of their carbon emissions by planting and maintaining tree restoration sites in Tacoma, Seattle, and Everett. (Sustainable Apparel Coalition, 2015)  All bags and boxes can be recycled.  Shopping bags are made of 25% of recycled material  30% of catalogs are made up of post-consumer waste content.  Receipts are also made from recycled material, however, the percentage of this varies on how much recycled resources are available (Nordstrom, 2015).  Participate in organic recycling programs. Technology such as computers and printers are also involved in a recycling program. Marketing  Nordstrom communicates their products and services through subscribed emails, flyers, and radio advertisements.  To have a competitive advantage, free shipping and free returns are offered for customers.  Outside of apparel, stores offer spa services and restaurants. This creates a more relaxing environment for customers to take a shopping break. Human Resources  Nordstrom offers internships in retail management, merchandising and planning, fashion, technology, and general headquarters internship  The company offers an MBA internship as well  900 interns are in the retail management internship alone  ”Open Door Policy” allows employees to express their concerns with management. The company highly values honesty. Research and Development  Nordstrom is looking into more ways to be sustainable.  In 2014 the U.S. Environmental Protection Agency awarded Nordstrom with a SmartWay Excellence award for their innovative ways of cutting down cost on mileage.  One-third of new customers come from online, which is why the company emphasizes on expanding in technology and ecommerce.
  15. 15. 14 | P a g e 1.10 Strategy Execution Policies The most noteworthy policy for strategy execution is product exposure and customer service. At each boardroom meeting every strategy challenge and opportunity is discussed and thus improved or replaced, this has allowed Nordstrom to have an adaptable and highly effective management tool for environmental changes. The newest strategy execution regards their omnichannel strategy, which allows online orders and alterations to be delivered from the store to the consumer’s doorstep known as ‘curbside pickup’ it is being implemented in its 20 flagship stores. What separates Nordstrom from competitions regarding omnipresent channels is its inventory visibility where customers can view the entire inventory online, where's it's located in the store and its availability (Popovec, 2014). 1.11 Executive Bonus Compensation Plans Key executive compensation is distributed to Michael Koppel, the Vice President and CFO, Erik Nordstrom the Executive Vice President and president of the online retail website, Peter Nordstrom the executive Vice President and president of merchandising, Blake Nordstrom the president, and ken Worzel the executive Vice President of strategy and development. Total compensation in 2014 was $20,194,158. 17% of compensation was through salary, 23% through restricted stock awards, 18% through security options, 22% through non-equity compensation (rewards through inventive plans), and an additional 10% in other compensations (Morningstar, 2015).
  16. 16. 15 | P a g e 1.12 Organizational Structure, Culture, and Leadership 1.12.1 Organizational Structure, Culture, and Leadership: Organizational Structure Overview: “Use good judgment in all situations”  Inverted organizational pyramid – Customers on top and executive team on bottom.  Employee Characteristics –Entrepreneurial spirit,persistence,passionforbusinessandfashion, create and maintainstrongrelationships.  Company Values  Ethics, Social Responsibility, Community giving, environment and human rights (The CareerBliss Team, 2012). 1.12.2 Organizational Structure, Culture, and Leadership: Culture and Leadership Thanks to the family’s leadership and people-first mentality, the company has maintained a “very family feeling” culture. Eighty-four percent say there is a team or family feeling throughout the organization (Nordstrom Cares, 2013). Nordstrom encourages people to be themselves and are empathetic towards customers’ needs and requests. By putting the customer first, they have changed the way retailers do business. Nordstrom is a company that is built on the idea of providing the best customer service possible while also providing an upscale environment to purchase high quality upscale products. With specific focus on creating and managing organizational cultures, Nordstrom has become very effective in creating a successful company that has developed powerful cultural norms from both its terminal and instrumental values which support its mission, “one goal: make the customer feel good” (Nordstrom, 2015). Nordstrom describes that they strive to work hard every
  17. 17. 16 | P a g e day in order to make the customer feel good about the shopping experience. They have also been very successful in implementing this value with their employees and creating the norm of providing friendly, caring, high-quality customer service. There have been many examples to prove their success in how their values have influenced the behavior of their employees to rise above and beyond what it means to provide great customer service. New.edu and educational website that outlines corporate management examples for learning purposes provides great examples of times Nordstrom has truly lived up to making the customer feel good. One example is from 1975 when the company had bought out an old tire shop to develop a new Nordstrom store. One day an elderly couple had come into the Nordstrom not realizing that the tire store was no longer there to return a set of tires they had purchased when the location was still a tire shop. Without hesitation the store accepted the tires and refunded the elderly couple. Values and norms of culture are a learned concept, Nordstrom works very hard to create an environment where its employees represent the overall values of the organization. They start this in their socialization process of employees and have been very successful in the programs and systems set up to have great employees. Form the very start, Nordstrom only hires people that they believe to possess the qualities and characteristics they are looking for. With a high standard for who they hire they focus on hiring the best people they can by requiring previous customer service and retail experience. They do this by training management in behavioral interviewing techniques, this creates interviews that give them an understanding of a person’s character and demeanor. Nordstrom as a whole also places high value on its employees and wants to build strong lasting relationships with the people they hire. They do this by promoting from within, and offering rewards for outstanding work. This creates an environment
  18. 18. 17 | P a g e of people that want and care to be there and participate in the organization because Nordstrom makes its employees feel welcome and desired. Nordstrom has been effective in promoting its values of high quality customer service and taking care if its employees by being well known for its continuous mentoring programs. Management mentors.com describes Nordstrom’s two most well know programs, Nordstrom’s future leaders and the new manager development program, as superior and excellent for employees because of their preference for examples and lessons over formal training. Nordstrom has also been able to reiterate to its employees its value on customer service and its openness for communication between employees and management with its programs that send senior level management around the country to speak with and inspire its employees. These seminars provide open communication for employees to voice their concerns as well as to continue to establish the culture and values of the organization in order to reinforce Nordstrom’s organizational norms. Nordstrom has also been successful in its efforts towards its corporate social responsibility with its stance describes on their webpage Nordstrom-cares.com as “leave it better than we found it.” On their website is also provides links to news articles that highlight their actions, for example, by participating in the EPA’s SmartWay smart transport partnership. With this they have been able to identify and lessen their environmental impacts when moving and shipping. As a result of the empowering culture that Nordstrom has created, they have also created an environment that would seem to attract and encourage entrepreneurs. Nordstrom offers good wages to their employees with incentives that increase compensation. Nordstrom also encourages internal career growth by offering extensive training and support to their staff. They adopt an “each one teach one” philosophy where everyone is responsible for training and supporting each
  19. 19. 18 | P a g e other as much as the company is. Nordstrom supports professional development with programs like Nordstrom Future Leaders and the New Manager Development Program, both of which rest on the shoulders of everyone to be mentors and to help with coaching (Lyman, 2009). Employees are also encouraged to have an entrepreneurial spirit to help customers and to maintain a customer focused strategy. Employees are expected to try new sales techniques and new approaches to help customers. This comes from the only rule that Nordstrom has which is to “use good judgment in all situations”, which is written in their famous employee handbook that really is just a card that has 75 words on it (Stansberry, 2011). Nordstrom has not changed its key values or culture for much of their existence; they believe in customer first and employee empowerment. As stated, Nordstrom has been around for quite some time, over a hundred years in fact, yet little has changed in the way they have chosen to do business. For most of the company’s existence, Nordstrom has stayed within the control of the Nordstrom family who established the culture of the company. However, in the 90’s Nordstrom began to decline in sales. In response to the declining sales, they had to change their business from a formal apparel location to something more fashion conscious in order to become more affordable for their target market. They switched their focus to following fashion trends and embraced web-based retail as well. The control of Nordstrom has only recently left the hands of the family but their influence and values are still prevailing. Nordstrom focuses on the customer's’ experience from start to finish and are aware that this is one of their strengths. However this requires a total employee and management buy-in for it to succeed. Nordstrom does this by empowering their employees so that they can provide the best possible customer service that they can. They have
  20. 20. 19 | P a g e focused on this for so long and that it is so ingrained into their culture. This creates loyal customers and ensures that they remain a major name in the retail industry. Beginning in the 60’s, when the company made the decision to expand their product offerings, innovation has always been one of the company’s prevalent traits. Key innovation for Nordstrom can be seen in the company's focus on the customer’s experience and the empowerment of their employees. It can be concluded then, that innovation has helped the company to expand and grow over the years, making it a trustworthy company that understands both their employees and customers. 1.13 Strategic Control Nordstrom uses many different types of strategic and operational control systems. Strategic control systems that the firm uses include: employee surveys and systems that deliver industry analysis (premise control), loss prevention cameras as well as systems that monitor customer spending/credit card fraud (strategic surveillance), and employee and customer surveys to assess the effectiveness of the company’s overall strategic control systems. There are no known special alert control systems that Nordstrom uses at this time. Operational control systems include: the POS systems used within all full line and rack stores, as well as micro strategy reports generated on each quarter’s sales by store and by department (Timberlake, 2011). 1.14 Entrepreneurship and Innovation Individuals should have clear understanding of the difference between invention and innovation.
