Nordstrom Company Analysis Essay
Table of Content
Abstract 3
Company Background and Basic Facts 4
Vision, mission and goals 5
Structure 6
External Environment 7
Management Change 11
Cultural and Ethical Values and Practices 12
Workforce diversity 15
Management of Training 16
Unique Practices 17
Nordstrom’s Leadership Style 17
Recommendation 20
References 21
Abstract
Nordstrom is a leading upscale fashion retailer in the United States. In this essay, our team will present an organizational analysis for Nordstrom from different aspects including company mission and goals, organization structure including the use of teams, business environment, management of change, organizational culture and ethical values, management training, and leadership styles. Then …show more content…
we will give a recommendation for the company going forward.
Company Background and Basic Facts
Started with a small shoe store in downtown Seattle in 1901 by Mr.
John W. Nordstrom, who came to the United States from Sweden at the age of 16 with only five dollars in his pocket and no English at all, Nordstrom has grown into a global fashion specialty chain with its focus on customer services. (Company History) Today, Nordstrom’s two reportable segments include Retail and Credit. In the Retail segment, there are a total of 242 Nordstrom stores in 31 states, including 117 full-line stores, 121 off-price Nordstrom Racks, two Jeffery Boutiques, treasure & bond and one clearance store, and not to mention Nordstrom’s fastest-growing online business through Nordstrom.com. And through these multiple retail channels, Nordstrom is always trying the best to make its customers’ shopping experience convenient and fun by offering a wide selection of high-quality brand name and private label merchandise focusing on clothing, shoes, accessories, cosmetics, and, of course, a range of services. The Credit segment includes Nordstrom’s wholly owned federal saving bank, two Nordstrom VISA cards and a debit card. This segment was established to strengthen customer relations by a shopping-based loyalty program that will increase customer visits and spending. The company also generates revenues from the Credit segment by financial charges from the cards and other fees that occurred from the Retail segment. (Company Annual Report, …show more content…
2013)
In this essay, we are going to make a recommendation for Nordstrom as an organization after analyzing the company from the following aspects: company mission and goals, organization structure including the use of teams, business environment, management of change, organizational culture and ethical values, management training, and leadership styles.
Vision, mission and goals
“At Nordstrom, our goal is to provide outstanding service every day, one customer at a time” (Our Structure)
From the beginning, Mr.
Nordstrom set up his business approach to bring customers exceptional selection, quality and value. This mission hasn’t changed after over 100 years of operations. In this highly competitive business environment, Nordstrom believes that the keys to competing in its industry are customer services and creating a great customer experience in store and online, which includes compelling price and value, fashion newness, quality of products, selection, convenience, technology, product fulfillment, service and stores in top locations.
"Here at Nordstrom, our people and their enthusiasm for service make all the difference.” (Our Culture) Due to the seasonal nature of the business, Nordstrom employees approximated 61,000 employees on a full- or part-time basis, and employment increases in July and December due to its Anniversary Sales and holidays. (Company Annual Report, 2013) Nordstrom believes that the best way to provide extraordinary customer service is by ensuring that its employees reflect the community they serve. Among Nordstrom’s entire employee population, 42% are people of color and 72% are women. (Diversity at
Nordstrom)
Structure
“We work hard to make decisions in the best interest of our customers and those serving them.” (Our Structure) This Inverted Pyramid above represents Nordstrom’s philosophy and structure. The customers are always at the top, which explains Nordstrom’s devotion to customer services. Next are salespeople who serve directly to the customers and those who support them. Department managers, store managers, regional managers, buyers, merchandize managers, executive team and board of directors all support those above them on the pyramid. This unique Inverted Pyramid of Nordstrom’s structure resembles the company’s value and mission that puts its customers first and support those who are closest to its customers. They are dedicated to work towards the best interests of their customers.
External Environment
As is mainly operating in the United States, Nordstrom is one of the leading fashion retailers in the U.S. retail industry.
General environment – PEST Analyze
Political
Nordstrom, the Seattle-based chain operates totally 234 stores, including 113 Nordstrom Rack sites all over the United States. So it is mainly bounded by the United States’ commerce policies and laws. Although Nordstrom does not have international stores yet, it has served customers in 44 different countries with its online store (Nordstrom, 2013). With the developing of Nordstrom, its expansion strategy indicates that Nordstrom is going international. However, the different countries’ barriers will limit Nordstrom’s expansion. For instance, Nordstrom will enter the Canadian retailing industry in 2014. The arrival of Nordstrom will definitely take a big bite out of the flagship stores of HBC, Holt Renfrew, Harry Rosen and Sears (National Post’s Financial Post & FP Investing, 2013). However, Nordstrom is facing other challenges regarding to its expansion to Canadian market. The Canadian dollar is unstable, which will indirectly influence the expectation of Nordstrom. Since Nordstrom may need to assign some employees for United States domestic to Canada, an issue may occur which cause by Canadian immigration and labor law.
Economy
United States Economy was crashed by the Great Recession began in late 2007 and is still needing time to recover. According to the statistic from the World Bank, the U.S.’s GDP growth rate was -0.4% in 2008, -3.5% in 2009 and 3.0% in 2010 (Worldbank, 2013). Although it grew back in 2010, the U.S. economy did not pick up the same level as it was before the Great Recession 2007. The population, though, also grew in these years. Comparing to the time before the recession there are still 2.6 million jobs fewer. According to Heidi Shierholz, an economist at the liberal Economic Policy Institute, the economy needs additional 8.6 million jobs, instead of 2.6 million, in order to be suitable for the rising population (USCB, 2013).
