Nordstrom is an upscale fashion retailer based in America which was founded by John Nordstrom and Wallin Carl. At inception, this company commenced as a shoes retailer but has seen enormous expansion to its current status which now includes the apparels, handbags, fragrances and accessories among others. Currently, the company is operating a total of 244 stores within 33 states. They also comprise 117 full-line stockpiles. Furthermore, the company seeks to expand further by opening up additional 5 stores in the state of Canada at 2014. Among its key national competitors there are luxury retailers such as Lord & Taylor, Neiman Marcus and Bloomingdale. Currently, the main objective of the company is to gain the most optimal customer outcomes. This entails acquisition, satisfaction and retention of the targeted customers besides improving significantly their share of expenditure with the company. In the learning and growth of the company, Nordstrom focuses on a rise in stores sales at the rate of 2-4 % while expanding the revenues generation with a margin of $25-$35 million besides proportionate reduction of the operational costs by a margin of approximately $15 million (Spector & Patrick 22).
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In order to win the customers loyalty and a corporate competitive advantage, Nordstrom employs the strategy of differentiation in providing singularly distinct products from its competitors. This is also coupled with personalized services, which the clients place a huge emphasis on and are much willing to pay for. The Nordstroms unique services have lured the customers into the enterprise. As a matter of fact, Nordstrom produces unique high quality products while employing a team of researchers with sales associates, which assists customers in shopping by analyzing their preference and guiding them through to the department for purchases. In essence, unique and excellent customer services help the company operate in line with its mission, which basically states the goal of the company as to provide outstanding customer services on a daily basis with one customer at a time approach.
Business External Environment
Essentially, Nordstrom is established in the high-end cloth retailing company which generates most of its revenue from selling high quality clothes, cosmetics and accessories. In order to face and address the various external forces in the industry, the companys management also has the audit committee comprising of the board of directors which is responsible for reviewing and appraising various companys functions. These include maintaining the companys integrity and act of financial statements, and management of both the business activities and the financial risks besides shedding lights on the companys internal environment. With respect to Porters five forces model, the audit committee also focuses on strategic combating of rivalry companies such as Macys and Neiman Marcus. However, Nordstrom boasts of just a few new entrants where majority of the specialty stores have workplace rapport with the purveyors. Nordstrom also carry exclusive feature products which are made by Faconnable (Spector & Patrick 34).
Consequently, this makes it hard for new entrants to acquire licenses, and therefore strength for Nordstrom and perhaps one of the most important opportunities for the company. Nevertheless, the company experiences some threat of substitutes with respect to off-brand commodities buyers. Furthermore, some consumers also make direct purchases of various commodity designs from the designers thus undermining the trade in such commodities from Nordstrom and, therefore, forming the most critical threat for the company. With respect to the consumers bargaining power, the companys experiences moderate force due to its distinct and quality brand image, which makes consumers willing to pay the requisite premiums. Indeed, Nordstrom engages in price switching, which in essence enables it to streamline its price with that of the other retailers. Finally, in this context, the company also experiences moderate bargaining powers due to the fact that it has limited specialty retail stockpiles. The departmental stores further require that they undertake their particular brands and, thus, a bargaining power to the suppliers which also enables them to sell their products at reasonable prices (Spector & Patrick 12).
Based on the companys internal environment, the company has reputable and strong brand name that enhances its sales. Clients identify the company due to its unique products as well as esteemed customer service. Furthermore, the company exhibits a high prevalence of reputable good governance which is essential in manipulating various company activities while maintaining a constant stream of growth and expansion. However, the main strength lies in the companys strong corporate governance, as well as control which manipulates product and supply engines through an excellent distribution system to a status of high product and service generation, which is quite distinct to itself, unlike its competing firms. The trade in exclusive products makes the company distinctively unique and also enables it to retain maximum customer loyalty. However, the company is also faced with particular challenges, especially in the management of the taskforce. This forms a major weakness in the sense that, as the company expands in its scope, it experiences strains in controlling its employees who also increase proportionately (Spector & Patrick 55).
Due to the large market segment and the challenge in managing the taskforce, the company faces a challenge of inability to satisfy the whole market which threatens its future position due to the creation of a loop hole for new entrants. Despite the companys ability to invest due to availability of financial resource, the increased challenges in the management of its expanding capacity of employees are likely to pin the companys performance down. The basic composition of the company strategic placement is its ability to focus extensively on the needs of the customers which is a reflection of their commitment to serve the customers with the optimum quality of services with abject orientation to clients needs and preferences (Spector & Patrick 76).