  21. 21. 20 | P a g e Invention – With the combination of existing and new knowledge new products and processes are created. Innovation – taking ideas and commercializing into a profitable source; after production product, services or processes are sold. Incremental innovation – “fine tuning” existing products, services or processes. Change and making adjustments. Less risky in comparison to breakthrough innovation. Breakthrough innovation – enforces drastic change on product, services or process. Dramatically increasing efficiency/ performance associated and greatly impacts costs associated with it. Entrepreneurship – “process of bringing together creative and innovative ideas and actions with the management and organizational skills necessary to mobilize the appropriate people, money and operating resources to meet an identifiable need and create wealth in the process” (Pearce & Robinson, 2015). Nordstrom’s primary focus is its customers; “understanding their needs, interests, and expectations. Strives to meet customer expectations and demands through all internal process and individuals involved in meeting customer needs; from the people at the front check out to the people behind the scenes designing, creating and implementing customer experiences. Late 1990s began focusing on technology that would further empower employees and increase accessibility and consistency of services and products offered to customers. By 2002 innovations included up and running website, Nordstrom.com and a perpetual inventory system. From 2004 to 2014 Nordstrom made various breakthrough innovations. Various investments were made, all focused around the customer experience. New POS system, personal book software, enabling salespeople to track individual needs and requests online.
  22. 22. 21 | P a g e Quickly after new POS system, Nordstrom innovation lab was established. Technology lab is comprised of various types of individuals; techies, designers, entrepreneurs, statisticians, researchers, and artists all collaborating to find and implement innovations in all aspects of Nordstrom; from operations, business model, products, technology and management. Created many new channels that are tightly integrated. Nordstrom apps, merging accessibility with other apps (primarily social apps), mobile check out enabling salespeople to text and cloud based clothing services. Successful opt-in only application, customers can enter their preferences in app and when they enter a store these preferences, as well as online purchase histories, are pushed to salespeople, expediting their shopping experience. All innovations are connected enabling the sales people to monitor individual customers from beginning to end, ensuring they have the best experience and exact demands are met (van Rijmenam, 2015) In comparison to other retailers, Nordstrom is very good at identifying and taking digital technologies that will best serve their purpose while also maintaining easy accessibility and simplicity for the customer. Recently reported to be downsizing innovative lab and really encouraging all employees to share innovative idea (Duryee, 2015). I believe this could be because the success they have experienced with the lab in recent years, not as many people are still required in the process, enabling employees to branch out to other tasks.
  23. 23. 22 | P a g e Section 2: Identification of Key Strategic Issues and Problems Key Strategic Issues and Problems Identified 1. Ecommerce is becoming a high demand, Nordstrom is meeting those demands; but is it in the company's best interest to continue expanding and doubling their chain of stores when culturally it is becoming more common and preferable to do shopping online. 2. Considering the millennial generation, how can Nordstrom’s position themselves more prominently to be desirable to the evolution of tastes and preferences of individuals in this demographic. 3. While retail companies usually face the challenge of a relatively high employee turn-around, steps to improve the internal retention rate should be taken to ensure the optimal customer service Nordstrom is known for.
  24. 24. 23 | P a g e Section 3: Analysis and Evaluation 3.1 External Environment Analysis The external environment consists of factors beyond the control of the firm. Nordstrom needs to be aware and understand these factors in extensive detail in order to make smart business decisions to continue to increase profitability. The external environment factors include the remote environment, industry environment, and operating environment. 3.1.1 External Environment Analysis: Remote Environment For our external environment analysis we will first analyze the remote environment and how it relevantly relates to Nordstrom. The remote environment is the “economic, social, political, technological and ecological factors that originate beyond, and usually irrespective of, any single firm’s operation situation” (Pearce & Robinson, 2015). Figure 3.1.1: Remote Environment Economic Social Political Technological Ecological  Since 2010 the unemployment rate in the US has been on a steady decline and has reached as low as 5.5% in recent months.  Since 2009 the unemployment rate in Canada has been on a steady decline and now plateauing at 6.8%.  As unemployment continues to decrease disposable  Changes in fashion preference (attitude & opinions)  Divorce rate  People are choosing to not have children or to wait longer to have children  Mot getting married (shifts in lifestyle)  Baby boomers  Use of social media   Tax  War  Pollution  Government injection  Changes in minimum wage requirement  Staggering increase use of smart phones/mobile devises  Advancements in Customer Relationship Management through systems 1. Less stock-out  Innovation of renewable/alte rnative energy  Global warming  Resource allocation  Increased expectation to be sustainable (green)  Urbanization
  25. 25. 24 | P a g e income becomes more prevalent  Availability of credit 3.1.2 External Environment Analysis: Industry Environment Next we will analyze the industry environment and how it pertains to the department store industry. The industry environment is “the general conditions for competition that influence all businesses that provide similar products and services” (Pearce & Robinson, 2015). We will be using Michael Porter’s Five Forces model for this analysis and determine the strength of each force as it pertains to industry rivals, new entrants, substitutes, buyers and suppliers. One thing to keep in mind as we analyze the department store industry environment is how the market continues to expand outside of department stores and into the online retailer market. With that said, figure 3.1.2A illustrates that the threat of new entrants is a strong force. This may not have been the case in the last 5 years but with the increased opportunity of entrance into the market through the internet this force has gained strength over the years and will continue to do so.
