Case Study Description of Nordstrom: Expansion into Canada
In August 2016, it had been almost two years since American fashion retailer Nordstrom opened its first Canadian store in Calgary. Nordstrom believed Canada to be an ideal location for its global expansion. Executives identified the country as a potential US$1 billion opportunity with no language barrier and a population with a higher average income than in the United States. Despite this enticing potential market, Nordstrom executives entered Canada with a slow, conservative approach. Nordstrom faced slow economic growth in Canada and fierce competition from other luxury retailers. Although Canada was an attractive potential market, increased competition and a changing economic environment presented new challenges to the retailer's international expansion plan. How could Nordstrom find success in Canada? Won-Yong Oh is affiliated with University of Calgary.
Swot Analysis of "Nordstrom: Expansion into Canada" written by Won-Yong Oh, Duane Myer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nordstrom Canada facing as an external strategic factors. Some of the topics covered in Nordstrom: Expansion into Canada case study are - Strategic Management Strategies, Growth strategy and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Nordstrom: Expansion into Canada casestudy better are - – wage bills are increasing, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Nordstrom: Expansion into Canada
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Nordstrom: Expansion into Canada case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nordstrom Canada, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nordstrom Canada 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: Expansion into Canada can be done for the following purposes –
1. Strategic planning using facts provided in Nordstrom: Expansion into Canada case study
2. Improving business portfolio management of Nordstrom Canada
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nordstrom Canada
Strengths Nordstrom: Expansion into Canada | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nordstrom Canada in Nordstrom: Expansion into Canada Harvard Business Review case study are -
Ability to recruit top talent
– Nordstrom Canada is one of the leading recruiters in the industry. Managers in the Nordstrom: Expansion into Canada are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Nordstrom Canada is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Nordstrom Canada has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nordstrom Canada 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.
Diverse revenue streams
– Nordstrom Canada is present in almost all the verticals within the industry. This has provided firm in Nordstrom: Expansion into Canada 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.
Effective Research and Development (R&D)
– Nordstrom Canada 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: Expansion into Canada - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Leadership & Managing People field
– Nordstrom Canada 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 Nordstrom Canada in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Nordstrom Canada
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nordstrom Canada does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Nordstrom Canada in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Nordstrom Canada in the sector have low bargaining power. Nordstrom: Expansion into Canada has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nordstrom Canada to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Nordstrom Canada has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– Nordstrom Canada has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Nordstrom: Expansion into Canada 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Nordstrom: Expansion into Canada firm has clearly differentiated products in the market place. This has enabled Nordstrom Canada to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Nordstrom Canada to invest into research and development (R&D) and innovation.
Weaknesses Nordstrom: Expansion into Canada | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nordstrom: Expansion into Canada are -
Aligning sales with marketing
– It come across in the case study Nordstrom: Expansion into Canada that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Nordstrom: Expansion into Canada can leverage the sales team experience to cultivate customer relationships as Nordstrom Canada is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nordstrom Canada is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Nordstrom: Expansion into Canada can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Nordstrom: Expansion into Canada, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Interest costs
– Compare to the competition, Nordstrom Canada 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Nordstrom: Expansion into Canada, in the dynamic environment Nordstrom Canada has struggled to respond to the nimble upstart competition. Nordstrom Canada has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Nordstrom Canada 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: Expansion into Canada should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Nordstrom Canada products
– To increase the profitability and margins on the products, Nordstrom Canada needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Nordstrom Canada supply chain. Even after few cautionary changes mentioned in the HBR case study - Nordstrom: Expansion into Canada, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nordstrom Canada vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Nordstrom Canada 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. Nordstrom Canada 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Nordstrom: Expansion into Canada, is just above the industry average. Nordstrom Canada 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.
Skills based hiring
– The stress on hiring functional specialists at Nordstrom Canada 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.
Opportunities Nordstrom: Expansion into Canada | 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: Expansion into Canada are -
Loyalty marketing
– Nordstrom Canada 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.
Buying journey improvements
– Nordstrom Canada can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Nordstrom: Expansion into Canada 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.
Leveraging digital technologies
– Nordstrom Canada can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nordstrom Canada 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. Nordstrom Canada 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nordstrom Canada 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 Nordstrom Canada to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Nordstrom Canada 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.
Developing new processes and practices
– Nordstrom Canada can develop new processes and procedures in Leadership & Managing People 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.
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 Nordstrom Canada in the consumer business. Now Nordstrom Canada can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nordstrom Canada in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Nordstrom Canada 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 Leadership & Managing People segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nordstrom Canada can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nordstrom Canada 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: Expansion into Canada, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Nordstrom Canada 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: Expansion into Canada External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Nordstrom: Expansion into Canada are -
Stagnating economy with rate increase
– Nordstrom Canada 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nordstrom Canada with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nordstrom Canada can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nordstrom Canada in the Leadership & Managing People industry. The Leadership & Managing People 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.
Technology acceleration in Forth Industrial Revolution
– Nordstrom Canada has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Nordstrom Canada needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Nordstrom Canada 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. Nordstrom Canada can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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: Expansion into Canada, Nordstrom Canada may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Consumer confidence and its impact on Nordstrom Canada 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 wage structure of Nordstrom Canada
– 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 Nordstrom Canada.
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.
Regulatory challenges
– Nordstrom Canada 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 Leadership & Managing People industry regulations.
High dependence on third party suppliers
– Nordstrom Canada 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.
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 Nordstrom Canada in the Leadership & Managing People sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Nordstrom: Expansion into Canada 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: Expansion into Canada 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: Expansion into Canada 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: Expansion into Canada 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: Expansion into Canada 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 Nordstrom Canada needs to make to build a sustainable competitive advantage.