In 2011, median household income of United States was $50,054, which is 1.5% lower in real terms than the 2010 median, 8.1% lower than the 2007 (the year before the most recent recession) median ($54,489), and 8.9% lower than the median household income peak ($54,932) that occurred in 1999 (Carmen DeNavas-Walt, Bernadette D. Proctor, Jessica C. Smith, 2012)
Sociocultural
United States is a Multilanguage country. Other than American English there are four major language groups in the whole country; Spanish, other Indo-European, Asian and Pacific Island, and all other languages.
According to the United States Census Bureau, the United States population on May 1th, 2013 was 315,773,955. There is one new birth every 8 seconds, one death every 12 seconds and one international migrant every 44 seconds. About 24% of the populations are under 18 years of age. 18 to 44 years are about 36.5%, 45 to 64 years about 26.4%, 65 years and over 13%. As California and Texas ranking the most populous states, about 60% of the nation population are distribute in the southwest. Whites (contains both White non-Hispanic or Latino and White Hispanic or Latino) constitute the majority of the U.S. population with a total of 72.4% of the population. Other race categories are Black or African American, American Indian or Alaska Native, Asian, and Native Hawaiian or Other Pacific Islander (USCB, 2013).
The social class structure in the United States is shaped as a rhombus. Upper class, who has a household income of $1 million or more, receives almost 5% of the income of the United States, contains the least population (1% of the population). Followed by the upper middle class (15% of the population), household incomes commonly exceeds $100,000. Then, the lower class (20% of the population), usually occupy poorly-paid positions. Working class has the second large population (30% of the population) while the lower middle class, typical white collars, household income roughly range from $50,000 to $100,000, has the largest population (34% of the population) (USCB, 2013).
Technological
What major matters for the retail industry is purchasing and selling – purchasing from the manufacture and selling to the consumer. Sophisticated Point of Sales system, also known as POS system, is the most common system that is using in the whole retail industry. It allows retailers to track its buying history and units sold. Since customer service is the most important element for the whole retail industry, knowing customer’s preference becomes the ahead of all.
By the time of 2012, more than 2.4 billion people are using the internet service, which is over one-third of the world’s population. Shopping online, now a days, cannot be more convenience and hotter. One can basically get everything he needs whether for living or not from one click though the internet. Nordstrom also started its e-commerce business in 1993. EDI: Electronic Data Interchange system is used to transfer data between computer systems or networks is commonly used for e-commerce.
These two systems are the most common ones we can see using in daily retail life. Other than these two systems, there are hundreds and thousands IT systems that are using among the whole retail industry. It seems like all the big high tech companies are stepping into develop organization use systems, IBM, Dell even Microsoft. We could not say there is a best system for use, but there will be a system best fits an organization.
Competition environment
Industry
Retailing might be the biggest category among all the industries. It is said, by the United States Department of Commerce, that total sales from the more than 3.6 million retail establishments in the United States reached about $2.5 trillion in 2011, and retailers supported more than 42 million jobs in the United States. This sales amount was expected to increase for 2012. However for the apparel retailers, spending in the apparel retail industry had declined every quarter since the third quarter of 2008. While spending in apparel showed some signs of recovery in 2010, the 2009 same store sales still showed that consumers had traded down in price points. As it was mentioned before, although recovering, unemployment is still high and discretionary spending will still keep low for a while. So a depressed trend is expected to continue in the apparel retail industry.
Competitor
Bloomingdales, Lord & Taylor, Neiman Marcus, and Saks Fifth Avenue are all equal size competitors of Nordstrom.
Nordstrom has the competitive advantage by having the outstanding customer service which differentiates themselves from other rivals. The competition among the department stores is high.
Management Change
Facing the depression economy and strong competitors in the United States, in year of 2012, Nordstrom announced its expansion plan in Canada. Followed by the plan, starting in the fall of 2014, Nordstrom is opening 4 stores in Calgary, Ottawa, Toronto and Vancouver.
It was announced by the Colliers International Consulting, a real estate research firm, that sales per square foot at Canadian malls were almost 50 percent higher in 2011 than sales per square foot at American malls. Such sales figure could be a real attraction for American retailers and for Nordstrom. Though the allure can be so strong, it is difficult for a firm to enter another country. “You can’t just say that we are close in proximity or we both speak English, so it should be the same,” said Blake Nordstrom, president Nordstrom. Canada has two major languages, English and French. Canadian dollar is not as strong as American dollar, and Canada only has about one-tenth of the United States’ population, so the cost in Canada would be higher than in America. Furthermore, said by the director of retail consulting at Colliers, “We have a much more conservative development financing and development industry in Canada. There’s not as many lenders for retail and large-scale shopping center development, so finding access to capital is trickier.” For an apparel retailer as Nordstrom, one of the big challenges for them would be the different demand of Canadians from Americans. Canada is a Frigid Zone country. Costco, which entered the Canada market in 1985, gives good examples, stores in Canada carries children’s snowsuits beginning in July, items like skiwear and snowshoes are selling well.
Strategy to that, Nordstrom is taking over three of former Sears Canada locations. Said by Blake Nordstrom, Nordstrom stores in Canada would contend with different distribution arrangements for brands it now carries.
Cultural and Ethical Values and Practices
Nordstrom’s vision of running a business is simply put as “leave it better than you found it,” and it prides on doing right for the customers as well as the employees. Organizational culture plays a vital role in the success of the company, in which it adds great value that is rewarding for the customers and the employees. Nordstrom describes their culture as not only striving to offer their customers the best possible service, but to make every effort to run an ethical business in which people want to work.
A combination of shared values and norms, which influence how members view each other and how they interact and solve problems, creates culture. Chatman and Cha (2003) describe that culture is all about execution and that an effective culture is related to business strategy. By ensuring that they are properly executing their strategy, Nordstrom explains that the employees hold themselves accountable by setting goals and demonstrating progress as well as recognizing accomplishments and identifying opportunities. Dolan and Lingham (2011) describe the concept of culture while managing an organizational-wide change in which changing the culture plays a vital role. When employees that do things because they feel that it’s the right thing to, a strong culture exists. Feedback from the employees and the customers are very important for the Nordstrom Company, and together they have created a comprehensive plan on their main focus. This strategy focuses on four main areas, which include supporting communities, sustaining the environment, protecting human rights, and caring for our people.