  26. 26. 25 | P a g e Figure 3.1.2A: Porter’s Five Forces Model Industry Rival | Strong Force New Entrants | Strong Force Substitutes | Strong Force Buyer Power | Strong Force Supplier Power | Weak Force  Dillard’s  Macy’s  Nieman Marcus  Barneys Warehouse  Kohl’s  Mr.Porter.com  H&M  Hudson’s Bay (Canada) o Saks Fifth Avenue  Popularity of online retailers  Ease of access for online retailers  Millennial’s interest  Local business  Economies of scale  Discount department stores  Drug stores  Shoe stores  Jewelry stores  Make up/beauty supply stores  Clothing and accessory boutiques  Online stores – i.e. etsy.com, zappos.com  Accessory/hand bag/hat stores  Children’s clothing retailers``  Company competition – price comparisons  Customer service  Promotional efforts  Product – quality, variety  Merchandise o Clothing o Shoes o Makeup o Accessories o Furniture o Kitchen appliances/ necessities o Kids and baby clothes/necessi ties o Shoes o Beauty – women/men  Utilities o Water o Gas o Electric o Trash/ recycling  Legal services  Maintenance  Building/land  Shipping trucks  Employees New Entrants Buyers Substitutes SuppliersIndustry Rivals
  27. 27. 26 | P a g e  Equipment o Racks o Hangers o Shipping packaging o POS work stations o Office supplies  Technology o Computers o Internet o Software Figure 3.1.2B: Department Store Industry Boundaries of the industry  Technology continues to shape the industry at a rapid pace  Perceptions of the consumer  Competitive environment Structure of the industry  Traditional department stores (locally owned)  National chain department stores (Nordstrom)  Full-line discount department stores (Walmart) (Cronin & Kelley, 2014) Competitors Direct  Hudson’s Bay/Saks Fifth Avenue (Canada)  Macy’s  Dillard’s  Neiman Marcus  Upscale online retailers Indirect  Kohl’s  Target  Walmart  Marshals  Ross  Online retailers (amazon.com, etsy.com) Major Determinates of Competition  Quality  Price  Variety  Customer service  Location  Online capacity/capability 3.1.3 External Environment Analysis: Operating Environment Lastly, we will analyze the operating environment of Nordstrom. There are five factors to consider when addressing the operating environment; 1. Competitive position, 2. Customer profiles, 3. Suppliers, 4. Creditors, and 5. Human resources. These factors are more controllable in nature compared to the remote environment. This is a benefit for Nordstrom, or any firms conducting this analysis, because this enables Nordstrom to be more proactive rather than
  28. 28. 27 | P a g e reactive when it comes to address factors that can improve market share and increase profitability (Pearce & Robinson, 2015). Competitive Position Competitive position is fairly strong for Nordstrom, shown by the increase in revenue of 7.8% from 2013 to 2014 (Nordstrom, Inc., 2014). They continue to steadily increase their revenue over time which continues to keep them competitive in their market. Location and age of facility Nordstrom has a total of 323 stores throughout the US and recently expanded internationally by opening stores in Canada. Considering the breadth of their locations they are able to reach a large share of the market. They plan to continuously expand. In 2014 alone they opened 27 Nordstrom Rack stores and plan to open a total of 300 Nordstrom Rack stores by 2020. Figure 3.1.3A: Competitive Position – Locations  121 full-line stores | US and Canada  194 Nordstrom Rack locations | Off-price fashion store  Trunk Club Clubhouses | Men’s fashion retailer  2 Jeffery Boutiques  1 Clearance store  Capability to serve customers in 96 counties through Nordstrom.com Advertising and promotion effectiveness Nordstrom does not have a prominent advertising and promotional strategy as far as traditional promotion channels (i.e. TV and radio). Much of their advertising is accomplished through “internet, magazines, store events and other media” (Nordstrom, Inc., 2014). They do, however, create and are known for their outstanding customer service and customer oriented approach when it comes to making their customers happy and increasing the amount of return customers by doing so. They focus on customer service as their number one priority but
  29. 29. 28 | P a g e they could benefit from extending their promotional activities to reach different market segments, such as millennials. Caliber of personnel Nordstrom strives to hire the best, qualified employees. Nordstrom’s employees are ultimately the ones who carry out and create the best customer service experience for their customers but they have to be willing and know how to do that. According to Frobes.com writer Micah Solomon (2014) they do that in two ways; 1. Empowering their employees and 2. Providing their employees with high standards to follow to create the optimum customer experience. Nordstrom expects their employees to use their best judgement in situations with customers and to do that Nordstrom knows they must empower their employees to make those decisions. This creates trust and respect between the employee and the company and enhances the opportunity for the employee to do their job the best they can. Employees cannot be expected to do everything right, according to Nordstrom’s standards, which is why employees are given a set of guidelines and standards that are clear and precise on how a Nordstrom customer should be treated. These two initiative together, empowerment and standards, are the recipe for success in Nordstrom customer service success. Customer profiles Nordstrom is typically thought of as an upscale, pricey department store. They continue to modify this perception and do so by their Nordstrom Rack stores (off-price/discount) and the launch of Nordstromrack.com and additional acquisitions such as HauteLook.com (men, woman and kids apparel) and Trunk Club (men’s apparel).
  30. 30. 29 | P a g e Suppliers Nordstrom has strong relationships with their suppliers through clear communication and well we-define supplier guidelines, policies and expectations through their Supplier Compliance document. Nordstrom prides themselves on these good relationships and must keep them positive in order to maintain exceptional product at a reasonable price. A way Nordstrom creates differentiation in regards to their suppliers is through a Supplier Diversity program. This program was launched in 1989 and is Nordstrom’s way of establishing progressive relationships with diverse-owned businesses. Through this program Nordstrom enlists vendors to provide merchandise, supplies and services through all parts of the company. This program was created to provide opportunity to these diverse-owned businesses while encouraging economic growth of the communities they serve (Nordstrom Inc., 2015). Creditors Nordstrom’s relationship with their creditors is positive since their net sales continue to increase year over year with a 7.8% increase since 2013. However, they did have a slight decrease in the earnings before interest and income taxes (EBIT) by 2% since 2013. Before 2014 Nordstrom’s EBIT had continued to increase slightly since 2010 (Nordstrom, Inc., 2014). The decrease in 2014 should not be something to be overly concerned about but should be followed to make sure trends do not start falling in a negative direction. Human Resources According to the Nordstrom 2014 Annual Report, they had approximately 67,000 full- time and part-time employees. This number fluctuates between 68,000 – 73,500 depending on seasonality in the months of July and December, respectively (Nordstrom, Inc., 2014). These
  31. 31. 30 | P a g e numbers are considerably higher than 2013 whereas they has 62,500 full-time and part-time employees and ranged from 64,500 – 66,000 in their busier months (Nordstrom, Inc., 2013). It would suggest that the increase in employment rate correlates with the number of stores Nordstrom opened in 2013 – 2014. It also suggests that there is a positive correlation between the increase in the number of employees and the reputation of the company. Nordstrom is a well-known brand and because of that is able to leverage their brand equity while searching for favorably qualified employees for the company. Nordstrom’s employees are all non-union and they believe their relationship with their employees are good (Nordstrom, Inc., 2014). 3.2 Internal Environment Analysis 3.2.1 Internal Environment Analysis: Resource-Based View The resource-based view is “a method of analyzing and identifying a firm’s strategic advantages based on examining its distinct combination of assets, skills, capabilities and intangibles as an organization” (Pearce & Robinson, 2015) In Figure 3.2.1 we will examine the tangible and intangible assets and determine how Nordstrom has turned those into organizational capabilities. Figure 3.2.1: Resource-Based View Tangible Assets  Real estate o Property plant/equipment o Brick and mortar retail locations  Equipment  Inventory  Employees  Online presence with a variety of acquired online retailers  Cash and cash equivalents equal $827 million in 2014 (Nordstrom, Inc., 2014)
  32. 32. 31 | P a g e Intangible Assets  Outstanding customer service  Culture  Positive brand equity  Organizational morale  Business methodologies  100% non-union employees  Positive relationships with suppliers Organizational Capabilities  Nordstrom is continuing to leverage their online market with Nordstromrack.com, Trunk Club and HauteLook. These channels continue to reach a younger demographic compared to their full-line stores. This is the market in which Nordstrom should be concentrating on to maintain positive growth rates in market share and increases in net sales.  Through their rewards program they offer store credit cards. The Nordstrom private label card can be used at any Nordstrom location or online entity, such as Nordstromrack.com. They also offer two Nordstrom Visa® credit cards and debit card which can be used for Nordstrom purchases. Attached to these credit cards is a loyalty program in which their customer accrue points based on the amount they spend. (Nordstrom, Inc., 2014)  Nordstrom also has a unique relationship and recruits suppliers through their Supplier Diversity Program. This provides Nordstrom with a competitive advantage in the market to have unique inventory/merchandise and to ensure they are providing additional opportunity to diverse-owned business. 3.2.2 Internal Environment Analysis: Value Chain Analysis Figure 3.2.1: Value Chain Analysis Inputs Conversion  Raw Materials (clothing, Shoes, Accessories and other inventory)  Human Resources (sales staff, managers, online sales staff, shipping and receiving personal)  Money and Capital (Shareholder investments)  Customers  Processes (customers service and sales)  Systems (cash registers, online ordering systems, and inventory management systems)  Human Skills and Abilities (sales staff and customer service)
