Competitive Intelligence and Benchmarking

Nordstorm and the Multi Line Retail Industry

Chirag Jain

Netid: cj472

Week- 4&5 Homework

Nordstorm

• Retail Presence: Nordstrom is an American luxury department store chain that operates 121 stores in 40 US states, as well as an e-commerce platform.

• Product Offerings: Nordstrom offers a wide range of products, including clothing, shoes, handbags, jewelry, beauty products, and home goods, from both established and emerging designers.

• Customer Experience: Nordstrom is known for its high level of customer service, offering free shipping and returns, in-store pickup, and personalized styling services, among other amenities. The company's focus on customer satisfaction has helped to establish its reputation as a premier luxury retailer.

Phase 1 

Industry Analysis

Step 1: Industry Trend

Step 2: Concentration and Competition Intensity

Step 3 : Value Chain Analysis

Step 1 - Industry Trend Analysis

• Industry Trend Analysis of Size for four sub industry in the Retail Category. 

• Industry Trend Analysis of Profitability for four sub industry in the Retail Category. 

• Industry Trend Analysis of Size for Multiline sub industry in the Retail Category.

• Industry Trend Analysis of Profitability for Multiline sub industry in the Retail Category.

Industry Trend Analysis of Retail Industry

• It is classified into 4 categories: Distributors, Internet & Direct Marketing, Multiline Retail and Speciality Retail

• We can see that Speciality Retail is bigger in size and has higher total revenue, however is almost equal to Multiline Retail in Median Gross and Operating Margin.  

• We also notice that Proportion of Profitable companies is much high in Multiline Retail than Specialty Retail, making it a better industry. 

Step 2 - Concentration and Competition Intensity

• Market Share Analysis by Total Revenue for each industry. 

• Competition Intensity - Four Firm Concentration Ratio

Enterprise Comparison - Size 

Competition and Nordstorm KPI Analysis

• Target and other companies have been doing really well in terms of Operating Margin. 
• Whereas looking at Nordstorm KPI, it is almost low on every aspect. 

Step 3 - Value Chain Analysis

• Supply Chain Mapping (Net Margin) - Global

• Supply Chain Mapping (Net Margin) - USA

Phase 2 

Competition Position Analysis 

Step 1: Profit Frontier

Step 2: Enterprise Ranking

Step 3: Key Performance Indicator Examination

Step 1 - Profit Frontier 

• Most profitable companies in each revenue class. Competition positioning in terms of Profitability.

Actions:

• Total Revenue vs Total Cost
• Operating Profit vs Total Assets
• Operating Profit vs Total Cost 
• Operating Margin vs Revenue
• Return on Assets (ROA) vs Liability Asset Ratio

Conclusion (Step 1)

• Starting with Profit Frontier Analysis, Total Revenue vs. Total Cost (2019), Target Inc is way higher than all the companies.
• I have taken Japan as my other country. Choosing Japan was not by choice; I researched and found out that more than 50% of Japan's GDP comprises the Retail Industry; therefore, Japan was a better choice.
• Norstorm Inc constantly stays on the lower side of all the graphs.
• However, it is higher when we compare Return on Asset vs. Liability Asset Ratio.
• It is the highest among all the Multi-Line Companies. This is why Nordstrom does not perform well in the post-Covid Era. 

Step 2 - Enterprise Ranking

• Company placement against other companies using varied metrics.

• We will focus on Nordstrom Inc (JWN), Target Corporation (TGT), Macy's Inc (M), Dillard's Inc (DDS) and Kohl's Corporation (KSS).

Actions: (Enterprise Ranking)

• Total Revenue (2019 and 2021)
• Net Margin (2019 and 2021)
• Return on Assets (2019 and 2021)

Step 3 - Key Performance Indicator (KPI) Examination

• A Key Performance Indicator (KPI) examination is a process of evaluating the metrics that are critical to the success of a business or organization. KPIs are specific, measurable, and quantifiable metrics that are used to track progress towards business objectives and goals.

• A KPI examination is important because it provides insights into the performance of a business or organization, and enables decision-makers to make informed decisions based on objective data. It helps to identify areas that are performing well, as well as areas that may require attention and improvement. By focusing on the right KPIs, businesses can improve their performance, enhance customer satisfaction, and achieve their strategic objectives.

Actions: 

• Enterprise Comparison - KPI
• Key Performance Indicator Examination - Nordstorm Inc. 

Conclusion

Phase 3 

Enterprise Diagnosis

Step 1: Strengths and Weaknesses

Step 2: Value Driver Analysis

Step 3: Breakdown Analysis

Nordstorm and Competitors

Step 1- Strengths and Weaknesses

• Strengths are an indicator of a company's effective use of internal techniques that are known to work well, while weaknesses highlight areas of underperforming activities that require improvement.

Actions: 

• Enterprise Comparison - Size, Profitability
• Enterprise Trend - Size, Financial Health

Step 2 - Value Driver Analysis

• Value driver analysis is a business strategy tool used to identify the key drivers that impact the value of a company. It involves analyzing the company's financial and non-financial factors that affect its performance, such as revenue growth, profitability, market share, customer satisfaction, and employee engagement. Value driver analysis can help a company to identify its strengths and weaknesses, and develop strategies to improve its performance and increase its value.

Actions: 

• Return on Assets (ROA) and Liability Asset Ratio
• Liability Asset Ratio and Operating Margin

Step 3 - Breakdown Analysis

• Looking at firm's COGS, SG&A Expenses, R&D, etc to compare with the industry. This could help in figuring out where a company has more spending when comparing with other companies in the same industry. (Jain, 2023)

Actions:

• Enterprise Breakdown - Revenue (Pre-Covid, During Covid, Post Covid)
• Enterprise Breakdown - Detailed Assets (Pre-Covid, During Covid, Post Covid)

Conclusion

• Phase 3

  Strengths and Weaknesses:  It is clear that Nordstrom's high risk, high Liability to Asset Ratio, and increased long-term debt was the leading cause for the decline in profits in the year 2021. 

  Value Driver Analysis: Similar to the above analysis, Nordstrom is the highest in the Liability to Asset Ratio, while Dillard's sudden increase in Return on assets remains a mystery. 

  Breakdown Analysis: I have done six analyses, Enterprise Breakdown (Pre-Covid, During Covid, Post-Covid) on Revenue and Detailed Assets. 

  - It seems Nordstrom's SG&A expenses were regular in the Pre-Covid Era; however, it had a sharp increase in the during and Post-Covid eras, comparatively more than other companies in the industry. While others had increased Cash and Cash Equivalents in 2021, Nordstrom's is close to nil. 

Summary/Recommendations

• Cut down on Liabilities. 
• Get better investments to increase return on Assets. 
• Lot's of market share still yet to capture, improve on business relationships. 
• A better supplier vendor management. 
• A better Supply Chain Network is needed.