|Type of paper:||Research paper|
|Categories:||Health and Social Care Medicine Society|
Nordstrom Organization is a shoe company that started earlier in the 1901 and have headquarters Seattle Unites states. The company has been in service for a good period now and the has been giving the customers the best experience ever making it to be known to be one of the best shoe selling companies in the region. This analysis is meant to give the financial overview of the organization, the internal and external analysis, the strategic problems and the possible recommendations.
1. Financial Analysis
Determination of the Financial Health of the Company
Nordstrom sources of revenue are the retails and the credits. The retailing segment comprise of the full-price as well as the discounted physical and the online stores. On the other hand, the credit segment comprise of store credit cards. The brands of the company as well gives them the best in getting their revenues. The market coverage of the company being one of the major strength, the company has always recorded good financial state. The company financial status as at now can therefore, be said to be at a good state when compared to the competitors. For instance since the year 2006 there has been significant increase in the revenue of the company. According to (Kopelman et al., 2012), revenues alludes to the cash that is received by the company in their sales of goods and services. In order to explain the financial healthiness of the company I will compare the revenue that the company had in the last three years that is from 2016, 2017 and 2018.
According to Nordstrom report, it can be depicted that in 2017, the revenue of the company was at $14.75B an increase of above 2.2 percent from the previous year 2016. In 2018, the annual revenue that was recorded was $15.47B a 4.89 percent increase from the 2017. On the other hand, the in 2019 now, the revenue is recorded to be $15.86, which is also a positive deviation from the previous year.
Moreover, the current ratio, also known as the liquidity ratio of Nordstrom in the year 2018 and 2017 were 1.06 and 1.07 respectively indicating that the current assets of the company is enough to take care of the company short term obligations. The comparison of the cash flow in the industry as well depicts that there are a significant increase. For instance in 2017, the cash flow was $354, in 2018, it was $437 and in 2019, the cash low is $567 million. This is as well a clear manifestation that the company financial status is at a good state. When it comes to profitability, over the last three years, the company has made a significant profit margin, an indication that the financial future of the company is luminous. From this analysis, it can be concluded that Nordstrom financial health is a great one and those one forms the main asset.
How strong is it relative to its competition? Are its competitors more or less profitable over time?
In the operative market, it is important to note that the main competitors of Nordstrom strengths can be analyzed by looking ate their financial status. In this case, the paper will compare the financial status of the company with that of the key competitor Neiman Marcus. Just like Nordstrom, the company has experienced great improvement over the years in their financial reviews. This can be noted from the fact that they have increased profit over the years making the company to post a great threat to Nordstrom. In comparison of the profit that was earned with this main competitor, Nordstrom still leads with some great percentages, but the competition is too that Nordstrom needs to do a lot of market awareness to ensure that they keep their profit margin far from reach with the other companies. With the rate of development, it is projected that the Neiman Marcus is likely to show significant positive projection in their financial earnings and this may post more threat to the other companies like Nordstrom. Nevertheless, the market value for Nordstrom in comparison to that of Neiman Marcus, it is indicated that customers still value the Norodom products due to their strong brand and the quality of products that the offer.
Sample Tables for the Financial Analysis Over time
Case Firm Current Year Prior Year % Change
Income Statement $534M $437 35.5%
Balance Sheet $7,886M $8,115M 25.56%
Table 1. Change in Financials and comparison with the closest competitor
Case Firm % Closest Competitor(s) %
Income Statement Sales $564,000.000 100% $ 1,092,784
Balance Sheet Total Assets $8,115,210 100% $ 7,462,477
Table 2. Financial health of the firm and comparison with the closest competitor for 2019
Ratio Case Firm Closest Competitor(s)
Current Ratio 1.06 1.01
Quick Ratio 1.03 1.02
Debt-to-equity Ratio 3.07 2.01
Debt-to-total Assets Ratio 2.03 1.98
Inventory Turnover 5.13 3.01
Total Asset Turnover 2.01 1.93
Gross Profit Margin 35.97 25.60
Net Profit Margin 3.55 2.20
Return on Assets 7.15 6.01
Return on Equity 64.60 55.90
Table 3. Financial Ratios for Case firm and closest competitor for 2019
Using the porter's 5 forces model, Nordstrom Company will have to assess the industry dynamics that can affect the firm's competition such as barriers or threats to entry, rivalry, threat of substitutes, bargaining for power of suppliers, and bargaining for power of buyers (Leiber et al., 2018). If a firm encounters a combination of the five forces, then it becomes unattractive industry and that can drive down the general profitability of the industry.