  33. 33. 32 | P a g e Environment Outputs  Satisfied Customers  Potential Customers  Suppliers of Apparel  Greater Population pool to choose from for employees  Competitors (Macy’s, JCPenney, TJ Maxx, Marshall's, Dillards)  Quality Apparel  Great Reputation  Satisfied Customers  Satisfied Employees  Satisfied Shareholders 3.2.3 Internal Environment Analysis: Current vs. Past Performance The company has shown signs of decline. In the early 1990’s Nordstrom struggled to appeal to a wide range of consumers and in an effort to change their brand and include a younger crowd they were unsuccessful. They ended up just alienating the older generations which had been a loyal customer base for many years. To fix this management abandoned the new ‘redefine yourself” campaign that was aimed to include 20 something year olds to shop at a store that was viewed as too formal and too expensive. Nordstrom had also seen a decline during this time period because of their lack to adjust to new and useful technology. They had always been behind when it came to internet literacy and sales but they also used an archaic POS system, they were unable to inspire quick change among all branches because of the co presidency that was established in the early 1990’s. This Co-presidency made it nearly impossible for effective and efficient communication to be spread as a result it took Nordstrom entirely too long to update the POS system to something that was beneficial to the company. To combat these inefficiencies management split up the co- presidency and re networked and upgraded technology company wide. Nordstrom has been fairly consistent, unlike many others in the same market, with their overall strategy over time. Nordstrom seems to take the approach that if it is working, and working well, why change things. This is evident in that their overall philosophy on which the
  34. 34. 33 | P a g e entire organization is built upon is provide excellent customer service. It is really as simple as that, and it works for them. The decision-making model that best characterizes the way Nordstrom makes decisions is defined by the “Rational Model,” Figure 3.2.3. Being one of the most simple of the models it makes sense that this is the model most utilized by Nordstrom. It goes along with their general philosophy of picking a general core competency, excellent customer service, and do it really well. It’s really the reason people like to shop at Nordstrom - the excellent shopping experience. 3.2.4 Internal Environment Analysis: Nordstrom’s Resource Competencies vs. Competitors Similar to Nordstrom competitors and quite frankly any entity that wants to compete, Nordstrom has adapted and utilized available technologies in day to day business operations. Technological resources that once gave competitive advantage to the organizations with the latest and greatest no longer have the same impact. In previous years, specifically from the 1990s to 2014 Nordstrom has been an industry leader due to innovative breakthroughs combined with a series of investments. Many of Nordstrom’s competitors have trailed behind mimicking their actions. Most recent years unveiled Nordstrom’s key resource competencies enabling the organization to prevail over its competitors. In its continuous process of establishing new channels the organization has maintained complete integration through all channels. Regardless of changes required for ongoing success; Nordstrom continuously ensures employees are further empowered. Easy and immediate accessibility to resources has allowed employees to better serve Figure 3.2.3: Rational Model
  35. 35. 34 | P a g e customers. Nordstrom has integrated all scopes of operations so well it is difficult to copy, thus creating an intangible asset. Ultimately establishing a resource competency competitors are unable to compete with. 3.2.5 Internal Environment Analysis: Analysis of Industry Success Determinants Figure 3.2.5: Industry Success Determinants Threats of new entrants  Threat is low in terms of brick and mortar.  Nordstrom has exclusive products, it would be very difficult for new entrants to establish exclusive licensing power.  Retailers have already established long term relations with suppliers. Threats of substitute products  Retailers that offer products at cheaper prices or “knock off brands”  Increase preference in online shopping  Consumer chooses to buy from designer store rather than Nordstrom. Bargaining power of consumers and suppliers  Consumer power is moderate, because Nordstrom is known for providing great customer service consumers are willing to pay more for desired product(s).  Ongoing shit into e commerce will continue creating more consumer power.  Nordstrom also matches price with competitors.  Supplier power is moderate, because of the limited specialty retailers in the market.  It is necessary to have certain products in stores which allows suppliers to have some negotiating power. Company long term objectives  Providing superior customer service, going above and beyond what competitors do.  Selling designer clothing at fair and reasonable prices.  Continues to remain the focus point regardless of internal and external factors. Technological advantage  All new processes add to the value chain, focused around the employees satisfying customer needs and customers easily accessing inventory whenever needed.  Free shipping and returns  Mobile shopping apps, providing real time inventory information.
  36. 36. 35 | P a g e  24/7 access to Nordstrom.com Customer Loyalty  Has established an image over the years. -Customers know the quality of products, the service provided and the ease in the overall shopping environment. 3.2.6 Internal Environment Analysis: Financial Health Analysis Figure 3.2.6: Financial Health Analysis Ratios and Working Capital 2010 2011 2012 2013 2014 Interpretation Liquidity: Current 2.57 2.16 2.82 1.01 1.87 The company has become less operationally liquid and more leveraged in operations. Quick 2.05 1.71 1.67 1.45 1.25 From the data we see the company has become less liquid over time minus inventory. Leverage: Debt- assets .37 .43 .39 .36 .34 Reveals the ratio of total debt to total assets, another liquidity ratio. Assets are 66% greater than assets. Debt-equity 1.38 1.86 1.64 1.5 1.28 Debt is the predominant source of financing for the company. Activity: Asset turnover 1.41 1.38 1.36 1.47 1.51 The company turns over assets 1 ½ times last year. Relatively more efficiently last year. Fixed asset ratio: Inventory turnover 4.67 5.07 5.37 5.56 5.56 The company turned over total inventory 5.56 times last year. Becoming more efficient over the years. Accounts receivable turnover 4.34 4.78 5.36 5.84 5.82 The company turned over AR 5.82 times last year. There is a trend increasing the ability for the company to fulfill AR. Average collection period 84.13 76.41 68.10 62.53 62.67 Average collection tool 62.67 days last year, overall decreasing from past four years. It has been greatly reduced within four years. Profitability: ROI 13.48 15.46 14.65 15.67 16.28 Last year investment returned 16.28%
  37. 37. 36 | P a g e ROE 31.70 34.12 34.35 37.99 36.76 Last equity financing returned 36.76%. A trend in the increase of return is noted. 3.3 SWOT Analysis Figure 3.3: SWOT Analysis Strengths Weaknesses  Brand equity  Typical customer base is moderately affluent  Good penetration in the market through multiple online channels  Product portfolio  Outstanding customer service  Current has over 300 stores (including Nordstrom Rack and full- line stores) o Nordstrom.com, Nordstromrack.com, HauteLook, Jeffrey Boutiques and Trunk Club (Weishaar)  Strong management  Digitally savvy o Providing customers with a strong mobile platform to shop and buy and continuance of providing customers with new features faster  Ability to expand internationally into Canada  Perceived to be for more affluent target markets  Nordstrom Rack, a lower cost alternative, could compromise Nordstrom’s bran equity  Perceived as outdated  Does not appeal to the millennial generation  High turnover for their frontline employees Opportunities Threats  Increases in minimum wage requirements  Financial leverage  New products  International emerging markets  Increased marketing efforts  Consumer are more willing to spend with the increase of disposable income  Social media usage and interaction  Smartphone/Mobile development  New entrants  Decreased need for brick and mortar locations  Security threats on firm’s systems and customer information  Existing competitors  Shifting customer preferences  Social media interaction of customers
  38. 38. 37 | P a g e 3.4 Mission Statement Analysis Given our internal and external analysis, we believe Nordstrom’s mission is appropriate. Their mission is “to provide outstanding service, one customer at a time.” Internal Nordstrom’s customer service is perfectly aligned with their mission. They have a reputation for their amazing customer service. They offer free shipping, free returns, in store amenities, one-to-one service and are accessible no matter where their customers are with their up-to-date apps and online presence. They recruit heavily through innovative means such as social media and are focused on keeping with trends and hiring tech first people. External Nordstrom’s focus on customer service allows them to have customer intimacy; to be close enough to their customers to understand how to meet their needs as trends change. They are able to stay up to date with social, political, and technological trends and in doing so give better customer service. 3.5 Generic Strategy Analysis Nordstrom uses their goal to be the best at customer service in the fashion retailer’s market as their generic strategy. They focus on customer satisfaction. This strategy allows them to differentiate themselves, use cost leadership and rapid response to grow profits.