The Nordstrom Company gives back to diverse communities as they support those who support them. Regarding communities, they have main areas of focus, which include Nordstrom Scholarship Program, United Way, Global Social Development, and Supplier Diversity. With the Nordstrom Scholarship Program, Nordstrom recognizes students around the country for their involvement in their community and their scholastic achievements. They award $10,000 scholarships to 80 students annually (Nordstrom). Nordstrom also has supported United Way, which directs resources to individual communities, for about six decades, and as of 2012, Nordstrom and its employees have donated over 9.33 million to United Way campaigns throughout the country (Nordstrom).
The Nordstrom Company has also managed to be more sustainable and have worked to eliminate environmental impact. The areas of focus regarding sustainability include resource conservation, recycling and waste management, and packaging and product innovations. Using heating and cooling systems in combination with technologies, Nordstrom has reduced per-square-foot-energy by 4.1% (Nordstrom). Recycling bins are placed in Nordstrom locations where aluminum, cardboard, plastic and glass are recycled. When packaging their products, Nordstrom uses less packaging and chooses products made out of recycled content.
Protecting human rights is very important for the company as Nordstrom values the people that help manufacture Nordstrom-label products. The company provides training to their suppliers around the Code of Conduct, social responsibility, and productivity and efficiency. The suppliers operations are also closely monitored through routine auditing to ensure that the suppliers are following guidelines. Nordstrom collaborates with other companies to ensure that the health and safety of the factory workers are supported and doing so will improve conditions in factories.
The last focus area, caring for our people, elaborates on social responsibility, as the people are the greatest asset to the company. Nordstrom explains its belief that each employee has the opportunity to realize his or her potential to contribute to the company’s success. With the company priding itself on providing outstanding customer service, employees are encouraged to use their good judgment in situations when taking care of their customers. This includes taking risks and doing things outside of what is required to ensure that customers are taken care of. Chatman and Cha (2003) explain that strictly relying on formal rules and policies will not result in outstanding service, innovation or quality. Instead, employees need to be freed from the rules to be able to fully achieve strategic objectives. This relates to having a strong culture, as people will take risks as well as going above and beyond what is expected because they believe it’s the right thing to do. They must care about reaching their goals to achieve their strategy objectives. The combination of high levels of agreement among employees about what’s valued and their high levels of intensity regarding those values develops and maintains a strong culture, and Nordstrom’s employees exhibit this. Nordstrom continues to work with their employees, in which their great ideas transform into positive change as well as contributing to the success of the company. As an organization, organizational changes occur on a consistent basis, but having a strong culture can overcome any changes. Success will result as long as they employees’ values are aligned with their mission and values.
Workforce diversity
Base on the changing demographics in U.S., Nordstrom found that its client base was getting diversified. They believed that hiring people from different backgrounds would help it mirror its client base. According to Nordstrom’s Diversity Mission Statement, it indicates: "When you think about the customer, that is really a tapestry of everything. We recognized that we had to deal with, be prepared for and understand all the different issues that are going on in society because those are our customers. The people living outside our doors are the people who walk inside our doors" (Nordstrom, 2013).
Women：
Since large kinds of Nordstrom 's merchandise meet the demand to women, they admitted that employing a large number of women would be favorable. As of March 2013, 72.5% of total employees were women, also the number in Nordstrom 's managers were 71.7%. Women also shared one-third chairs in company’s board (Nordstrom, 2013).
Minorities:
“Nordstrom is an equal opportunity employer, committed to recruiting, hiring and promoting qualified people of all backgrounds regardless of sex; race; color; creed; national origin; religion; age; marital status; pregnancy; physical, mental or sensory disability; sexual orientation, or gender identity. In its employee handbook, the company had a written non-discrimination policy covering sexual orientation and gender identity”(Nordstrom Diversity, P1) The diverse workforce at Nordstrom included ethnic and racial minorities like African-Americans, Asian-Indian Americans, Native Americans, Asian/Pacific Islanders, and Hispanics. As of May 2013, colored race shared Nordstrom’s 31.4% of managers and 41.9% of employees (Nordstrom, 2013)
Management of Training A significant amount of training is provided by Nordstrom for salespeople through the continuous coaching and mentor to new hires, and to staff through the ongoing support provided by managers and senior sales people. Managers are taught in an approach that has taken hold in many great organizations to be servant leaders, which is best exemplified by believe that a great leader is first a great servant to those who depend on her or him. At Nordstrom, where the best seen is that the ‘each one teach one’ approach which aims in to ensure that employees are continuously supported through their professional growth and development. While formal, structured programs are applied to support professional development such as Nordstrom Future Leaders and the New Manager Development Program, it all based on the fact that mentoring and coaching is part of everyone’s job. In the Culture Audit response to a question about training and development, Nordstrom indicates that they have a rigorous training process or a special secret. The key is Nordstrom’s employees. Nordstrom is a company made up of nice, competitive, hard-working staffs that enjoy Nordstrom’s working environment. An “each one teaches one” philosophy is ingrained in the culture, and all the great leaders in the company are teachers to others. Nordstrom thinks that its employees will learn more through the examples and lessons of mentors than they do in formal training (Nordstrom, 2009).
Unique Practices There are many programs offered at Nordstrom to support employees’ growth and development, and to insure that Nordstrom’s unique culture is maintained and strengthened.