Major Strategic Issue
Essentially, Nordstrom has been anchored on good governance and resource availability ranging from financial to the human resource potential of experts in customers research associates among others. However, the most significant strategy that the company has adopted is the use of high strong focus on the customers needs. The customer orientation needs, as well as its ability to focus on a larger spectrum of clients, makes the company a sound competitor in the industry. Furthermore, the company wins the customer loyalty which is an essential component of the main business objective. Indeed, Nordstrom has been involved in consistent open focus on the customers convenience which is the greatest reserved company resource. In essence, customers treatment at the point of sales is essential in development of the customers loyalty. Consequently, any activity that boosts the customers loyalty helps deepen the self-urge to contribute the product premium by the customer (Spector & Patrick 31).
While at this, Nordstrom undertakes a close focus on the customers with a view to meeting their divergent needs. This is done in a number of ways including point of sales services through a guide into departments of choice while at the same time offering very high quality and distinct products and services.
As a matter of fact, Nordstrom embarks on its competitive strategy of product differentiation, which it employs effectively to lure the extensive capacity of the buyers. Over the years, the management, which has been in an inheritance perspective from the core founder, Erick Nordstrom, has continued to strengthen the strategy while establishing a diverse perspective of retail outlets with the latest being the Australian outlet. All this has been aimed at supporting the process of diversifying the companys scope and market coverage. In order to maintain its status besides enhancing more performance-based achievements, Nordstrom must continue its integrated technological innovations to increase its competitive advantage. Furthermore, the company uses the switching cost mechanism on online products for enhancing customers loyalty, which increases the long-run operational costs (Spector & Patrick 56).
Alternative Strategies for the Company
Using the customer based sales strategies is quite important for Nordstrom as it builds the most essential component of transaction customers loyalty. However, other than that, the company may also establish links with the main competitors through the establishment of collusions. For instance, the company may merge with Neiman Marcus with a view to increase their market share as well as compelling the other market players in the industry outside the business. This would lead to the company to the acquiring of domination besides creating a significant proportion of the companys ability to command business activities and capital generation important for expansions and other large scale related economies (Spector & Patrick 67).
Furthermore, the company ought to explore other markets such as the emerging markets of China and the Far East which may also contribute a significant proportion of the aggregate revenue for the company. Furthermore, this would also enhance the companys market share besides eliminating costly investments in switching off costs with a view to win the customers loyalty. The emerging markets would also enable the company practice the strategy of price discrimination prior to entrants of new suppliers and other traders into the cycle of supply. The high financial base of the company, besides its ability to offer distinct range of products, would enable the company to operate in a state of solitude; thus, enjoying the high market share particularly in the emerging markets (Spector & Patrick 87).
In essence, positive traits in the customer treatment have become a major issue that promotes the development and enhancement of the growth in customers loyalty and has singled out the company as a distinct customer-oriented enterprise. However, with the growth in the number of customers patriotic to the company, it is essential to have a proportionate growth in the number of employees working for Nordstrom. On the contrary, as the company expands, there has been witnessed increased complexity in management of the task force which may derail the companys prospects to expand. In order to secure Nordstroms future in e-commerce, the company must also increase its expenditure on the integrated technological capacity besides creating a room for technological expansion within its scope at the convenience of its customers (Spector & Patrick 45).
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E-commerce plays a significant role in the future of the company. Investment in technology will not only provide the company with a better chance to expand globally but also to counter the splendid competition that its close competitors exact in the market particularly due to the highly dynamic client groups. Furthermore, this move will also enable the company to upscale its market share to the international markets and the emerging markets in particular. Technology will also boost online sales besides giving more purchasing accessibility to the upscale shoppers in their daily purchases of luxury and brands online. However, amidst all the external and internal challenges, Nordstrom has been able to perpetuate its profit generation with the latest report indicating 12.2 % rise in the amount of sales made in the second quarter of the year of 2012 and a net income rise of 19.9 % (Spector & Patrick 27). Therefore, Nordstrom can be attributed to a successful business venture which has continued to manipulate its ability to cross-cut through the ranging level of competition.