Case: Nordstrom’s
Student:
Page 1 of _____
STRATEGIC AUDIT FACTOR ANALYSIS WORKSHEET

ANALYSIS
STRATEGIC AUDIT
PARAMETER
(+) Factors
I.
COMMENTS
(-) Factors
CURRENT SITUATION
I.A. Past corporate performance
indexes
Steering controls:
Traditional Financial: 1,209%
increase in net sales from 1980-1997.
Sales in ’97 - $4.85 billion. From ’78 to
’98, appx. 383% growth in number of
stores (24-92). 1999 – record sales.
Nordstrom.com increasing in sales.
Cash flow declined 389.9 million from
98 to 99 – 6.6%. Quick ratio has
declined from .8 to .6. 1999 ROA 6.6%,
ROE 17.1%. S&GA $106/sq ft - $53
higher than industry avg. Poor inventory
turns, inventory levels rising to 90+days.
Stakeholder: Board of Directors
comprised mainly of Nordstrom’s family
members. Known as black hole into
which shoppers disappear, never to
enter nearby stores.
Family serving on the board and
management team can lead to a limited
vision – 35% insider ownership.
Shareholder: Family continuity
provides stable company worth the
investment. $500 million credit line
intact.
Stock slumped badly in 1999. Outsider
analysts’ views negative.
36% of square footage in California.
Behavior controls: Family ownership
and management early on. Company
public in 1971.
Output controls: Has Internet presence,
direct-mail catalogues reach wide
audience, 114 stores in 23 states,
Nordstrom’s credit card.
Page 1
27 states not covered, diversifying into
Racks may diminish perceived value.
I.B. Strategic Posture:
Mission
Objectives
What, when, & quantified
Strategies
2 philosophies: focus on customer –
outstanding service, selection, quality,
and value; select managers from
among employees with sales floor
experience.
No real mission stated – could cause
confusion and makes strategic planning
very difficult.
The what and when and how are
answered.
Steady growth increases stakeholder
security.
What does the top quartile mean in
sales figures or in increases – does it
pertain to stores – the amount of square
footage – what? Total shareholder
return sounds nice, and is the bottom
line – but what does it mean for the
company?
Good marketing slogan – will they?
Aggressive store expansion, new store
layout.
New buying structure will reduce costs.
Emphasize merchandise and service
tailored to appeal to affluent and
fashion-conscious shoppers.
Do not lose middle-class customers.
Offered unparalleled attention to
customers, guaranteed service, and
wide & deep line of merchandise.
Merchandise selection, local tastes, and
customer preferences shaped what
stores looked like inside.
Focusing on goals provides superior
service to customers.
Chance of alienating existing customer
base.
Costs will be extremely high.
Page 2
Time to implement this strategy not
given.
Chance of losing interest of middleclass shoppers – could take offense.
Inventory costs and labor hours high,
store frontage and square area
extremely large.
Some continuity from store to store is
lost.
Focus on attracting 25-30 year
olds
Move into top quartile
Sustain growth of 3 to 5 new
stores/yr, of 150k to 250k sq/ft.
15 new Rack stores by 2001.
Distribution centers for new areas
to Nordstrom’s.
Reinvent yourself
Shift from regional to national
approach
#1 in service in country.
Goal orientation of employees.
Carry a good percentage (30) of
specialized inventory of r each
store or region.
Policies
Control of marketing message allows
them to tailor it according to desire.
In-house advertising and marketing cut
costs.
Return policy improves customer
satisfaction.
Each Bus. Unit developed own planning
strategy (buyers when applicable).
Operational Mngmnt. Store Mngr duty.
Idea generation and operat’l dec.
making encouraged, expected and
supported wherever employee had
approp. Info. Units and indiv. Goaldriven and rewarded for achievements.
Employee heroics provide behavior
standard.
Costs are high for large campaign.
Also reduces the amount of people, and
customer base, reached. Do they
possess enough expertise to pull off a
major campaign?
RP also adds costs, as does the
personalized services offered to the
customers – is it worth it?
Could cause conflict with overall
strategies or objectives.
Personal agendas often cause internal
conflict in stores.
Who determines what appropriate info
is?
Motivation is on ends not means.
Stress is potential problem.
Entertain customer, special
services, return policy.
No promotions – 3 major sales
events, in-store advertising, inhouse marketing.
Goal oriented - attention to
customer is focus.
S.W.O.T. Analysis Begins
II. STRATEGIC MANAGERS
II.A.
Board of Directors
Chairman has strategic management
responsibility – sets strategic direction
and major expansion decisions.
Co-pres. Oversee nine business
operating units.
Sense of continuity with family presence
in company management. Two women
on board shows desire to diversify
Could become stagnant.
All co-pres. in mid-thirties and white,
chairman in mid-forties, ex. Committee
all young old men. All of top
management appears to be Caucasian
– no diversity here.
Less industry experience here.
COB: 45yr old J. Whitacre
6 co-presidents – 4th gen
Nordstroms
3 previous co-chairmen now
serve as executive committee on
board. Chairman – 66 (Male
Nordstrom), President – 39 (MN),
President of Nordstrom.com –
37(FN), Executive VP – 46 (MN
In-Law), Exe. VP. – 48 (F).
II.B.
Top Management
43% of officers of vice-pres. And higher
and 61% of store mngrs were women.
Five of nine bus unit mngrs women, by
1997, and 22% managers were
minorities. Inverted pyramid stresses
sales, and department managers, while
top management rests at the bottom,
making strategic decisions.
Fast becoming a female dominated
orgz – this also holds threats of
becoming stagnant, with only a feminine
point of view (70% of workforce).
General managers oversee nine
business operating units,
divisional merch. Mangrs, rgnl
mngrs, corp. staff offcrs NW, CA,
E Coast, MW, and Rack
Clearance and Off-Price stores.
Direct Sales, Faconnable
Boutiques, Nordstrom Prod.
Group, Nord Nat Credit Bank.
Middle Management
Page 3
.
III. EXTERNAL
ENVIRONMENT:
[Optional External Factor
Analysis Summary, or
EFAS]
Page 4
III.A
Societal Environment
Socio-Cultural
Political-Legal
Economic
Technology
Baby Boomers cohort trends to spend.
Value conscious shoppers see
Nordstrom’s as providing higher value
in services and return policies.
NAFTA provides some new
opportunities.
Employ a majority of women in sales
force.
Income levels are increasing –
Nordstrom’s could expand customer
base.
Internet presence is critical for growth
into new regions and improves the
customer information and knowledge
for both Nordstrom’s and the consumer.
Dual income families expand potential
customer base.
Higher standard of living equates to
more customers.
Page 5
Minority groups expanding in numbers –
Nordstrom’s does not target them.
Casual dress has become more
prevalent, which leads to projected
apparel sales decreases. Without
advertising or promotions, Nordstrom’s
could easily lose market share to
competitors.
Increased stressors on families – mean
less time to shop.
AIDS reaching epidemic proportions,
people dying off, slowly.
Employment laws address the concerns
of discrimination at Nordstrom’s
Diversity, as far as minorities, needs to
be focused upon.
Must stay on top of style changes and
trends in apparel industry.
Trade Agreements – NAFTA,
etc., Employment laws, American
w/ Disabilities Acts, Diversity.
Average number of children
decreasing.
Poverty levels increasing
Average income of devlpd and
undevelpd nations increasing.
World population growing to
reach 7.32b by 2010.
Number of nations increasing.
Trade increasing $5tr to $16.6tr.
World economy growing $26tr to
$48tr, by 2010.
Average life expectancy rising.
AIDS cases increasing.
Telecommunications computers
and related technology increasing
– Internet.
Automobile production increasing
rapidly in dvlpng nations.
Entertainment industry
burgeoning.
Air travel, credit card
transactions, McDonald’s
restaurants (fast food industry),
communications satellites,, golf
courses, casinos, Int. value of US
dollar all will increase
tremendously in the next ten
years, as consumer inflation will
decline.
III.B.
Task/Industry
Environment
Shareholders
Suppliers
Customers
Competitors
Governments
Trade Associations
Labor Unions
Committees
Special Interest Groups