Below a variety of Nordstrom’s Best People Practices are highlighted： * Pacesetters * “Driving Your Business” awards * All-Star Award * John W. Nordstrom Award * New Manager Development (NMD) * Sabbatical Program * Health and Wellness
Nordstrom’s Leadership Style
Generally, leadership is the power that can motivate, persuade and even force others to perform in order to achieve the organization’s goals. According to Goleman, Boyatzis & McKee, there are six types of leadership styles, which include: visionary, coaching, affiliative, democratic, pacesetting and commanding (Goleman, Boyatzis & McKee, 2002). And Nordstrom’s case, both coaching and democratic leadership style will be most appropriated.
Initially, Nordstrom connect its employees from different levels with the company’s goal. Nordstrom need talented staffs from a diverse population and background. Based on Nordstrom’s statistic, of its entire employee population, 42% are people of color and 72% are females. In addition, there are 31% of its management team are people of color. According to Nordstrom’s description, it indicates “having a workplace that attracts and supports diversity benefits both its customers and employees” (Diversity at Nordstrom, 2013). Therefore, Nordstrom is an organization with diversified workforce. Since Nordstrom is a company that best known for its outstanding customer service, its diversified workforce helps them to better serve its customers. In order to keep the entire organization in a same page and general better result, Nordstrom established a common vision which written in its employee handbooks for the entire organization.
Nordstrom’s vision is “provide outstanding service every day, one customer at a time” (Goodall, 1992). For many years, every new employees enter Nordstrom have given this handbook. Nordstrom creates the vision for its employees to act rationally. Furthermore, Nordstrom claims for itself for using only one rule: Use good judgment in all situations (Goodall, 1992). Apparently, for Nordstrom, customers are their priority concert for business. Nordstrom informs all of its employees by this message and persuade them to achieve the organization’s goals. For Nordstrom’s case, the leader’s team connects employees’ goal to the organization. Nordstrom’s leadership strategy to unit entire diversified workforce is to establish the company’s goal and let its employees to follow.
Another leadership style that appropriate for Nordstrom is “democratic leadership style. As the former chairman of Nordstrom for long period, Bruce Nordstrom indicates that Nordstrom differentiate itself from competitors by "its army of highly motivated self-empowered people who have an entrepreneurial spirit". And he further indicates that this strategy also helps employee to gain confidence (McCarthy & Spector, 2005). In another word, this employee empowered strategy is related to Nordstrom’s democratic leadership style.
Improving customer service can be painful and costly to most companies. As a result, they give limited authority to their employees in order to reduce the customer service cost. For Nordstrom’s case, it originally focused on the customer satisfaction that would help them to accommodate to the strategy. On the other hand, Nordstrom empowers its employees by provide whatever is required to satisfy its customers. Democratic leadership style will not only help Nordstrom improve its employees’ job and customers’ satisfaction by involving them to participate and interact, but also help development of employees’ personal skill. Employees were given authority to make quick decision to overcome the issue of dealing with customers. Apparently, this decentralized democratic leadership style that really helps Nordstrom to improve its customer satisfaction. According to the American Customer Satisfaction Index (ACSI), Nordstrom gained the highest ACSI score of 82 points (ACSI, 2011).
In addition, Nordstrom’s employee compensation is based on sales commission. Employees’ ability and attitude to participate to the company’s activities will be specifically important. And there is a monthly Customer Service All Stars based on his or her sales volume, customer service and teamwork. And the rewards owners will receive additional benefit because of his or her outstanding performance in Nordstrom (McCarthy & Spector, 2005). Nordstrom’s democratic leadership style will motivate its employees in order to benefit themselves.
Recommendation
We believe that Nordstrom is staying competitive due to its focus on not only bringing the quality products to the market but also providing the best customer services. Going forward, we recommend Nordstrom to continue to keep making their customers and employees its top priority and to ask for feedback on a monthly basis to ensure that the company is consistently improving and growing as an operation. At the same time, we suggest Nordstrom to establish more advanced employee training and create a platform for its employees to post feedback. This will help enhance employee skills and strengthen operation structure. In terms of Nordstrom’s international expansion, Nordstrom should seek for local talents and bring them on board instead of sending employees overseas. This will help Nordstrom to save labor cost as well as adjust to the foreign market quicker.
References
Nordstrom, Inc,. (2013). Annual Report.
In Retrieved from http://interactivedocument.labrador-company.com/Labrador/US/Nordstrom/2012AnnualReport/
Our history. (n.d.). Retrieved from http://shop.nordstrom.com/c/company-history?origin=leftnav
Diversity at Nordstrom. (n.d.). Retrieved from http://shop.nordstrom.com/c/diversity-at-nordstrom
Our culture. (n.d.). Retrieved from http://about.nordstrom.com/careers/culture.asp Our structure. (n.d.). Retrieved from http://about.nordstrom.com/careers/structure.asp
"Arrival of target, Nordstrom to force changes at Canadian retailers." National Post 's Financial Post & FP Investing (Canada). (March 28, 2013 Thursday ): 260 words. LexisNexis Academic. Web. Date Accessed: 2013/05/28.
American customer satisfaction index reveals customer satisfaction weakens. (2011). Entertainment Close-Up, Retrieved from http://search.proquest.com/docview/853655238?accountid=14749
Carmen DeNavas-Walt, Bernadette D. Proctor, Jessica C. Smith, 2012, Income, Poverty, and Health Insurance Coverage in the United States: 2011, Current Population Reports
C&CCNKF Retail Secures Nordstrom Rack for Burgeoning Market Street Location. Retrieved 2009, from http://www.ccarey.com/news-pr/opennews.asp?id=2016398603
Cha, S.E., & Chatman, J.A. (2003). Leading by Leveraging Culture. California Management Review, Vol. 45, No. 4, 20-33. http://www2.cob.ilstu.edu/mpdumler/leadculture.pdf
Diversity at Nordstrom. 2013. Retrieved from: http://shop.nordstrom.com/c/ diversity-at-nordstrom.
