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Nordstrom Inc. Ltd.

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Nordstrom Inc. Ltd

Company Overview
Nordstrom Inc. was established in 1901 as a retail shoe business in Seattle, Washington. The
business was established under the guiding principle that the success of the business would be
achieved by offering quality products and services to customers that meet their needs. The
business offers high-quality brand-name and private-label merchandise for men, women, young
adults, and children, focusing on shoes, cosmetics, accessories, and home goods (Nordstrom Inc.,
2022). Nordstrom is the leading destination for the breadth of products. Establishing an effective
strategy for meeting the company's objective is essential to its success. Designing an effective
strategy requires analyzing the internal and external factors in the business environment.
Customers, market position, organizational culture, and employees are essential to developing an
effective strategy (Lofgren, 2018).

Generic Business Strategies of Nordstrom

Generic strategies help a company address the competitive forces in an industry and maintain a
competitive edge over other companies. The generic business strategies are discussed along;
strategic scope and strategic strength dimensions. The strategic scope dimension is largely
associated with demand, while strategic strength is associated with the supply side (Islami &
Latkoviki, 2020). Nordstrom has adopted the following several generic strategies to achieve its
objectives for growth;

Cost leadership

Core leadership involves lowering product and service prices to gain a competitive advantage. It
emphasizes company efficiency by requiring continuous product development through cost-
effective operations in all aspects of a business. It allows a company to build an advantage against
its competitors by being the lowest-cost producer. Cost leadership is Nordstrom's primary generic
strategy in various customer markets. Cost leadership aims to ensure competitive advantage
through effective value chain management. The cost drivers determining the cost behavior of a
value chain include interrelationship, integration, timing, secretory policies, economies of scale,
and institutional factors. The cost leadership strategy allows Nordstrom to increase its market
share by targeting various consumer segments. Nordstrom frequently offers discounted prices and
coupons to increase its sales volume, minimize competition, and increase consumption (Tanwar,
2013). The cost leadership strategy aligns with the company’s growth strategy. Several risks have
been linked to this strategy, including technological changes that can erase previous investments.
Second, risk of product imitation by new entrants with low-cost learning. Third, the exclusion of
customer preferences and need due to prioritization of cost reduction. Finally, unexpected inflation
in costs thus affecting the company’s ability to address product differentiation (Islami &
Latkoviki, 2020).

Differentiation
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Differentiation is one of the generic business strategies. Differentiation involves the capacity of a
company to produce something unique and valuable to its consumers. Firms widely use
differentiation to achieve competitive advantage by distinguishing themselves from competitors
through their products and services. According to Porter, a differential strategy promotes customer
loyalty (Islami & Latkoviki, 2020). Using differential as a generic strategy allows companies to
expand their customer base and increase sales volume by emphasizing unique product features.
(VanDusen, 2019). The company’s differentiation advantage comes from strong customer
relations, firm linkages, and product features.

Nordstrom's adoption of this differentiation strategy is based on innovation and addressing diverse
client needs. The company frequently improves its products and offers high-quality services
addressing customer needs and increasing their preference for Nordstrom products. More so, the
company continuously extends its product line to address the changing customer interests.
Nordstrom offers various products and unique tastes that meet customer needs. This allows the
company to maintain a competitive advantage and expand opportunities in the industry. Also, the
brand logo of the firm sets is embedded in its differentiation strategy. The company has a unique
and distinctive logo that promotes customer brand recognition. Furthermore, the combination of
cost leadership and this strategy has allowed the company to expand its customer base.

Some of the risks associated with this strategy include increased cost differential between low-cost
retailers and the company, thus reducing customer loyalty. Second, product imitations can
minimize perceived differences between products. Finally, low performance from the
differentiating company can lead to a decline in competitive advantage (Islami & Latkoviki,
2020).

Focus strategy

Focus as a generic strategy encourages companies to utilize their resources to expand their target
segment. Focus strategy allows companies to serve a specific market segment and focus theory
competition on that segment. Nordstrom focuses on its product attributes to improve its design and
packaging to promote customer satisfaction and maximize value for money. The low-cost
approach serves the needs of a market niche with the most affordable prices. The best value
approach emphasizes taste, size, and product design that matches customer needs. Nordstrom
continuously updates its branding strategies, product design, and packaging to satisfy customer
needs and offer value for money.