Bricks and clicks – going to enhance
customer value (perceived), and
expand customer base.
Overhauling their purchasing strategies
should lead to reduced costs.
Customers are fairly loyal to
Nordstrom’s.
Outgrew major competitors with
aggressive growth.
Well known for excellent sales staff.
Federated, Nieman Marcus, and May
stores all have increased the
competitive advantage in different
areas.
Could alienate existing suppliers.
Nordstrom’s needs an advertising or
promotional effort to stem the tide of
lower market share.
Potential customers may be blocked by
a mental picture of stodginess.
Diversity still seen as a problem, many
lawsuits and affirmative actions taken
against Nordstrom’s.
NAFTA, other Trade agreements.
Too many catalogues and stores,
along with discount stores. Cost
management, and consolidation
INTERNAL ENVIRONMENT
IV.A.
Corporate Structure
Good decision to form divisions – may
lead to higher profitability. Somewhat
decentralized by operational decisions
being passed to General Managers of
stores.
Too many family members controlling
and making a majority of decisions.
Store managers make many of
the important decisions regarding
their stores.
Inverted pyramid: Store mngmnt
level, the mid-level – 9 business
unit managers, and the executive
level.
IV.B.
Corporate Culture
Customer focus, do anything to retain
customer. Extravagant stores.
Promotions come from within and are
based on outstanding sales and
customer relations(rewards). Continuity
with customer contact adds to
Nordstrom’s mystique. Goal driven.
Sometimes expectations can be set too
high, leading to employee failure, in
both customer service and sales goals.
Goal orientation leads to high stress
levels.
Family controlled.
IV.C.
Corporate Resources
Employs multiple channels to reach
customer. Spends 2% less than
competitors on advtsg. Great reputation
for quality and service.
Is Nordstrom’s capable of affording to
reinvent themselves? Does their
message reach enough potential
customers in minority ranks and twoincome families?
Main stores, Rack, Internet,
email, and catalogue. Reinvent
yourself
MC1
Marketing
Page 6
MC2
Finance
Ratios and indicators suggest
Nordstrom’s is stable. Not much debt
utilization to fund growth. Share value
improved from 88 ($7.86) to 97
($19.34).
Return on Equity and Return on Assets
have both decreased steadily, over the
years, but appear to be on the upswing
again. Low returns, must realize some
cost-cutting.
Stock price low, currently.
MC3
Research and
Development
Based on direct customer feedback –
relative to their desires not trends.
Ebusiness would provide better returns
than interactive
Nordstrom’s not quick enough in
responding to recent trends through.
TV.
MC4
Operations
(Manufacturing
services)
Very large inventory.
Strong distribution system serves stores
in geographical areas. Stores
strategically located in affluent
communities. Large base of suppliers
(12k to 15k).
Breakdown of 70% shared styles for all
stores and 30% unique to each region
assists in maintaining image.
Cost is extremely high to maintain and
labor intensive.
Too much concentration in California.
Human Resources
Good rewards for attaining goals
(compensation). Not a large amount of
turnover, surprisingly.
Strong values dictate younger sales
force with degree. Sales mngr hires.
Promotions happen from w/in the sales
force. 31% of workforce is minority.
High pressure sales lead to gigantic
stress.
70% of sales force are women –
reverse discrimination.
Missed sales quotas, 3 months in a row
leads to dismissal.
MC6
Information Systems
Information systems lead to improved
inventory ordering and vendor services
and relations.
Web site promotes product lines and
increases orders.
Need for improved intranet system for
internal transfer of data.
An employee data base for customer
information might also prove invaluable.
(+) Factors
(-) Factors
Page 7
ROE
.13
.10
.12
.15
.12
Some continuity lost from store to store.
MC5
V. ANALYSIS OF STRATEGIC
FACTORS
(Optional: Strategic Factor
Analysis Summary, or
SFAS)
98
97
96
95
94
ROA
.065
.055
.060
.085
.064
HANDBOOK: Use good
judgement in all situations.
.
V.A
S.W.O.T
Key Internal and
External Strategic
Factors.
STRENGTHS:
WEAKNESSES:

Public image has attained most
goals – excellent reputation as a
Herculean customer service
retailer.

Past financial troubles have some
predicting a return to form.


No International presence,
minorities not targeted for apparel.
One of the tops in fashion retailers.


Lawsuits tarnished public image.
Distribution channels


Family stranglehold on company.
Financial ratios on upswing


Decentralized managerial approach
leads to better decisions.
Huge inventory lowers style change
responsiveness and escalate costs.


Too much California dependency.
Sales per square foot solid.


Community service projects helped
to regain some of the public image.
Lack of current effective strategic
direction.

Alienating current customer base.
OPPORTUNITIES:
VIII.
Customer service expectations
increase each year –
IX.
International and regional
markets.
X.
Price-sensitive shoppers’
needs.
XI.
Global Economy: NAFTA,
Asian Pacific Rim, European
Economic Community, South
American Union, etc., facilitate
trade and therefor sales.
Page 8
THREATS:

Competition heightened among the
main three rivals.

Increased alienation of customer
base through reinventing yourself –
“Why am I not good enough?”

Unions may cause problems

Afro and ethnicity discrimination
based lawsuits may continue.

Markets are maturing in the US and
elsewhere.

Recession in California.

Causal Fridays may cause
decreased sales.

Outlet stores and lower priced
retailers.
V.B.
Review of Mission and
Objectives
STRENGTHS:
WEAKNESSES:

New inventory and purchasing
systems implemented.

Not targeting burgeoning minorities.


Capturing more of the female
market share, through the targeting
of a younger age working woman,
allows complimentary clothing
designs.
Does not specify how top quartile
will be met.

Growth is emphasized when
financial situation does not reflect
capacity.