Dolan, S., & Lingham, T. (2011). Introduction to International Organizational Behavior. My Educator. https://snap.myeducator.com/reader/web/introtoob/
Goleman, D., Boyatzis, R. E., & McKee, A. (2002). Primal leadership : realizing the power of emotional intelligence / Daniel Goleman, Richard Boyatzis, Annie McKee. Boston, Mass. : Harvard Business School Press, c2002.
Goman, C. K. April/22/2010. Nordstrom 's One and Only Rule. The Washington Post. Retrieved from http://views.washingtonpost.com/leadership/panelists/2010/ 04/nordstroms-one-and-only-rule.html
Goodall, H L Jr. 1992. Empowerment, Culture, and Postmodem Organizing: Deconstructing the Norstrom Employee Handbook. Journal of Organizational Change Management, ISSN 0953-4814, 1992, Volume 5, Issue 2, pp. 25 – 30.
McCarthy, P. & Spector, R.. The Nordstrom Way to Customer Service Excellence: a Handbook for Implementing Great Service in Your Organization. (2005). Reference and Research Book News, 20(4), n/a. Retrieved from http://search.proquest.com/docview/199568568?accountid=14749
Nordstrom. 2013. About Us. Retrieved from: http://shop.nordstrom.com/c/about-us
Nordstrom Cares. 2013 Nordstrom, Inc. Retrieved from: http://shop.nordstrom.com/c/nordstrom-cares-people?origin=topnav
Nordstrom – Great Service for Over 100 Years Best Company for 25 Years. Retrieved 2009, from http://resources.greatplacetowork.com/article/pdf/2009-best-company-for-25-years-nordstrom.pdf
United States Census Bureau. 05/28/2013. Retrieved from: http://www.census.gov/
World Bank Group. 05/28/2013. Retrieved from: http://www.worldbank.org/
Abstract 3
Company Background and Basic Facts 4
Vision, mission and goals 5
Structure 6
External Environment 7
Management Change 11
Cultural and Ethical Values and Practices 12
Workforce diversity 15
Management of Training 16
Unique Practices 17
Nordstrom’s Leadership Style 17
Recommendation 20
References 21
Abstract
Nordstrom is a leading upscale fashion retailer in the United States. In this essay, our team will present an organizational analysis for Nordstrom from different aspects including company mission and goals, organization structure including the use of teams, business environment, management of change, organizational culture and ethical values, management training, and leadership styles. Then …show more content…
we will give a recommendation for the company going forward.
Company Background and Basic Facts
Started with a small shoe store in downtown Seattle in 1901 by Mr.
John W. Nordstrom, who came to the United States from Sweden at the age of 16 with only five dollars in his pocket and no English at all, Nordstrom has grown into a global fashion specialty chain with its focus on customer services. (Company History) Today, Nordstrom’s two reportable segments include Retail and Credit. In the Retail segment, there are a total of 242 Nordstrom stores in 31 states, including 117 full-line stores, 121 off-price Nordstrom Racks, two Jeffery Boutiques, treasure & bond and one clearance store, and not to mention Nordstrom’s fastest-growing online business through Nordstrom.com. And through these multiple retail channels, Nordstrom is always trying the best to make its customers’ shopping experience convenient and fun by offering a wide selection of high-quality brand name and private label merchandise focusing on clothing, shoes, accessories, cosmetics, and, of course, a range of services. The Credit segment includes Nordstrom’s wholly owned federal saving bank, two Nordstrom VISA cards and a debit card. This segment was established to strengthen customer relations by a shopping-based loyalty program that will increase customer visits and spending. The company also generates revenues from the Credit segment by financial charges from the cards and other fees that occurred from the Retail segment. (Company Annual Report, …show more content…
2013)
In this essay, we are going to make a recommendation for Nordstrom as an organization after analyzing the company from the following aspects: company mission and goals, organization structure including the use of teams, business environment, management of change, organizational culture and ethical values, management training, and leadership styles.
Vision, mission and goals
“At Nordstrom, our goal is to provide outstanding service every day, one customer at a time” (Our Structure)
From the beginning, Mr.
Nordstrom set up his business approach to bring customers exceptional selection, quality and value. This mission hasn’t changed after over 100 years of operations. In this highly competitive business environment, Nordstrom believes that the keys to competing in its industry are customer services and creating a great customer experience in store and online, which includes compelling price and value, fashion newness, quality of products, selection, convenience, technology, product fulfillment, service and stores in top locations.
"Here at Nordstrom, our people and their enthusiasm for service make all the difference.” (Our Culture) Due to the seasonal nature of the business, Nordstrom employees approximated 61,000 employees on a full- or part-time basis, and employment increases in July and December due to its Anniversary Sales and holidays. (Company Annual Report, 2013) Nordstrom believes that the best way to provide extraordinary customer service is by ensuring that its employees reflect the community they serve. Among Nordstrom’s entire employee population, 42% are people of color and 72% are women. (Diversity at
Nordstrom)
Structure
“We work hard to make decisions in the best interest of our customers and those serving them.” (Our Structure) This Inverted Pyramid above represents Nordstrom’s philosophy and structure. The customers are always at the top, which explains Nordstrom’s devotion to customer services. Next are salespeople who serve directly to the customers and those who support them. Department managers, store managers, regional managers, buyers, merchandize managers, executive team and board of directors all support those above them on the pyramid. This unique Inverted Pyramid of Nordstrom’s structure resembles the company’s value and mission that puts its customers first and support those who are closest to its customers. They are dedicated to work towards the best interests of their customers.
External Environment
As is mainly operating in the United States, Nordstrom is one of the leading fashion retailers in the U.S. retail industry.