The competitive rivalry is greatly determined by the number and the capacity of all the existing competitors in the market. If Nordstrom company has multiple external competitors that offer the products and services that are undifferentiated, chances are high that the market attractiveness of the company will decline. However, if there are few or no competitors in the market, then the market attractiveness will definitely expand.
The threat of substitution is a scenario where there are very close substitute products in the market. Customers in the market are more likely to switch to the new alternatives in the market if there are price increases (Leiber et al., 2018). In such a market, the attractiveness and the power of suppliers will have to decline. Nordstrom company will ensure that promotes marketing by offering new qualities of products at a good cost.
The barrier of threat or new entry applies when markets that are profitable attract new entrants which in turn affect the profitability of the industry. When the incumbents do not have strongly established and long-lasting entry barriers, the effects may be far-reaching. For example, when there are no stable economies of scale, stable government policies, and proper capital abilities, the profitability of a firm will have to decline to the level of a competitive rate.
Bargaining for the suppliers' power is primarily an analysis of how the suppliers have easy time or not to drive prices high. The number of suppliers doing each market input and how special or unique their products determines such forces or services can be from others. It is also imperative to note that the strength of Nordstrom Company and the ability to shift from one supplier to the other can equally determine such powers.
The bargain for buyers' power refers to the ability of buyers in the market to be able to pull the prices of products and services down. If there are few potential buyers in the market, it means the demand will be down. Therefore, buyers will have the power to bring the prices down as suppliers will be scrambling for them. Nordstrom Company will have to consider how to bargain for many buyers for it to dictate terms and maintain the supply prices high.
Through the SWOT Analysis, Nordstrom Company will be able to evaluate various opportunities and threats they face as well as the strategies to manage those threats and capitalize on the opportunities. When a firm develops a strategic business plan, it will be able to increase its profitability in the market (Madhavaram et al., 2017). One of the most significant opportunity for a firm to identify is when the business if expanding and there are multiple opportunities for success in future.
Another opportunity would be when the government has shown the interest to support the local industries. Government subsidy and policies can be extended towards businesses to enable the local firms to grow. A company should therefore take this opportunity to expand all its sectors to hit the top of market.
The last opportunity for the business would be when other competitors are reluctant to implement the adoptio0n of new technologies. Like the case of suppliers' power, when there are few competitors in the markets, Nordstrom Company will have an opportunity to dictate the terms and keep prices high to their benefit.
Apart from the opportunities to capitalize on, development of technological changes may also pose a threat to Nordstrom Company by shifting the market beyond the capacity to adopt. When too many changes occur in the market, it may be difficult for companies to adopt (McDONALD, 2016). Another threat to the firm would be if the change is too smaller than the focus of a larger competition.
Value Chain Analysis Internal analysis
During the physical creation or production of products and services, Nordstrom Company will have to undergo certain operational activities to transform the acquired raw materials into finished products. It is an internal primary activity since the company will have to convert its inputs to realize the desired product. At this level, the company will have to employ the use of conveyor belts processes such as machinery, packaging, assembly, and all the facility operations.
The products sale and distribution is where the company will have to look for market to supply with their products. The firm will have to ensure that their finished products are made available for both consumers and other businesses for resale (Jagilot et al., 2016). This process in the value chain is required to add value to the final consumers.
The product service after sale refers to any post-sale assistance or information that the company provides to customers after purchasing specific products. These may involve gifts and incentives that will sell the company in good light and retain customers. For example, after doing a large purchase, the company may decide to offer transport services to the purchaser to his destination. That will enable the buyer to save on transportation costs and boost his profitability. Such after-sale services will ensure that firms retain their market potential buyers.
For the sustainability of primary production activities, support activities must provide purchased inputs, labor, technology, and management skills. Nordstrom Company will have to avail such support activities for product creation to be a success. The activities can be categorized into four groups such as technology development, firm infrastructure, procurement, and the human resources. Development of technology is vital for the company since the knowhow and processes are all embodied in technology (Jagilot et al., 2016). Technology will enable Nordstrom Company to enhance their product and the processes to produce the same.
Human resource management encompasses all the activities involving the recruitment, training, hiring and firing, and all rewards to all the employees within the company. The cost of hiring for skilled labor and motivation has a lot of impact on the quality of production that the company will offer to the market. Therefore, Nordstrom Company will ensure that it trains the best expertise to inject more quality in their production as a way of increasing their profitability in the market.
Procurement is also an integr...
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