  39. 39. 38 | P a g e Differentiation Nordstrom differentiates itself by offering superior customer satisfaction. In order to offer a high level of service to their customers, Nordstrom has taken an initiative to create a company culture that is employee driven. This focus on the front lines allows them to offer superior services. This year Nordstrom was listed in Forbes Top One Hundred places to work. Companies that landed on Forbes’ list of top one hundred places to work saw profits increase on average of 22.2% (Bio, 2014). Through the empowerment of their employees to create their own clientele and rewarding them for it, Nordstrom has created an entrepreneurial culture and has seen profits rise because of it (Son, 2015). This profitable retail environment that Nordstrom has created comes from their unique recruitment strategy. Outstanding service comes from company culture and outstanding employees. Nordstrom uses social media techniques to market to potential employees keeping corporate brand identity top of mind and due to their understanding that e-commerce is important; they started marketing directly to tech talent (Bevegni, 2015). This helped lead to Internet sales at Nordstrom.com accruing one third of their net sales growth. In addition to offering their customers excellent customer service through free shipping free returns, and unlimited return policy Nordstrom has in store amenities and offers one to one service. Cost Leadership Nordstrom‘s size allows them to have competitive prices. They order larger quantities of product, which allows them to pay lesser amounts than smaller companies. This economy of
  40. 40. 39 | P a g e scale allows Nordstrom to be competitive through their cost leadership and makes it harder for potential competitors to enter the market. In addition to lower cost due to their margins they also offer price matching to the consumer. The introduction of Nordstrom Rack has allowed them to offer lower prices on select items and target different and younger demographics. Rapid Response As stated previous, Nordstrom markets directly to tech focused potential employees in order stay competitive through technology. The emphasis that Nordstrom puts on being at the forefront of online sales and their customer service allow them to have high rapid response rates. Their technological presence allows them to receive and ship customers’ orders efficiently. Their customer service allows them to be very responsive to their customer’s needs and trends. Market Focus Nordstrom focuses on their target demographics but not on a particular niche. Their size allows them the luxury of having a larger market to sell to. 3.6 Long-term Objectives Analysis Long-Term Objectives Now we will review Nordstrom’s long-term objectives and summarize each in figure 3.6: 1. Technological 2. Profitability 3. National Expansion 4. International Expansion
  41. 41. 40 | P a g e Figure 3.6: Long-term Objectives Technological Leadership Nordstrom looks to improve their customer experience through the use of new technology. Currently, Nordstrom uses their online store, mobile app, and location based technological features in order to drive sales (Tierney, 2015). This objective possesses many qualities to be successful. It is flexible given the new and different technologies they have introduced. Improvements in technology can be small or large and this scale allows them to be either and still be positive. It is measurable. By looking at the sales numbers and how they correlate directly to sales from the website, app or any other new technology, it is easy to measure the effectiveness of the new technology. E-commerce accounts for 19% of Nordstrom’s total sales (Brohan, E-commerce for Nordstrom accounts for 19% of total sales: Internet Retailer, 2015). Since the driver behind this objective is to enhance the customer experience, it suits the company’s mission. It is easy to understand and easy to motivate employees to reach this objective, especially, because Nordstrom employs tech specific people. Profitability Nordstrom has a goal of $20 billion by 2020 (Tierney, 2015). This objective is measurable and generally has some flexibility. Although Nordstrom has increased profits every year ($9.7 billion and in 2011 and $13.51 billion in 2015) is expanding nationally and internationally, this objective is still high. It is easy to understand this objective and it suits the company’s mission. Given how employee driven Nordstrom is, their creative incentive programs should still motivate their employees to reach this objective. National expansion Nordstrom plans on opening twenty-four stores by 2018. This objective is understandable, suitable and carries the characteristic to motivate in regards to new employees. One example of a store opening in the US shows Nordstrom’s objective to social responsibility. Before it opens its doors, the store will host a gala to benefit Ronald McDonald House Charities and the United Way (Gores, 2015). International Expansion Nordstrom plans to open six new stores and introduce Nordstrom Rack in Canada by 2017. This objective gives measurable numbers, is easy to understand and suits the company’s mission. It also allows the company to follow their objective of employee development. Although these stores are in a new country it is still key to follow the company’s standard of excellent employee engagement. 3.7 Grand Strategy Analysis Nordstrom’s main grand strategies include Market Development, Concentric diversification, Product development, and Strategic Alliances.
  42. 42. 41 | P a g e Figure 3.7: Grand Strategy Market Development Nordstrom has expanded internationally into Canada, planning to have 6 locations by Spring of 2017. Each location will be opened roughly six months apart from each other. This is done intentionally so that the company can learn about the Canadian market and fine-tune their approach. Nordstrom has also acquired multiple online retailers in order to expand their market share on different channels. Nordstrom Rack locations are expanding in the United States in order to attract millennials. Concentric Diversification Nordstrom has invested heavily in e-commerce by acquiring online retailers. Bonobos, Shoefitr, Trunk Club, and HauteLook have been purchased by Nordstrom so that the company can have more channels for customers to shop. Product Development Nordstrom has new styles and products seasonally. Offering customers new clothes as soon as new styles are developed. The new styles are high quality, making it difficult for substitutes to compete. Innovation Nordstrom is coming up coming up with new ways for customers to shop online, in-store, or a combination of the two. This includes new user-friendly ways to shop online as well as ways to shop in-store more efficiently. Nordstrom is trying smart fitting rooms, which is a digital way to shop in the dressing room. Designers are constantly coming up with new products and styles for customers of Nordstrom (Wahba, 2015). Vertical Integration Nordstrom is opening up its third distribution center in Pennsylvania. The goal is to make online order deliveries faster. Instead of relying on typical mail carriers such as FedEx or UPS, Nordstrom has decided to take the delivery process into their own hands. (Wahba, 2014) Horizontal Integration Recycling programs and energy saving programs are expanding regionally in order to meet the company's sustainability goals, as well as saving costs productively. (Corporate Social Responsibility Report, 2014) Strategic Alliances Certain brands are only offered at Nordstrom. This gives the company a competitive advantage over other department stores. A few in-house brands include Caslon, Nordstrom Collection, and Classiques. Nordstrom also teams up with other companies to help offset emissions and promote recycled material in clothing lines. Based off the grand strategy selection matrix, Nordstrom is utilizing quadrant III and IV since the company is maximizing their strengths internally and externally. With Nordstrom’s mergers with HauteLook, Trunk Club, and Shoefitr, they have created concentric diversification.
