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 - – challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, technology disruption, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, 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 -
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.
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.
Training and development
– Nordstroms 7.1 has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Nordstrom: The Turnaround Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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.
Ability to lead change in Strategy & Execution field
– Nordstroms 7.1 is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Nordstroms 7.1 in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
Ability to recruit top talent
– Nordstroms 7.1 is one of the leading recruiters in the industry. Managers in the Nordstrom: The Turnaround are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Strategy & Execution industry
– Nordstrom: The Turnaround firm has clearly differentiated products in the market place. This has enabled Nordstroms 7.1 to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Nordstroms 7.1 to invest into research and development (R&D) and innovation.
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 -
No frontier risks strategy
– After analyzing the HBR case study Nordstrom: The Turnaround, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Low market penetration in new markets
– Outside its home market of Nordstroms 7.1, firm in the HBR case study Nordstrom: The Turnaround needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Nordstrom: The Turnaround HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Nordstroms 7.1 has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Nordstrom: The Turnaround, it seems that the employees of Nordstroms 7.1 don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Nordstroms 7.1 has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High cash cycle compare to competitors
Nordstroms 7.1 has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 -
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.
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.
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.
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.
Building a culture of innovation
– managers at Nordstroms 7.1 can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nordstroms 7.1 is facing challenges because of the dominance of functional experts in the organization. Nordstrom: The Turnaround case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nordstroms 7.1 in the consumer business. Now Nordstroms 7.1 can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
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 -
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.
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 .
Increasing wage structure of Nordstroms 7.1
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Nordstroms 7.1.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nordstroms 7.1 business can come under increasing regulations regarding data privacy, data security, etc.
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.
Environmental challenges
– Nordstroms 7.1 needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nordstroms 7.1 can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Nordstroms 7.1 will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nordstroms 7.1 in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.