General environment – PEST Analyze
Political
Nordstrom, the Seattle-based chain operates totally 234 stores, including 113 Nordstrom Rack sites all over the United States. So it is mainly bounded by the United States’ commerce policies and laws. Although Nordstrom does not have international stores yet, it has served customers in 44 different countries with its online store (Nordstrom, 2013). With the developing of Nordstrom, its expansion strategy indicates that Nordstrom is going international. However, the different countries’ barriers will limit Nordstrom’s expansion. For instance, Nordstrom will enter the Canadian retailing industry in 2014. The arrival of Nordstrom will definitely take a big bite out of the flagship stores of HBC, Holt Renfrew, Harry Rosen and Sears (National Post’s Financial Post & FP Investing, 2013). However, Nordstrom is facing other challenges regarding to its expansion to Canadian market. The Canadian dollar is unstable, which will indirectly influence the expectation of Nordstrom. Since Nordstrom may need to assign some employees for United States domestic to Canada, an issue may occur which cause by Canadian immigration and labor law.
Economy
United States Economy was crashed by the Great Recession began in late 2007 and is still needing time to recover. According to the statistic from the World Bank, the U.S.’s GDP growth rate was -0.4% in 2008, -3.5% in 2009 and 3.0% in 2010 (Worldbank, 2013). Although it grew back in 2010, the U.S. economy did not pick up the same level as it was before the Great Recession 2007. The population, though, also grew in these years. Comparing to the time before the recession there are still 2.6 million jobs fewer. According to Heidi Shierholz, an economist at the liberal Economic Policy Institute, the economy needs additional 8.6 million jobs, instead of 2.6 million, in order to be suitable for the rising population (USCB, 2013).
In 2011, median household income of United States was $50,054, which is 1.5% lower in real terms than the 2010 median, 8.1% lower than the 2007 (the year before the most recent recession) median ($54,489), and 8.9% lower than the median household income peak ($54,932) that occurred in 1999 (Carmen DeNavas-Walt, Bernadette D. Proctor, Jessica C. Smith, 2012)
Sociocultural
United States is a Multilanguage country. Other than American English there are four major language groups in the whole country; Spanish, other Indo-European, Asian and Pacific Island, and all other languages.
According to the United States Census Bureau, the United States population on May 1th, 2013 was 315,773,955. There is one new birth every 8 seconds, one death every 12 seconds and one international migrant every 44 seconds. About 24% of the populations are under 18 years of age. 18 to 44 years are about 36.5%, 45 to 64 years about 26.4%, 65 years and over 13%. As California and Texas ranking the most populous states, about 60% of the nation population are distribute in the southwest. Whites (contains both White non-Hispanic or Latino and White Hispanic or Latino) constitute the majority of the U.S. population with a total of 72.4% of the population. Other race categories are Black or African American, American Indian or Alaska Native, Asian, and Native Hawaiian or Other Pacific Islander (USCB, 2013).
The social class structure in the United States is shaped as a rhombus. Upper class, who has a household income of $1 million or more, receives almost 5% of the income of the United States, contains the least population (1% of the population). Followed by the upper middle class (15% of the population), household incomes commonly exceeds $100,000. Then, the lower class (20% of the population), usually occupy poorly-paid positions. Working class has the second large population (30% of the population) while the lower middle class, typical white collars, household income roughly range from $50,000 to $100,000, has the largest population (34% of the population) (USCB, 2013).
Technological
What major matters for the retail industry is purchasing and selling – purchasing from the manufacture and selling to the consumer. Sophisticated Point of Sales system, also known as POS system, is the most common system that is using in the whole retail industry. It allows retailers to track its buying history and units sold. Since customer service is the most important element for the whole retail industry, knowing customer’s preference becomes the ahead of all.
By the time of 2012, more than 2.4 billion people are using the internet service, which is over one-third of the world’s population. Shopping online, now a days, cannot be more convenience and hotter. One can basically get everything he needs whether for living or not from one click though the internet. Nordstrom also started its e-commerce business in 1993. EDI: Electronic Data Interchange system is used to transfer data between computer systems or networks is commonly used for e-commerce.
These two systems are the most common ones we can see using in daily retail life. Other than these two systems, there are hundreds and thousands IT systems that are using among the whole retail industry. It seems like all the big high tech companies are stepping into develop organization use systems, IBM, Dell even Microsoft. We could not say there is a best system for use, but there will be a system best fits an organization.
Competition environment
Industry
Retailing might be the biggest category among all the industries. It is said, by the United States Department of Commerce, that total sales from the more than 3.6 million retail establishments in the United States reached about $2.5 trillion in 2011, and retailers supported more than 42 million jobs in the United States. This sales amount was expected to increase for 2012. However for the apparel retailers, spending in the apparel retail industry had declined every quarter since the third quarter of 2008. While spending in apparel showed some signs of recovery in 2010, the 2009 same store sales still showed that consumers had traded down in price points. As it was mentioned before, although recovering, unemployment is still high and discretionary spending will still keep low for a while. So a depressed trend is expected to continue in the apparel retail industry.
Competitor
Bloomingdales, Lord & Taylor, Neiman Marcus, and Saks Fifth Avenue are all equal size competitors of Nordstrom.
Nordstrom has the competitive advantage by having the outstanding customer service which differentiates themselves from other rivals. The competition among the department stores is high.
Management Change
Facing the depression economy and strong competitors in the United States, in year of 2012, Nordstrom announced its expansion plan in Canada. Followed by the plan, starting in the fall of 2014, Nordstrom is opening 4 stores in Calgary, Ottawa, Toronto and Vancouver.