  43. 43. 42 | P a g e Market Development is being internally created by expansion of off-price locations, international expansion, and e-commerce expansion. 3.8 Short-Term Objectives Analysis Short-term objectives assist the company’s long-term objectives. Short-term objectives are the current activities implemented to achieve future goals. Long term objectives include productivity, profitability, competitive position, employee development, employee relations, technology leadership, and social responsibility. Figure 3.8: Short Term Objective Analysis Short-Term Activities Long-Term Objectives Within the next year Nordstrom plans on opening 19 stores in the United States and Canada.  Competitive Position  Profitability Store openings in Canada have been separated roughly by 6 months. By taking time to open each location the company can better understand their new market and train new employees. (Levine-Weinberg, 2014)  Employee Development  Employee Relations Recycled material is used in catalogs, shopping bags and receipts. Cut down on energy, gas, and water use - offset carbon emissions by 50%. (Corporate Social Responsibility Report, 2014)  Productivity  Profitability  Social Responsibility Acquire multiple online retailers in order to increase shopping channels and market share. (Beath, Ross, Sebastian, 2015)  Competitive Position  Technology Leadership Opening more Nordstrom Rack’s to appeal to millennials. Off-price stores are more appealing to younger consumers but eventually the company expects millennials to shop in full line stores as they age. Off-price stores have the opportunity to sell older inventory and are more profitable per square foot.  Competitive Position  Profitability  Productivity Employee retention is being worked on, hope to lower the employee turnover rate.  Productivity  Employee Relations
  44. 44. 43 | P a g e 3.9 Functional Tactics Analysis Figure 3.9: Functional Tactics Short-Term Activities Functional Tactics Within the next year Nordstrom plans on opening 19 stores in the United States and Canada.  Operational/Sustainability  Marketing  Financials Store openings in Canada have been separated roughly by 6 months. By taking time to open each location the company can better understand their new market and train new employees. (Levine- Weinberg, 2014)  Human Resource Management  Research and Development Recycled material is used in catalogs, shopping bags and receipts. Cut down on energy, gas, and water usage. Offset carbon emissions by 50%. (Corporate Social Responsibility Report, 2014)  Operational/Sustainability Acquire multiple online retailers in order to increase shopping channels and market share. (Beath, Ross, Sebastian, 2015)  Marketing  Financials Opening more Nordstrom Rack’s to appeal to millennials. Off-price stores are more appealing to younger consumers but eventually the company expects millennials to shop in full line stores as they age. Off-price stores have the opportunity to sell older inventory and are more profitable per square foot.  Marketing  Financials  Research and Development Employee retention is being worked on, hope to lower the employee turnover rate.  Human Resources Management 3.10 Analysis of Policies Aiding Strategy Execution Figure 3.10: Policy Analysis Strategy Policy Execution
  45. 45. 44 | P a g e Great customer service (Differentiation)  100% return policy  Returns acceptable to any store  Employees will provide Excessive product knowledge and recommendations  Free minor alterations  Friendly and customer oriented sales staff Outlet Store Positioning (Cost leadership)  Nordstrom Rack will provide options for discount buyers  Value exposure to bring in value customers and introduce them to high- end stores Millennial Market Share Growth (Focus)  Omnichannel presence  Breadth of brand exposure  “Space” concept, in-store shops featuring young rotating young fresh designers Omnichannel Presence (Differentiation)  Curbside pickup provides a new convenience to shoppers (Anderson, 2015)  “text-to-shop”, mobile shopping service helps shoppers navigate store inventor  In-store inventory assessable online provides shoppers with a better understanding of store inventory (Lutz, 2014) Variable Strategy Adaptation (Differentiation, Focus)  Management will address old strategies and create new ones on a regular basis, avoiding fixed strategies (Farvaro, 2013)  Conduct market intelligence analysis of key industry trends (consumers, competitors, technology) that inform key decisions and long-term strategy  Develop compelling materials that effectively communicate insights/strategies and influence decision-making within Nordstrom  Provide analytical and execution support to key marketing initiatives including financial model development, communication of strategic relevance and execution required for potential
  46. 46. 45 | P a g e strategic opportunities (Velvet Jobs, 2015) Policies regarding “great customer service” are appropriate, they have thus excited these policies so well that Nordstrom’s reputation is based on these principal strategies. They are great for image and customer retention. Additionally, Nordstrom rack has successfully introduced value-oriented customers to its brand as well as young customers. Policies regarding millennial customers such as the introduction of its Omnichannel presence as well as discount outlets like Nordstrom Rack have proven to provide a more interactive and convenient method for millennials to familiarize themselves with the Nordstrom brand and reputation as well as obtain significant revenues from this demographic. Furthermore, omnichannel policies have proven successful to all demographics, as Nordstrom has proven to be a market leader and trendsetter by allowing all in- store inventory to be accessible online, with industry competitors replicating the same policies. Variable strategy policies have allowed for the creation of Nordstrom’s Omnichannel presence, innovation in the entire industry as well as the ability to be flexible with changes in the industry and overall environment.
  47. 47. 46 | P a g e 3.11 Structure, Cultural, and Leadership Analysis Figure 3.11: Structure, Cultural, and Leadership Analysis Bonus Type Actual Bonus Description Rational Shortcomings Restricted stock awards $4,644,656.34 Shares given to executives who are prohibited from selling them for a specific time period. May include performance restrictions. Promotes longer executive tenure than other forms of compensation. Biggest shortcomings regard the fact that third and fourth generation founding family members make up a substantial amount of the executive body. Security Options $3,634,948.44 Right to purchase stock in the future at a price set now. Compensation is determined by “spread” between option price and exercise price A lucrative bonus which ties employee’s immediate performance to pay. Shortcomings include employee’s disregard for long-term outcomes and lack of incentive to stay with the firm. Non-equity compensation $4,442,714.76 Cash/monetary compensation including retirement and other insurance benefits. Liquid compensation which encourages quick results tied to short-term performance. Employees may be encouraged to act irrationally to business ethics and company standards in order to achieve short- term goals. (Morningstar, 2015) At Nordstrom, executive bonus compensation may become a hot subject of lower level employee and investor scrutiny. This is due to a substantial number of founding family members compromising the executive body (Loeb, 2015). The current structure is highly susceptible to
  48. 48. 47 | P a g e nepotism which would not only cause unrest with investors but in addition may disrupt internal operations and employee morale. Fortunately Nordstrom has positioned its executive bonus compensation plan to primarily tie long-term performance to compensation. The majority of its compensation plan is made up of restricted stock awards. With this plan executives are encouraged to stay longer in the company and long-term performance is the primary determinant of pay. What should be noted here is that non-equity compensation is the second largest segment of executive bonuses, just barely falling short of the restricted stock awards segment. This form of compensation, being highly liquid in nature, does not sit well with investors due to employee’s immediate behavior in achieving these awards, which generally consists of irrational behavior with disregard to long-term performance and client/employee retention. 3.11.1 Structure, Cultural, and Leadership Analysis: Structure, Culture, and the Environment Nordstrom’s environment, strategy, culture and structure are completely based on the customer experience. Their strategy is to offer exceptional customer service. This idea is echoed through all facets of the company. The business structure that Nordstrom uses is an inverted pyramid. The customers and front-line employed on the top and the CEO on the bottom. John W. Nordstrom stated that when starting Nordstrom he wanted “to provide exceptional service, selection, quality and value” (Nordstrom, 2015). This idea is used by the current CEO, Blake Nordstrom to the front line employees and has been the focal point of the culture at Nordstrom. This culture has led to the company empowering their employees with a sense of entrepreneurship. As stated in section 3.5, these employees are highly recruited for all company positions in order to find those that are the right fit and will promote the company’s strategy of customer service and their number one rule to use
  49. 49. 48 | P a g e good judgment. Ultimately, Nordstrom’s environment, strategy, culture, and structure all revolve around one main focus; to give excellent customer service. This, when added to the strategic leadership practices that are based on this goal gives them their competitive advantage. Their ability to have all personnel focused on customer service from the top down, gives them the advantage of understanding their customers’ needs and knowing how to best fill them. 3.11.2 Structure, Cultural, and Leadership Analysis: Strategic Leadership Nordstrom has lead the retail industry through various different strategies recently; however, its key strategy has obviously been differentiation. Eric, Peter, and Blake Nordstrom have recently changed the vision of buy addressing new aspects of its strategic intent (Loeb, 2015). Historically Nordstrom has differentiated itself with outstanding customer service but with the Nordstrom family taking control of key executive positions within the last ten years we have seen Nordstrom redefine its differentiation strategy by being the first in its industry to create an Omnichannel presence to aid its differentiation strategy. By doing so it has become a market mover in its strategy with its competition recreating the same policies and strategies. 3.12 Strategic Controls Analysis Now we will evaluate the strategic controls of Nordstrom. “Strategic control is concerned with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making necessary adjustments” (Pearce & Robinson, 2015). Surveys, as a strategic control, has positively measured Nordstrom’s customer service and the level of customer satisfaction their customers are receiving (Timberlake, 2011).
