Order custom Harvard Business Case Study Analysis & Solution. Starting just $19
Nordstrom SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Nordstrom managers to do a situational analysis of the company . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Nordstrom is facing in its current business environment.
The Nordstrom is one of the leading firms in its industry. Nordstrom maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Nordstrom to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Nordstrom strengths, and eradicate its weaknesses.
Step by Step Guide to Nordstrom SWOT Analysis
Strengths of Nordstrom – Internal Strategic Factors
As one of the leading companies in its industry, Nordstrom has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Nordstrom are –
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Highly skilled workforce through successful training and learning programs. Nordstrom is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong distribution network – Over the years Nordstrom has built a reliable distribution network that can reach majority of its potential market.
- Good Returns on Capital Expenditure – Nordstrom is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong Free Cash Flow – Nordstrom has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Successful track record of developing new products – product innovation.
- Superb Performance in New Markets – Nordstrom has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Weakness of Nordstrom – Internal Strategic Factors
Weakness are the areas where Nordstrom can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The profitability ratio and Net Contribution % of Nordstrom are below the industry average.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Nordstrom
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Nordstrom is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Nordstrom needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Nordstrom has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Opportunities for Nordstrom – External Strategic Factors
- The market development will lead to dilution of competitor’s advantage and enable Nordstrom to increase its competitiveness compare to the other competitors.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Nordstrom’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Nordstrom in other product categories.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Nordstrom. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Nordstrom to capture new customers and increase its market share.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Nordstrom.
- Government green drive also opens an opportunity for procurement of Nordstrom products by the state as well as federal government contractors.
Threats Nordstrom Facing - External Strategic Factors
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Nordstrom
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Nordstrom in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Imitation of the counterfeit and low quality product is also a threat to Nordstrom’s product especially in the emerging markets and low income markets.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Limitations of SWOT Analysis for Nordstrom
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Nordstrom
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Nordstrom
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Nordstrom managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Nordstrom
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
Previous 5 SWOT Analysis
- Office Depot SWOT Analysis
- Marriott International SWOT Analysis
- Western Digital SWOT Analysis
- NRG Energy SWOT Analysis
- National Oilwell Varco SWOT Analysis