It was announced by the Colliers International Consulting, a real estate research firm, that sales per square foot at Canadian malls were almost 50 percent higher in 2011 than sales per square foot at American malls. Such sales figure could be a real attraction for American retailers and for Nordstrom. Though the allure can be so strong, it is difficult for a firm to enter another country. “You can’t just say that we are close in proximity or we both speak English, so it should be the same,” said Blake Nordstrom, president Nordstrom. Canada has two major languages, English and French. Canadian dollar is not as strong as American dollar, and Canada only has about one-tenth of the United States’ population, so the cost in Canada would be higher than in America. Furthermore, said by the director of retail consulting at Colliers, “We have a much more conservative development financing and development industry in Canada. There’s not as many lenders for retail and large-scale shopping center development, so finding access to capital is trickier.” For an apparel retailer as Nordstrom, one of the big challenges for them would be the different demand of Canadians from Americans. Canada is a Frigid Zone country. Costco, which entered the Canada market in 1985, gives good examples, stores in Canada carries children’s snowsuits beginning in July, items like skiwear and snowshoes are selling well.
Strategy to that, Nordstrom is taking over three of former Sears Canada locations. Said by Blake Nordstrom, Nordstrom stores in Canada would contend with different distribution arrangements for brands it now carries.
Cultural and Ethical Values and Practices
Nordstrom’s vision of running a business is simply put as “leave it better than you found it,” and it prides on doing right for the customers as well as the employees. Organizational culture plays a vital role in the success of the company, in which it adds great value that is rewarding for the customers and the employees. Nordstrom describes their culture as not only striving to offer their customers the best possible service, but to make every effort to run an ethical business in which people want to work.
A combination of shared values and norms, which influence how members view each other and how they interact and solve problems, creates culture. Chatman and Cha (2003) describe that culture is all about execution and that an effective culture is related to business strategy. By ensuring that they are properly executing their strategy, Nordstrom explains that the employees hold themselves accountable by setting goals and demonstrating progress as well as recognizing accomplishments and identifying opportunities. Dolan and Lingham (2011) describe the concept of culture while managing an organizational-wide change in which changing the culture plays a vital role. When employees that do things because they feel that it’s the right thing to, a strong culture exists. Feedback from the employees and the customers are very important for the Nordstrom Company, and together they have created a comprehensive plan on their main focus. This strategy focuses on four main areas, which include supporting communities, sustaining the environment, protecting human rights, and caring for our people.
The Nordstrom Company gives back to diverse communities as they support those who support them. Regarding communities, they have main areas of focus, which include Nordstrom Scholarship Program, United Way, Global Social Development, and Supplier Diversity. With the Nordstrom Scholarship Program, Nordstrom recognizes students around the country for their involvement in their community and their scholastic achievements. They award $10,000 scholarships to 80 students annually (Nordstrom). Nordstrom also has supported United Way, which directs resources to individual communities, for about six decades, and as of 2012, Nordstrom and its employees have donated over 9.33 million to United Way campaigns throughout the country (Nordstrom).
The Nordstrom Company has also managed to be more sustainable and have worked to eliminate environmental impact. The areas of focus regarding sustainability include resource conservation, recycling and waste management, and packaging and product innovations. Using heating and cooling systems in combination with technologies, Nordstrom has reduced per-square-foot-energy by 4.1% (Nordstrom). Recycling bins are placed in Nordstrom locations where aluminum, cardboard, plastic and glass are recycled. When packaging their products, Nordstrom uses less packaging and chooses products made out of recycled content.
Protecting human rights is very important for the company as Nordstrom values the people that help manufacture Nordstrom-label products. The company provides training to their suppliers around the Code of Conduct, social responsibility, and productivity and efficiency. The suppliers operations are also closely monitored through routine auditing to ensure that the suppliers are following guidelines. Nordstrom collaborates with other companies to ensure that the health and safety of the factory workers are supported and doing so will improve conditions in factories.
The last focus area, caring for our people, elaborates on social responsibility, as the people are the greatest asset to the company. Nordstrom explains its belief that each employee has the opportunity to realize his or her potential to contribute to the company’s success. With the company priding itself on providing outstanding customer service, employees are encouraged to use their good judgment in situations when taking care of their customers. This includes taking risks and doing things outside of what is required to ensure that customers are taken care of. Chatman and Cha (2003) explain that strictly relying on formal rules and policies will not result in outstanding service, innovation or quality. Instead, employees need to be freed from the rules to be able to fully achieve strategic objectives. This relates to having a strong culture, as people will take risks as well as going above and beyond what is expected because they believe it’s the right thing to do. They must care about reaching their goals to achieve their strategy objectives. The combination of high levels of agreement among employees about what’s valued and their high levels of intensity regarding those values develops and maintains a strong culture, and Nordstrom’s employees exhibit this. Nordstrom continues to work with their employees, in which their great ideas transform into positive change as well as contributing to the success of the company. As an organization, organizational changes occur on a consistent basis, but having a strong culture can overcome any changes. Success will result as long as they employees’ values are aligned with their mission and values.
Workforce diversity
Base on the changing demographics in U.S., Nordstrom found that its client base was getting diversified. They believed that hiring people from different backgrounds would help it mirror its client base. According to Nordstrom’s Diversity Mission Statement, it indicates: "When you think about the customer, that is really a tapestry of everything. We recognized that we had to deal with, be prepared for and understand all the different issues that are going on in society because those are our customers. The people living outside our doors are the people who walk inside our doors" (Nordstrom, 2013).
Women：
Since large kinds of Nordstrom 's merchandise meet the demand to women, they admitted that employing a large number of women would be favorable. As of March 2013, 72.5% of total employees were women, also the number in Nordstrom 's managers were 71.7%. Women also shared one-third chairs in company’s board (Nordstrom, 2013).
