Case Study Description of Nordstrom: The Turnaround
After a period of turbulence, the fourth generation of Nordstroms are in control of the $7.1 billion apparel retailer. They have instituted a number of changes in buying and IT that have turned the business around. What can they do to ensure future growth?
Swot Analysis of "Nordstrom: The Turnaround" written by Rajiv Lal, Arar Han includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nordstroms 7.1 facing as an external strategic factors. Some of the topics covered in Nordstrom: The Turnaround case study are - Strategic Management Strategies, Leadership, Organizational structure and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Nordstrom: The Turnaround casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Nordstrom: The Turnaround
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nordstrom: The Turnaround case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nordstroms 7.1, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nordstroms 7.1 operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nordstrom: The Turnaround can be done for the following purposes –
1. Strategic planning using facts provided in Nordstrom: The Turnaround case study
2. Improving business portfolio management of Nordstroms 7.1
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nordstroms 7.1
Strengths Nordstrom: The Turnaround | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nordstroms 7.1 in Nordstrom: The Turnaround Harvard Business Review case study are -
High brand equity
– Nordstroms 7.1 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nordstroms 7.1 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Nordstroms 7.1 is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Rajiv Lal, Arar Han can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Nordstroms 7.1 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nordstroms 7.1 has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Nordstroms 7.1 has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Nordstrom: The Turnaround HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Nordstroms 7.1 is one of the most innovative firm in sector. Manager in Nordstrom: The Turnaround Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Nordstroms 7.1
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nordstroms 7.1 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Nordstroms 7.1 is present in almost all the verticals within the industry. This has provided firm in Nordstrom: The Turnaround case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Nordstroms 7.1 is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nordstroms 7.1 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Nordstrom: The Turnaround Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Nordstroms 7.1 has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Nordstrom: The Turnaround - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Nordstrom: The Turnaround Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Low bargaining power of suppliers
– Suppliers of Nordstroms 7.1 in the sector have low bargaining power. Nordstrom: The Turnaround has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nordstroms 7.1 to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Nordstroms 7.1 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nordstroms 7.1 has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Nordstrom: The Turnaround | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nordstrom: The Turnaround are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nordstroms 7.1 is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Nordstrom: The Turnaround can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nordstrom: The Turnaround, is just above the industry average. Nordstroms 7.1 needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Lack of clear differentiation of Nordstroms 7.1 products
– To increase the profitability and margins on the products, Nordstroms 7.1 needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nordstrom: The Turnaround, in the dynamic environment Nordstroms 7.1 has struggled to respond to the nimble upstart competition. Nordstroms 7.1 has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Nordstrom: The Turnaround HBR case study mentions - Nordstroms 7.1 takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study Nordstrom: The Turnaround has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nordstroms 7.1 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Nordstroms 7.1 has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow decision making process
– As mentioned earlier in the report, Nordstroms 7.1 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Nordstroms 7.1 even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Nordstroms 7.1 has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Nordstroms 7.1 has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Products dominated business model
– Even though Nordstroms 7.1 has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Nordstrom: The Turnaround should strive to include more intangible value offerings along with its core products and services.
Opportunities Nordstrom: The Turnaround | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Nordstrom: The Turnaround are -
Loyalty marketing
– Nordstroms 7.1 has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Nordstroms 7.1 can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nordstroms 7.1 can use these opportunities to build new business models that can help the communities that Nordstroms 7.1 operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Buying journey improvements
– Nordstroms 7.1 can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nordstrom: The Turnaround suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Creating value in data economy
– The success of analytics program of Nordstroms 7.1 has opened avenues for new revenue streams for the organization in the industry. This can help Nordstroms 7.1 to build a more holistic ecosystem as suggested in the Nordstrom: The Turnaround case study. Nordstroms 7.1 can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nordstroms 7.1 to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Better consumer reach
– The expansion of the 5G network will help Nordstroms 7.1 to increase its market reach. Nordstroms 7.1 will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nordstroms 7.1 to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Nordstroms 7.1 to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Nordstroms 7.1 has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Nordstrom: The Turnaround - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nordstroms 7.1 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nordstroms 7.1 can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nordstroms 7.1 can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– Nordstroms 7.1 can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Nordstroms 7.1 to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nordstroms 7.1 can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Nordstrom: The Turnaround, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Nordstrom: The Turnaround External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nordstrom: The Turnaround are -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nordstroms 7.1 in the Strategy & Execution sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Nordstroms 7.1 is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nordstroms 7.1 can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Nordstrom: The Turnaround .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nordstroms 7.1 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Nordstroms 7.1 needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
High dependence on third party suppliers
– Nordstroms 7.1 high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nordstroms 7.1 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nordstroms 7.1 needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Consumer confidence and its impact on Nordstroms 7.1 demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Nordstrom: The Turnaround, Nordstroms 7.1 may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Nordstroms 7.1.
Stagnating economy with rate increase
– Nordstroms 7.1 can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Nordstrom: The Turnaround Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Nordstrom: The Turnaround needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Nordstrom: The Turnaround is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Nordstrom: The Turnaround is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Nordstrom: The Turnaround is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nordstroms 7.1 needs to make to build a sustainable competitive advantage.