  50. 50. 49 | P a g e During a time in 1995 the company was handled off to John Whitacre, who was the first person that was nonfamily to run the business. During that time he completely changed the image of Nordstrom with various marketing campaigns that were not in line with Nordstrom’s original mission. In 2000 two of the Nordstrom brothers were given the company and were able to again focus their attention on the customer and not gimmicky marketing campaigns. They improved outdated inventory management systems and started engaging each other to create new a fresh ideas that would ultimately lead to Nordstrom’s success today (Timberlake, 2011). By addressing the tainted image of Nordstrom at one time the new leaders had to employ strategic controls in order to get Nordstrom back on its feet. As each company should intelligently enforce strategic surveillance other company’s wanted in on the successes of Nordstrom and how they connected with their customer. They would personally surveillance Nordstrom to see what they were doing for their customers that made it a unique experience. It all boiled down to customer service (Timberlake, 2011). Nordstrom clearly implements strategic surveillance and this is apparent by them expanding into the markets of ecommerce and analyzing trends to see how they can continue to grow their existing and new channels, their omnichannel. They will have to continue to do this as to stay a leading competitor in their upscale fashion industry.
  51. 51. 50 | P a g e 3.13 Executive Compensation Analysis Figure 3.13: Executive Compensation Bonus Type Actual Bonus Description Rational Shortcomings Restricted stock awards $4,644,656.34 Shares given to executives who are prohibited from selling them for a specific time period. May include performance restrictions. Promotes longer executive tenure than other forms of compensation. Biggest shortcomings regard the fact that third and fourth generation founding family members make up a substantial amount of the executive body. Security Options $3,634,948.44 Right to purchase stock in the future at a price set now. Compensation is determined by “spread” between option price and exercise price A lucrative bonus which ties employee’s immediate performance to pay. Shortcomings include employee’s disregard for long-term outcomes and lack of incentive to stay with the firm. Non-equity compensation $4,442,714.76 Cash/monetary compensation including retirement and other insurance benefits. Liquid compensation which encourages quick results tied to short-term performance. Employees may be encouraged to act irrationally to business ethics and company standards in order to achieve short- term goals. At Nordstrom, executive bonus compensation may become a hot subject of lower level employee and investor scrutiny. This is due to a substantial number of founding family members compromising the executive body (Loeb, 2015). The current structure is highly susceptible to
  52. 52. 51 | P a g e nepotism which would not only cause unrest with investors but in addition may disrupt internal operations and employee morale. Fortunately Nordstrom has positioned its executive bonus compensation plan to primarily tie long-term performance to compensation. The majority of its compensation plan is made up of restricted stock awards. With this plan executives are encouraged to stay longer in the company and long-term performance is the primary determinant of pay. What should be noted here is that non-equity compensation is the second largest segment of executive bonuses, just barely falling short of the restricted stock awards segment. This form of compensation, being highly liquid in nature, does not sit well with investors due to employee’s immediate behavior in achieving these awards, which generally consists of irrational behavior with disregard to long-term performance and client/employee retention. 3.14 Innovation and Entrepreneurial Analysis Curbside Pickup Curbside pickup is seen as an add-on to the company’s ever-expanding omnichannel presence in high-end retail. This extension allows for customers to purchase their products either through mobile or internet medians and pick up the products outside the store at the customer’s convenience. This approach is seen as expanding on Nordstrom’s amazing customer service reputation which has distinguished the company from the rest of the competition through the years. Text-to-Shop Text-to-shop, a mobile service which allows customers to locate and purchase store inventory through the customer’s mobile device is attempting to address several different short and long-term goals of Nordstrom’s including increasing its younger demographic base due to millennials reliance on mobile devices, further developing its omnichannel presence through
  53. 53. 52 | P a g e merging in-store and online retail processes, and expanding on customer convenience and service. Sale of Credit Department The sale of the credit department has not only allowed for Nordstrom’s credit base to be managed by a third-party but also allows for the expansion into Canada to be partnered by an American-Canadian bank which specializes in both territories. This has also freed up enough cash for investor compensation through dividend growth and earnings-per-share (EPS). Because of the freed up capital, Nordstrom can continue to innovate as well as continue its product acquisition route. “Space” Concept The “Space” concept basically creates a store within a store experience by creating small units within the store space featuring rotating collections of various young and fresh designers. This new feature is meant to attract the millennial segment by maintaining a young and relevant appeal, thus connecting to the younger demographic and increasing millennial market share exposure.