Regardless, there are several risks associated with this strategy, including increased cost
differentiation between brand-range competitors, and the company can offset the differentiation
and turn consumers to other firms offering similar broad-range products. Second, competitors can
find a submarket within the target market of the Focus Company and outperformer the focus
company (Islami & Latkoviki, 2020)

Nordstrom Business Strategy

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Nordstrom prides itself on excellent customer service. Also, the company has an excellent return
policy that seeks to improve customer experience. The company allows clients to return
merchandise via mail or any store location. The company accepts returns of products with original
receipt tags and sale receipts up to thirty days from the purchase date. Furthermore, the company
offers a customer loyalty program and provides customers exclusive access to products, services,
and a personalized shopping experience (Nordstrom Inc., 2022). The business strategy ensures that
the company meets customer needs.

The business strategy of Nordstrom has several advantages, including extensive support for
product development through continuous improvement of product and service delivery, an
increase in the company's capacity to improve its strategies and processes based on the market,
and an increased competitive advantage. However, there are a few disadvantages, such as limited
autonomy of the product-associated divisions and restricted expansion of business operations in
regional markets due to reduced priority in the geographical grouping organizational component.

Nordstrom Business Model

Nordstrom utilizes customer solutions focused on making the customers appreciate the company's
efforts in providing them with customized products and services that meet their needs. Nordstrom
values its customer and wants shopping to be pleasurable for its clients, whether online or in-store.
Nordstrom continuously changes its products and services based on customer needs; for example,
in 2022, the company added free shipping and returns to its catalog to enhance the customer
shopping experience. Nordstrom utilizes all its resources and shopping channels to ensure
increased customer value.

A company's value proposition is the marketing strategy that a company utilizes to highlight the
value of its product and its superiority to other existing products. It persuades customers to buy its
product by convincing them it will add value to their lives. The value proposition f Nordstrom can
be described as quality, value, selection, and service.

Nordstrom has two profit-generating segments; retail and credit. The credit segment comprises
wholly owned federal saving banks, through which the company provides privately labeled credit
cards, VISA credit cards, and debit cards. These cards feature shopping-based customer loyalty
programs to increase their sales volume. The company generates revenue from finance charges
and other fees on these cards. The retail segment comprises branded full-time stores, online stores,
off-price stores, clearance stores, and other retail channels. The company generates revenue by
offering several high-quality brand names and private-label merchandise.

Nordstrom Corporate Strategy

Nordstrom began as a retail shoe business and expanded its product line to include high-quality
cosmetics, accessories, and home goods. The company purchases its products from domestic and
foreign suppliers. Also, it utilizes unique inventory models providing broader assortments in new
and existing categories. The company has agreements with contract manufacturers and agents to
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produce privately labeled products. Nordstrom strategically purchases merchandise from top
brands before an upcoming peak sale season to minimize the inventory gap in the supply chain
(Nordstrom Inc., 2022).

Nordstrom is vertically integrated into its supply chain due to the participation of several
stakeholders. Nordstrom outsources its fabric externally. The company participates in several
stages of its value chain, such as retailing and after-sale services. These activities place the
company close to the product's final consumers. Thus, the company is one of the participants in
the last stages of the supply chain and thus has a direct interaction with its customers. The supply
chain network of Nordstrom comprises three fulfillment centers, six distribution centers, and one
omnichannel center. The fulfillment centers process and ship orders to clients, while the
distribution centers process and ship merchandise to the company stores and other stores. The
omnichannel center fulfills customer orders and ship merchandise to stores (Nordstrom Inc.,
2022).

