Nordstrom SWOT Analysis the Intent

Nordstrom SWOT Analysis The intent of this paper to complete a thorough SWOT analysis of high-end retailer Nordstrom's and provides a series of recommendations to the company based on a complete analysis of the company. Today the company operates a chain of stores both across the U.S. And internationally, selling men's, women's and children's clothing, accessories, shoes, luggage, sundries and home decorating products. Nordstrom has also pioneered the development of online retailing and customization of apparel and shoes for men, women and children.

They are widely recognized for their excellent coordination of selling efforts between Nordstrom Direct, their online initiative, and their catalog sales strategies. Nordstrom is traded on the New York Stock Exchange under the symbol of JWN. Strengths Fundamental structure of the company is based profiting from execution across the entire retail value chain. The company operates in four segments as of 2008, which include the retail, credit, direct sales and ancillary, other businesses.

Best known for its retail operations Nordstrom now operates 155 stores in the United States throughout 27 states, 99 of which include full-line Nordstrom stores, 50 discount Nordstrom Racks, two clearance stores that operate under the name Last Chance, and one free-standing shoe stores. Nordstrom has concentrated on being the financial intermediary for transactions originating in their stores and this is a major competitive strength from a financial standpoint.

The credit segment of the company offers a private label Nordstrom Visa credit card, in addition to offering debit cards offered on accounts at Nordstrom fsb, a wholly-owned federal savings bank the company launched (Upside Today, 2000). Nordstrom's strategy with regard to its credit card and investing in their own bank is to become more vertically integrated in the shopping process, regularly offering discounts on apparel and merchandise ordered online via Nordstrom.com and shipped from the company's fulfillment center in Cedar Rapids, Iowa. Weaknesses Heavily dependent on the U.S.

For the majority of its revenues. As of 2008 the majority of revenues, 98.7% in the latest fiscal year, were generated in the United States as the company made the decision to re-trench domestically. Smaller scale of operations don't sale well into nationally-based discount stores. This is evident in the performance of the company in regional roll-outs of their Nordstrom Rack stores. Critics have contended that this is due to the company not having systems in place to deal with discounted merchandise.

It is however a weakness of execution the company needs to address. Opportunities Increasing reliance on online shopping channels by retailers. This is increasingly becoming a preferred buying channel on the part of consumers who are increasingly starved for time. The challenge for Nordstrom's is to replicate their in-store experience online as well (Cate, 2007). More projects which include the key success factors the Nordstrom online shoe store had need to be introduced. Growth of discount retailing makes Nordstrom Rack a high growth potential opportunity.

This is also a critical factor in their growth as mass merchandisers including Wal-Mart and Costco increasingly compete in the clothing retail industry. Nordstrom faces a daunting challenge of coming down-market with its messaging, as it is today at the high-end of the market in terms of branding. Threats Increasing rental rates while the U.S.-based credit crunch continues to reduce retail sales in 2008.

The U.S.-originated credit crunch and recession is now impacting many other economies around the world and significantly slowing down sales of retailing chains and independent stores. This is the most severe threat facing Nordstrom's today. A tendency to get out of focus due to so many ancillary businesses running concurrently. The company has diluted management focus due to the many businesses the company is in including financial services products, involving credit cards and even mortgages through Nordstrom Bank.

Nordstrom's is in one of the most competitive sectors of the retailing industry there is, facing Target and other entrenched, well capitalized competitors. Nordstrom competes with several major retailing chains including Dillard's, Federated Department Stores, Target Corporation, the Gap, Inc., Neiman Marcus Group and several others. Competitors' market shares are shown in Figure 1. Target dominates U.S. retailing today with 30.2% market share, followed by Sears' (24.1%) and Macy's (12.5%). Figure 1: Market Share by Competitor Source: SEC Filings by Nordstrom and competitors Recommendations Nordstrom's future is full of potential.

The following are the series of recommendations for the company to focus on greater efficiencies operationally in addition to building out its premium brand. Here are the recommendations for Nordstrom: Concentrate information systems spending on pricing analysis and execution. Clearly from the financial statements Nordstrom needs more control over pricing. The inclusion of ProfitLogic for pricing optimization is one alternative for example, to better harvest demand at the optical price point. Go after the $300+ denim market globally more aggressively and with more concerted strategies today.

In their latest financials and in their latest earnings calls, Nordstrom reports that even they are even surprised by the number of $300+ jeans being sold. As Nordstrom has a stable $100+ range of denim, the company needs to consider building out a strategy of bringing in a new designer to add more flair to the jeans. Focus on multi-channel management to ensure all customers have an identical high-quality experience with each Nordstrom touch point.

The many channels that Nordstrom sells through including the Web, their stores, discount stores and boutiques makes for a challenging strategy of unifying responses across all channels. Nordstrom needs to focus on preserving their culture in these channels and actually promoting it. Continued expansion plans yet focus on sales per square foot of $400 or more. The trending on this specific metric is critical if the company is to continue growing profitably and with a maximizing of their retail floor space.

In 2007, sales per square foot were $365, high for the last twenty years, much far above the low of $319 per square foot in 2001. Summary Nordstrom is an excellent example of a company that has turned their culture into a strong competitive advantage and differentiator (Antonacopoulou, Kandampully, 2000).

Nordstrom's culture reinforces a much stricter set of norms and values than any manager could impart or enforce; that's because the employees tell each other they are different than any other retailer in that they focus on doing what in their good judgment will assist the customer best (Spector, McCarthy, 2001).

While the company has challenges with growth in the future, their key metrics of performance, customer loyalty, customer lifetime value, and sales per square foot continue increasing due to the prudent and insightful use of pricing, supply chain, and product information quickly. Appendix a Fiscal Year-based Financial Analysis Nordstrom Inc. Ratio Analysis Profitability Ratios Return on Equity (%) Return on Assets (%) Return on Investment Gross Margin EBITDA of Revenue (%) Operating Margin (%) Pre-Tax Margin Net Profit Margin (%) Effective Tax Rate (%) Liquidity Indicators.