Minorities:
“Nordstrom is an equal opportunity employer, committed to recruiting, hiring and promoting qualified people of all backgrounds regardless of sex; race; color; creed; national origin; religion; age; marital status; pregnancy; physical, mental or sensory disability; sexual orientation, or gender identity. In its employee handbook, the company had a written non-discrimination policy covering sexual orientation and gender identity”(Nordstrom Diversity, P1) The diverse workforce at Nordstrom included ethnic and racial minorities like African-Americans, Asian-Indian Americans, Native Americans, Asian/Pacific Islanders, and Hispanics. As of May 2013, colored race shared Nordstrom’s 31.4% of managers and 41.9% of employees (Nordstrom, 2013)
Management of Training A significant amount of training is provided by Nordstrom for salespeople through the continuous coaching and mentor to new hires, and to staff through the ongoing support provided by managers and senior sales people. Managers are taught in an approach that has taken hold in many great organizations to be servant leaders, which is best exemplified by believe that a great leader is first a great servant to those who depend on her or him. At Nordstrom, where the best seen is that the ‘each one teach one’ approach which aims in to ensure that employees are continuously supported through their professional growth and development. While formal, structured programs are applied to support professional development such as Nordstrom Future Leaders and the New Manager Development Program, it all based on the fact that mentoring and coaching is part of everyone’s job. In the Culture Audit response to a question about training and development, Nordstrom indicates that they have a rigorous training process or a special secret. The key is Nordstrom’s employees. Nordstrom is a company made up of nice, competitive, hard-working staffs that enjoy Nordstrom’s working environment. An “each one teaches one” philosophy is ingrained in the culture, and all the great leaders in the company are teachers to others. Nordstrom thinks that its employees will learn more through the examples and lessons of mentors than they do in formal training (Nordstrom, 2009).
Unique Practices There are many programs offered at Nordstrom to support employees’ growth and development, and to insure that Nordstrom’s unique culture is maintained and strengthened.
Below a variety of Nordstrom’s Best People Practices are highlighted： * Pacesetters * “Driving Your Business” awards * All-Star Award * John W. Nordstrom Award * New Manager Development (NMD) * Sabbatical Program * Health and Wellness
Nordstrom’s Leadership Style
Generally, leadership is the power that can motivate, persuade and even force others to perform in order to achieve the organization’s goals. According to Goleman, Boyatzis & McKee, there are six types of leadership styles, which include: visionary, coaching, affiliative, democratic, pacesetting and commanding (Goleman, Boyatzis & McKee, 2002). And Nordstrom’s case, both coaching and democratic leadership style will be most appropriated.
Initially, Nordstrom connect its employees from different levels with the company’s goal. Nordstrom need talented staffs from a diverse population and background. Based on Nordstrom’s statistic, of its entire employee population, 42% are people of color and 72% are females. In addition, there are 31% of its management team are people of color. According to Nordstrom’s description, it indicates “having a workplace that attracts and supports diversity benefits both its customers and employees” (Diversity at Nordstrom, 2013). Therefore, Nordstrom is an organization with diversified workforce. Since Nordstrom is a company that best known for its outstanding customer service, its diversified workforce helps them to better serve its customers. In order to keep the entire organization in a same page and general better result, Nordstrom established a common vision which written in its employee handbooks for the entire organization.
Nordstrom’s vision is “provide outstanding service every day, one customer at a time” (Goodall, 1992). For many years, every new employees enter Nordstrom have given this handbook. Nordstrom creates the vision for its employees to act rationally. Furthermore, Nordstrom claims for itself for using only one rule: Use good judgment in all situations (Goodall, 1992). Apparently, for Nordstrom, customers are their priority concert for business. Nordstrom informs all of its employees by this message and persuade them to achieve the organization’s goals. For Nordstrom’s case, the leader’s team connects employees’ goal to the organization. Nordstrom’s leadership strategy to unit entire diversified workforce is to establish the company’s goal and let its employees to follow.
Another leadership style that appropriate for Nordstrom is “democratic leadership style. As the former chairman of Nordstrom for long period, Bruce Nordstrom indicates that Nordstrom differentiate itself from competitors by "its army of highly motivated self-empowered people who have an entrepreneurial spirit". And he further indicates that this strategy also helps employee to gain confidence (McCarthy & Spector, 2005). In another word, this employee empowered strategy is related to Nordstrom’s democratic leadership style.
Improving customer service can be painful and costly to most companies. As a result, they give limited authority to their employees in order to reduce the customer service cost. For Nordstrom’s case, it originally focused on the customer satisfaction that would help them to accommodate to the strategy. On the other hand, Nordstrom empowers its employees by provide whatever is required to satisfy its customers. Democratic leadership style will not only help Nordstrom improve its employees’ job and customers’ satisfaction by involving them to participate and interact, but also help development of employees’ personal skill. Employees were given authority to make quick decision to overcome the issue of dealing with customers. Apparently, this decentralized democratic leadership style that really helps Nordstrom to improve its customer satisfaction. According to the American Customer Satisfaction Index (ACSI), Nordstrom gained the highest ACSI score of 82 points (ACSI, 2011).
In addition, Nordstrom’s employee compensation is based on sales commission. Employees’ ability and attitude to participate to the company’s activities will be specifically important. And there is a monthly Customer Service All Stars based on his or her sales volume, customer service and teamwork. And the rewards owners will receive additional benefit because of his or her outstanding performance in Nordstrom (McCarthy & Spector, 2005). Nordstrom’s democratic leadership style will motivate its employees in order to benefit themselves.
Recommendation
We believe that Nordstrom is staying competitive due to its focus on not only bringing the quality products to the market but also providing the best customer services. Going forward, we recommend Nordstrom to continue to keep making their customers and employees its top priority and to ask for feedback on a monthly basis to ensure that the company is consistently improving and growing as an operation. At the same time, we suggest Nordstrom to establish more advanced employee training and create a platform for its employees to post feedback. This will help enhance employee skills and strengthen operation structure. In terms of Nordstrom’s international expansion, Nordstrom should seek for local talents and bring them on board instead of sending employees overseas. This will help Nordstrom to save labor cost as well as adjust to the foreign market quicker.
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