  54. 54. 53 | P a g e Section 4: Consulting Report with Recommendations 4.1 Summary of the External and Internal Environment’s Analysis Figure 4.1.1: External Environment Major Insights Key Opportunities Key Threats Remote Environment  Unemployment rate decreasing since 2010 (U.S.)  Unemployment rate decreasing since 2009 (Canada)  Availability of credit Industry Environment  Global warming  Urbanization  Increased expectation to be sustainable Social  Baby boomers  Advantages of many social media users  Not getting married Political  Pollution  War  Changes in minimum wages Technological  Alternative energy/Innovative renewable  Advantages of increased use of smartphones/mobile devices Economic/Social/Technological  Declined use of brick and mortar locations  New competitors  Security threats from hackers Conclusion Nordstrom’s external environment has many key opportunities for the firm to use its advantages to grow. Advancements in the internet and technology are changing the way customers shop, such as smartphones and tablets. Customers don’t need a laptop that requires a Wi-Fi to shop online. They can shop online from wherever they are from their mobile devices. Nordstrom’s key threats are the expectations of everything becoming sustainable and always the risk of losing customers information. Further information can be found in the following Figure: Section 3.1
  55. 55. 54 | P a g e 4.1.2 Summary of the External and Internal Environment’s Analysis: Internal Analysis Summary Figure 4.1.2: Internal Environment Major Insights Key Strengths Key Weaknesses  Outstanding Customer Service  Strong Brand Equity  Over 300 Stores in the Nation  Strong Management  Good Penetration in the Market  Product Portfolio  The potential of Nordstrom Rack could compromise Nordstrom’s brand equity  Not attractive to the millennial generation  Lack of international market share Conclusions Nordstrom’s internal environment, it displays main strengths as well as weaknesses. Above mentioned strengths and weaknesses are affecting Nordstrom’s long-term objectives. The key strengths Nordstrom is known for is the great customer service they provide. Other strengths including: hundreds of stores in the U.S. and strong management in the company. The key weaknesses Nordstrom has is the lack of attracting the millennial generation, the potential of Nordstrom Rack could compromise Nordstrom’s brand equity and the lack of expansion in the international market share. 4.2 Mission Statement Recommendations As their mission, Nordstrom strives to deliver best customer service possible (Nordstrom Inc. 10K, 2014). Although, there is not an exact wording on Nordstrom’s mission statement, it falls within constraints of Joh W. Nordstrom’s founding philosophy, to “offer the customer the best possible service, selection, quality and value” (Nordstrom, 2015) Nordstrom’s mission served the company well for many decades, partially due to it being broad while still identifying the scope – exceptional customer service. For that reason, it is not suggested to make any changes to company’s mission, but to identify its location and its wording more clearly. 4.3 Generic Strategy Nordstrom is beating every other retail stores, the company shares gained 110% in 5 years. The Nordstrom is in a great position and have a bright future as well. Nordstrom’s successes are due to key points:
  56. 56. 55 | P a g e 1. Great Customer Service: Throughout their history, Nordstrom provided some of the best customer services in the industry. 2. The Outlet Business: Nordstrom Rack gave the company exposure to a completely different customer who is all about value. 3. Emphasizing Omnichannel: Nordstrom made it possible to buy clothes through Instagram. 4. Reaching Young Customers: Nordstrom Rack opened the door for younger customers to step in the Nordstrom high quality products for affordable prices. However, one of the strengths that could be improved is the reaching the younger customers. Nordstrom is known for its expensive, great quality products. Nordstrom is trying to reach the younger customers through their Nordstrom Rack, the outlet version of the Nordstrom. Nordstrom Rack do offer great quality products for discounted prices, however the products are from last year, where the fashion is out of style. Younger customers want what is trending at the moment, not what was hot a year ago. Nordstrom acquired Trunk Club, an online store, you sign up and take style survey to find out what clothes are the best for the customer. Then the stylist will handpick the products that the customer chose in the survey and the customer can review the products before it shipped. Once the customer gets the products, he has 10 days to try it on and keep what he liked and return what he didn’t. The customer only pays for the clothes he keeps and the shipping is free on both ways. Acquiring Trunk Club does help Nordstrom with connecting the male customers, however there are few issues that Trunk Club doesn’t solve. 1. Trunk Club is not sold at the Nordstrom store. People like to try on clothes before they buy it and to see how it looks on them. Every brand’s sizing isn’t always the same and Trunk Club sells about 100 different brands.
  57. 57. 56 | P a g e 2. Trunk Club only reaches men within the targeted demographic. What Nordstrom needs is to horizontal acquisition on a company that does decent quality products but also for an affordable prices for both male and female. The store has to also represent Nordstrom, so it can’t be just a very cheap price and poor quality products. The store/line should use:  Differentiation: because the products are designed to appeal younger (new) customers with special sensitivity for a particular product (trending) attribute. The Nordstrom will attempt to build customer loyalty and which will translates into a firm’s ability to shift younger customers to eventually convert into the premium price products.  Speed-Based Strategies: Nordstrom has to understand the target market (younger customers) and make the trending products fast so it doesn’t become fast version of Nordstrom Rack but still late. The products has to be available to when the demand is high and accelerating new-products improvement and development, quick at adjusting any production processes and needs make decision quicker. The store like Express would be a nice fit. Express isn’t cheap but they do offer many discounts and the products usually goes on sale fast and most importantly, they follow what style is trending at the moment. Once, Nordstrom acquires the affordable store for the younger customers, Nordstrom needs the advertise that. When it comes to Positioning in marketing, Nordstrom is the expensive retail where the younger customer don’t even think about it. Acquiring stores such as Express would also mean getting their customers as well. The brand should be located at the Nordstrom so the younger customers will also convert into the higher quality products eventually. Citation
  58. 58. 57 | P a g e Nordstrom's Simple Strategy For Beating Everyone Else In Retail. (2014, October 8). Retrieved November 15, 2015, Gallagher, B. (2014, February 3). The 10 Lamest Department Stores in America - 8. Nordstrom Rack. Retrieved November 15, 2015, Abrams, R. (2014, July 30). Nordstrom Buying a Website for Men’s Wear. Retrieved November 9, 2015, 4.4 Long-term Objectives, Grand Strategies, Short-Term Objectives, and Action Plans Figure 4.4A: Formulation Plan Long-Term Objectives Grand Strategies Short-Term Objectives Functional Tactics Time Frame Who’s in Charge Profitability: Revenue goal of $20 billion by 2020. This will be achievedby technological improvement, and expansion both domestically and internationally (Tierney, 2015) Market Development Opening19 storesinthe UnitedStates and 2 in Canada. Fine-tuning market approach in Canada by openingstores roughly6 monthsapart. (Levine- Weinberg, 2014) Target the best store locations for best shopping traffic. Strategized buyingout failingSears’s locationsin Canada. Secur edreal estate inmallsthat generate 50% more salesper square foot than inthe U.S. September 2015 – June 2017 Eric Nordstrom KennethJ. Worzel, Executive Vice Presidentof Strategyand Development Market Directorof Canada locations Productivity: Expandingto 300 Nordstrom Rack locations inthe United Statesby 2020; appealingto younger Market Development with Competitive Position Reach 230 Rack locationsby 2016. Expand NordstromRack online inventory choices,off- price inventory ishard to predictwith Researchand developmore efficientways to offeroff- price inventory online faster. August 2015 - November 2016 OliviaKim, Directorof Creative Projects GeeryS.K. Thomas, Presidentof Nordstrom Rack
  59. 59. 58 | P a g e millennialsand increasing inventory turnover trends. (Wahba,2015) Competitive Position: Expansionine- commerce offersmultiple channelsto shop,by 2020 the company will invest$4.3 billionine- commerce. (Wahba,2015) Purchase of delivery facilitieswill speedup online orders. Concentric Diversification with Vertical Integration Online shoppingwill have 2-day deliveries (Wahba,2015) Use social mediatolink the online and offline shopping worlds(Loeb, 2014) Openupa new distribution centerin Pennsylvaniato cut down deliverytime Popularitems on Pinterest will be displayedand featuredin stores. October 2015 – February 2017 Michael Sato, Executive Vice Presidentof SupplyChain Brian Saltzman, Executive Vice Presidentof User Experience and Optimization Employee Development: Expansionin the US, Canada,and PuertoRico will require outstanding trainingand hiringof new personnel. Concentrated Growth Hire 1,000 employeesin Canada Buildmore personalized relationships withcustomers and employees (Clay,2012) Recruitand hire the employeesthat are most passionate aboutfashion Train employeesto use mobile devicesto checkout customers anywhere on the floor, quicklycheck inventory,and notifyclients aboutnew products. September 2015 – December 2016 Christine Deputy,Vice Presidentof Human Resources Human Resource managersin Canada and PuertoRico

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