Nordstrom incorporates global alliances as part of its corporate strategy. The company has entered
several global alliances to increase its market share. 2012 the company purchased Top Man and
Top Shop to increase its competitive advantage among young customers. It was the only retailer in
the United States to own the two British brands. Presently, the company operates two hundred and
sixty-one stores in thirty-five states (Edelson, 2021). The company has alliances with several other
firms, including Allbirds, Reformation, and Greats. The company has also hosted "pop-up" shops
for jewelry and cult beauty bands (Edelson, 2021). The global alliances established pave the way
for a wider strategy for the company to increase its sales and competitive advantage in the
industry.
Corporate Structure of Nordstrom

Nordstrom operates a vertical corporate structure with key executives, board members, and
executive committees running the firm. The company’s corporate governance seeks to support its
tradition of integrity, trust, and commitment to the right thing. The board of Directors oversees
and advises management in the interest of the company and its shareholders. The executive
committees that run the organization include the audit committee, compensation committee, fiancé
committee, technological committee, and corporate governance and nominating committee. Each
committee has an approved charter reviewed yearly (Nordstrom Inc, 2017).

The executive committees present in the company have diverse functions. The audit committee
reviews accounts, audit, and financial reporting processes and ensures regulatory compliance. The
compensation committee reviews the company's compensation practices for employees. The
fiancé committee assists the Board of Directors in fulfilling oversight responsibilities related to the
company's capital structure, financial policies, investments, and business and financial planning
(Nordstrom Inc, 2017).

Nordstrom believes establishing the best customer experience begins with creating a suitable
employee environment. The company seeks to ensure high employee retention by cultivating a
work culture that promotes diversity, inclusion, and active employee participation. Nordstrom has
approximately sixty thousand employees comprising eight percent hour and twenty percent
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salaried employees. Approximately seventy-five percent of employees support the company's

store, and twelve percent support its supply chain network (Nordstrom Inc., 2022). The seasoned
nature of the company makes the number of temporary employees vary.

Nordstrom is committed to enhancing a diverse and inclusive environment. The company believes
in fostering a greater representation of diversity in its workforce. The company has increased its
diversification and inclusion efforts. It has set the following objectives to be achieved by 2025:
increase retail sales design by minority ethnic groups and increase the representation of diversity
in its management. The diversification and inclusion progress of the company is continuously
monitored by its executive team and Board of Directors.

Strategic Fit of Business and Corporate Strategies

Business strategies address decisions linked to product choice, competitive advantage, and
customer satisfaction, while corporate strategy addresses the overall objective of business to fulfill
stakeholder expectations. Major investment decisions are made at corporate-level strategies.
Mergers and acquisitions are an important component of corporate strategy. They can only occur
in businesses operating more than a single business area with different business units and
business-level strategies that should align to ensure consistency at corporate-levels strategy.
Hence, corporate strategies are largely utilized in multinational companies or conglomerates.
Regardless, business and corporate strategies play an important role in the success of an
organization. These strategies rely on each other for the company to compete successfully in the
electronics industry.

Nordstrom has achieved a good strategic fit between its business and corporate strategies. This is
evident in their products and competitive advantage. Nordstrom's business and corporate strategies
blend in with the company's efforts to promote customer satisfaction and competitive advantage in
the industry. The excellent customer service business approach allows the company to improve its
product, processes, and services based on customer needs. Combining business and corporate
strategies gives the company a strategic position in the industry. Nordstrom's business and
corporate strategies align with the company’s objectives and provide an opportunity for expansion
and ensure the success of the company.
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References

Edelson, S. (2021, July 12). Nordstrom And Asos Announce A Joint Venture Aimed At Attracting
Gen Z. Retrieved from Forbes:
https://www.forbes.com/sites/sharonedelson/2021/07/12/nordstrom-and-asos-announce-
a-joint-venture-aimed-at-attracting-gen-z/?sh=2dd4e1b913a7

Islami, X., & Latkoviki, M. (2020). Linking Porter’s generic strategies to firm performance.
Future Business Journal, 6(3). doi: https://doi.org/10.1186/s43093-020-0009-1

Lofgren, J. (2018, February 28). How To Improve Your Strategic Plan. Retrieved from Forbes:
https://www.forbes.com/sites/forbescoachescouncil/2018/02/28/how-toimmediately-
improve-your-strategic-plan/#683562d525c2

Nordstrom Inc. (2017). Nordstrom Proxy Statement. Washington D.C: Nordstrom.

Nordstrom Inc. (2022). Nordstrom Annual Report. Washington D.C: Nordstrom.

Tanwar, R. (2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and
Management, 15(1), 11–17.