29 Mar 2009
Introduction
This paper elucidates the strategy and its analysis if Nordstrom company, which was founded by John W. Nordstrom and Carl Wallin in 1901. At the beginning of the previous century it was a little shoe store in Seattle, the main principles of which were “based on exceptional service, selection, quality and value” . So far company obtained a good client base and gained an opportunity to expand business. In the course of time company became a leader of shoe retail. In the 1960’s company diversified its business and successfully entered clothing market. In 1973, when company was managed by the third generation of John W. Nordstrom and their friends, the company was officially renamed to Nordstrom Inc and continued to expand through the United States of America.
Nowadays Nordstrom Inc became one of the largest and the most popular chain of fashion specialty store. Company’s philosophy was not changed through the century. The main focus of the company is to meet individual customers’ needs and wants.
Statement of strategic intent
As it was already mentioned in the above paragraph, Nordstrom’s strategy is based on the following principle: “offer the customer the best possible service, selection, quality and value” . Owing to this philosophy company was successfully operated and expanded through the whole century and became “nationwide fashion specialty chain with renowned services, generous size ranges and a selection of the finest apparel, shoes and accessories for the entire family” .
Nordstrom’s business is also based on the following driving values and principles: – company’s management strongly believes that their employees make their business prosper and that “success is built around people ”; – company appreciates and respects contributions of each employee, customer or vendor; – diversity (individual and delicate approach to each customer, supplier); – company does its best in order to establish good relationships with its partners, including customers and society; – commitment to existing legislation and standards etc. There is a full partnership guide available on the company’s website, which describes other driving values and principles of partnership in full.
There is a list of company’s main goals: – “to increase minority representation in its general employee and management ranks” (there are plenty of minorities’ representatives work in the company beginning from maintenance staff and managers, and finishing on the board of directors); – to provide diversity in services, internal corporation’s structure, advertisement, suppliers etc; – to serve the society (for example recruiting minorities, women and people with disabilities; healthcare and education programs etc)
When people come to Nordstrom’s stores they do not find usual departments with merchandise – they find fashion departments, where individuals can find clothes and shoes which correspond to their lifestyles and Weltanschauung. Of course stores have large size ranges in order to be able to serve any customer.
Company has its own ethics code with the highest standards which cover the relationships inside and outside the company. These principles also prove that Nordstrom is a very public company and there are video files on their web-site with the records of annual shareholders meetings, conferences etc.
It is obvious that Nordstrom targets the whole country now and it is possible that company will enter the international market in the future. Company targeted all the main market segments: children, teenagers and adults; men and women; single customers and families; scrawny and full-bodied; national minorities and aboriginals; people of different social status etc. In other words, company has substantially occupied very large market segment and will not give up its positions.
The control packet of shares belongs to brothers Nordstrom, there are many minority stockholders of the Nordstrom. Nordstrom stock was split for six times already (1973, 1978, 1983, 1986, 1987, 1998). Company became public in 1971. Then its price was $24.50 per share, now adjusted initial price is $0.5 per share.
Financial dynamics of Nordstrom is amazing: $6.4 billion of total sales in 2004 and $7.1 billion in 2005 already; “net income increased 52 percent to $104.5 million, or 75 cents per share, from $68.7 million, or 48 cents per share, a year earlier” . In order to present financial dynamics of the company I would like to introduce the following table :
Year
2002 2003 2004 2005
Annual Sales ($ mil.) 5634,1 5975,1 6491,7 7131,4
Annual Net Sales ($ mil.) 124,7 90,2 242,8 393,5
SWOT Analysis
Strengths: 1. Strong brand name – people identify Nordstrom with quality and service. 2. Good reputation among customers, vendors, suppliers and employees. 3. Good relationships with customers, vendors, suppliers and employees. 4. Strong corporate governance and control. 5. High standards to services, quality, selection, ethics and partnerships. 6. Constant growth and expansion. 7. Wide range of products and large market segment. 8. Excellent distribution system (32 own stores, 10 leased stores and 43 partly-leased or partly-owned stores). 9. Excellent staff. 10. Excellent service.
Weaknesses: 1. As far as company grows its staff personnel increases and it becomes difficult to control all employers; in other words, growth and expansion is a weakness from the flip side. 2. High demands to partnerships. Company can loose old or fail to obtain new partners because of high demands to partners, especially emphasized demands to national minorities’ criteria – Nordstrom prefers to work with companies which are managed by women and hire ‘color’ employees. 3. High social contribution – it increases Nordstrom’s reputation but it is very costly so far. 4. Difficulty to forecast fashion trends – fashion is very uncontemplated.
Opportunities: 1. Permanently claimed industry (people will always like to be fashionable, to receive qualitative services and products). 2. Entering international market.
Threats: 1. Wide range of products and large market segment. It becomes more difficult to satisfy such a large segment and it is possible that in future new competitors will enter the market and ‘grasp’ certain Nordstrom’s segments by using tight specialization and smaller segments. 2. High dependence on the suppliers.
Personally I consider that Nordstrom is quite successful company, which has a lot of strengths and survived through the whole century. Its key points to success are the following: – outstanding service and quality; – high ethic and partnership standards; – selection; – availability. Despite all strengths there is a high probability that new ‘players’ on the market can take away certain clients from the company.
Present strategies
First of all I have noticed that since the company foundation by John W. Nordstrom it was governed by his family. This family business was inherited by new Nordstrom generations. Of course this factor played the major role in company’s prosperity. The philosophy of the company survived through more than a hundred years and is not changed in anyway. If the company was controlled or governed by other people or business structures its philosophy and ethics code could be changed. That is the reason not to alienate stock of the company to ‘outsiders’. I can conclude that Nordstroms love their business, respect their ancestors and their traditions.
Second strategy which leads company to success is orientation on customers’ needs and wants. It is absolutely obvious that company’s services are customer-oriented and customer-driven. From the previous century company followed its philosophy and permanently increased the quality, selection and services level. The company diversified its products and expanded its business. As soon as it was possible company targeted the whole families to be their clients. These families became steady customers and preferred to buy Nordstrom’s products. Consequently company earned good reputation and made its own client base which was constantly and systematically increased. The overall strategy is very simple: high quality of products and services can satisfy customers; satisfied customers return to the company again and again; moreover, satisfied customers bring their friends to the company and they become satisfied too; unsatisfied clients do not return and prevent others from using this company’s services.
The third thing I have found out is that company establishes good and strong relationships with its partners (including clients, suppliers, vendors and communities). This is very important trait of the Nordstrom’s strategy. The company has a partnership guide with high standards which establishes the main principles of partnership with environment. Owing to this guide many partners are cut off from any relations with Nordstrom Inc. Relationships with employees are on top – company management believes that employees are the keys to Nordstrom’s success. Of course such a treatment stipulates good corporate spirit and good motivation for employees. Employees have the opportunity for self-expression and thus reveal creativity and do their best.
Fourth trait of the Nordstrom’s strategy is individual approach to each client. Company has found a way to satisfy anyone in accordance to client’s lifestyle and favor. I consider that company has quite developed marketing department – especially marketing research and informational marketing system – because company targets very large and significant marketing segment. Company believes that “customers are lifetime investment” .
One more important nuance is that Nordstroms do not stop on the attained results but they consider that there is still a lot of work to be done. I imply that such ambitions would result in much more success and prosperity.
Future expectations
After my research I can conclude that company has good management, good corporate structure and spirit, good motivation of employees; company represents a good example of success from a little shoe store up to national retail chain. Moreover financial results impressed me too and I think that in the future company will prosper. Nordstrom continues expanding from year to year and sets a good pace.
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