Cstmr service expectations
exceeded.

Quantifiable
THREATS:

This is a race between Nordstrom’s
and its competitors to locate and
occupy the most affluent
neighborhoods, within the major
cities across the nation.

Competitors are in an average of
ten States more than Nordstrom’s.

Union, labor, minority and other
concerns must be overcome.

Becoming too female dominated in
the workforce – 70% is a form of
reverse discrimination.
OPPORTUNITIES:

Expand shoe stores Internationally.

Expand Internationally.

Regional expansion of main stores
and shoe stores and Rack stores
are possible, providing enough
revenue can be generated.

Minorities, especially Hispanics,
Asians, and African-Americans
provide a huge potential market.
S.W.O.T. Analysis Ends
VI. STRATEGIC
ALTERNATIVES &
RECOMMENDED
STRATEGY
VI.A.
Strategic Alternatives
ADVANTAGES
DISADVANTAGES
Page 9
Alt.1
Growth Strategy: Related
Diversification
Explore all Cities within the US,
with major markets likely to
support a store, and which type:
a Racks or Nordstrom’s.

Already have two different stores,
covering the extremes of high-end
and low-end retailing.

Growing larger will increase debts
and possible problems with
stakeholders.

Push with both into appropriate
markets, pre-anticipating the
competition’s moves.


Will increase the Nordstrom image,
and reach a larger customer base.
Will mandate a task force or
committee be formed to examine
issues concerning minorities;
clothing, shoes, and store layout.

Utilizes Nordstrom’s perceived
customer service excellence
advantage.
Expansion may diminish the
Nordstrom mystique.

Expansion can also threaten the
normal transfer of culture to new
Nordstrom’s.

Low risk.

Low returns.

Less resources committed.


Less cost and expenses.
New investigative committees must
be formed.

Debt not increased dramatically.

Potential to lose market share to
competitors is great.

Might lose competitive growth
advantage.

Might lose whole target market
segments to competition – ie:
FUBU.

Stakeholders’ and Shareholders’
relations may become strained.

Net assets will be reduced.

Public image may be negatively
affected – ‘wishy-washy.’

Reinvent yourself campaign may be
construed as revert to your old self.

Alt.2
Stability Strategy:
Pause/Proceed with Caution
Must gather all the facts
concerning International markets
and Minority markets
penetration.
Alt.3
Retrenchment Strategy:
Divestment
Sell off Racks stores and
anything else that gets away
from original culture of affluence.

Overhead greatly reduced.

Less inventory.

Consolidation will hone focus and
reinvent themselves
simultaneously.

Will allow focus on Minority target
markets and International pursuits.
Page 10
VI.B.
Recommended Strategy
Growth Strategy: Related
Diversification coupled with
Stability Strategy of
Pause/Proceed with Caution and
Retrenchment Strategy of
Divestment of all things not
affluent.
VII. IMPLEMENTATION

Strong footholds in Affluent Apparel
and Shoes will require minimal
attention and energies to maintain.

Requires long-term commitment to
task forces and committees
dedicated to research.

Diversification into untapped
minority markets will lead to
exponentially increasing sales and
growing markets.

Requires more R&D funds be
diverted to researching potential
markets.


Examining minority markets will
lead to a better understanding of
them – more sales, and an
enhanced public image.
Public may see Nordstrom’s as
elitist.

Customer service will be
compromised due to changes,
unavailable merchandise, etc.

Marketing should be divided into
national and International branches.

Web site will have to be expanded
to contain an International section
which will require translation
software and International
operators.

Ethnic focus will require new
thinking and planning for store
layout and design.

Less inventory initially, will lead to
more inventory, but of many
standard items.

Will provide more focus for
Nordstrom’s in-house marketing –
affluent customer base, regardless
of ethnicity.

Can focus on expanding revenue
through catalogues and the Internet
versus building.

Must restructure the existing
business units to accommodate an
International branch.

Fully integrated Intranets will allow
better information transferal
between units and Management.
Page 11
XII. E VALUATION AND
CONTROL
(ASSESSMENT)

Sales and revenue.

Marketing must be evaluated
through measures beyond sales
and generated revenue – surveys,
etc.

R&D, task forces, and committees
must comprehend what it takes to
sell to affluent peoples of all races.

Intranets must be expanded to
include new focus and exclude
divested ones.

New management team must be
hired for International unit(s).

Monitor major competitors.

Transportation costs will increase
and warehousing overseas.

Marketing costs will increase.

Manufacturing costs will increase
and inventory.

Distribution Channel Management
is critical for smooth integration.

Cultural and national differences
must be accounted for.

Payroll will increase.
NOTES:
Page 12