Expert answer:PROJECT FUNDING
Solved by verified expert:Need the FINAL paper cleaned up using the feedback from graded sections and the final project rubric as attached. PLEASE make sure that financial information from each section is connected as well as citations fixed or deleted and replaced when needed.
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Nordstrom, Inc – Funding Request
TO:
FROM:
DATE:
SUBJECT: Funding Request for Storefront Locations in the UK
In today’s market of anything you need at your fingertips, customer service and
convenience still play a key roles in the decisions that consumers make when it comes to
shopping. A little more than 50 years ago, a chain of shoe stores in the Pacific Northwest
decided to add clothing to its merchandise mix. Since then, Nordstrom (NYSE:JWN) has
grown to become one of the largest department store companies in the U.S. (LevineWeinberg, 2015). Nordstrom, Inc. has leaned on diversity in its product offering to
capture the consumer market on all levels. From their top designer store Nordstrom, their
discount store Nordstrom Rack to their online marketplace Hautelook, they have found
themselves offering the top end products they are known for to meet the needs of
consumers in the US and Canada making them the nation’s top ranked fashion retailer for
the 5th year in a row according to consumers. Their consistent success in North America
is a great platform to break into the UK fashion scene where consumers have shown that
discount designer stores like the TJX Companies Inc. are the leading off-price retailer of
apparel and home fashions in the United States and world-wide. (Loeb, 2015) Off –Price
brand stores have been gaining popularity not only in the US and Canada but also in the
UK as customers can shop stores that they trust at prices they can afford. It is evident by
the popularity of Nordstrom’s fast growing Rack stores – now 167 units achieving sales
of $3.2 Billion (Loeb, 2015) here in the US. While the TJX Brands are still relatively
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Nordstrom, Inc – Funding Request
new in the UK market- the time for Nordstrom, Inc to expand into the market is now
before TJX or any other major department store chain can still jump into the market at an
early entry point.
Key Information Sources
•
Nordstrom, Inc. Website – This will be used to gain a history on Nordstrom and
their current product offerings. It will be important when expanding to understand
the vision of the company in order to not sacrifice the products that have gained
the trust of consumers in the US and Canada.
•
CSI Market – This website houses comprehensive information such as Market
Analysis, Stock Quotes, Earnings, Economy, News and Research pertaining to the
department store industry. This will be used to see trends in the marketplace
pertaining not only to Nordstrom, Inc. but also its competition.
•
PricewaterhouseCoopers (doing business as PwC) – PWC is a multinational
professional services network headquartered in London, United Kingdom. It is the
second largest professional services firm in the world and I will use this in order
to research the department store industry specifically has it pertains to the UK.
After the continued success of Nordstrom in the US and Canadian marketplace, it is a
natural progression to expand its growth into the European market following the success
of its like competitors. The expectation that Nordstrom, Inc is the top of its industry in
North America would be the perfect stepping stone to continue the dominance into other
proven markets and capitalize on the success while the entry is still relatively new.
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Nordstrom, Inc – Funding Request
Investment Project
Ordinarily, when a company experiences a huge success in a particular market, it
is natural that it develops an appetite for other markets. Over the years, Nordstrom has
experienced significant levels of success in its activities in North America. Traditionally,
the company focused on the retail of shoes in its stores. However, in the last few decades,
the company decided to expand its line of goods to include clothing items and other
accessories. In America, the company has grown immensely and attained the leading
position in customer preference for the last five years. The company offers goods of high
quality and provides services that are customer centered. Presently, the company operates
over 167 outlets in the United States alone (Pasquerelli, 2017). In the United Kingdom, it
appears as if the customers have started appreciating the products of Nordstrom. While
the company does not have outlets in the region, it is notable that a lot of customers have
been placing orders with the company for shipment. In light of these developments, it is
incredibly important for the company to open front offices in the region officially.
Recent adjustments in the industry have made it incredibly necessary for the
company to seek other markets. In the recent years, there has been heightened
competition from other firms in the industry. Besides, the entry of technology in the
sector through the utilization of e-commerce has contributed to the company’s growth
over the years. The application of technology in the distribution of the goods of the
company has made a significant contribution to the widening of the customer base of
Nordstrom. To build on this positive trend, it becomes necessary for Nordstrom to make
sure that adopts strategies that would allow it to tap into the goodwill that it has
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Nordstrom, Inc – Funding Request
established in the markets. Venturing into the UK market would turn out to be a positive
step in the development and expansion agenda of the enterprise.
The resources
The following are some of the resources that would be required to realize the new
project;
a. Financial resources; the project would need about USD 1.8 billion. A cost
schedule for the project would be provided on request
b. Human capital
c. Buildings and equipment
The time schedules
a. The project is scheduled to commence in January 2018. Due to the nature of the
business to be executed, it is not possible to state when it would be completed.
The timing of the program
The timing can never be better for Nordstrom. Instructively, various research
studies indicate that it is profitable and desirable for a company to expand when it enjoys
a tremendous reputation in the market. As at 2017, Nordstrom enjoys massive support
from clients across North America. Apparently, this customer confidence in America has
been rubbed on the growing market in Britain. As indicated earlier on, Nordstrom has cut
a niche in the shoes and clothing industry as a result of its determination to provide
quality items that meet the specifications of the customers. The fact that the products of
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Nordstrom, Inc – Funding Request
the company have been widely accepted across the region is an important aspect that
makes the venture quite attractive.
Expansion projects usually require the presence of a strong management team.
Presently, Nordstrom has an experienced team that is capable of leading the company in
this new direction. Nordstrom is probably experiencing one of its best moments when the
activities seem flawless, and that fact would be helpful in making sure that the expertise
of the current team is utilized to facilitate the take-off of the new venture.
Finally, the timing is preferable due to the prevailing economic conditions in the
United Kingdom. While it is true that the recent political events in Britain including
‘Brexit’ had adverse effects on the performance of the economy of the region, the
influence was not so bad that it affects the purchasing power of the citizens of the
country. The fact that is that at the moment, the economy of Britain is one of the
strongest in the region and the commercial activities have not shown any signs of
collapsing. Given these factors, it is necessary to point out that the timing is the best for
Nordstrom to venture into the United Kingdom fashion market.
Strategic Fit
Every organization has strategies that it uses to achieve its goals. Nordstrom is not
isolation. For the company to realize the level of success that is evident, there are
strategies that it might have put in place to achieve its objectives. As a matter of fact,
among peers in the industry, it is the policy that has been implemented which brings the
difference. The strategy of the company is to provide goods of the highest quality, make
the service delivery efficiency and make the needs of the customers the fulcrum upon
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Nordstrom, Inc – Funding Request
which all decision-making strategies oscillated. In that regard, it is apparent that
Nordstrom has made the interests of the customers the basis of their operations. It is this
aspect of the strategy of the company that has endeared it to a lot of clients in the region.
Additionally, statistics from the company indicate that Nordstrom Rack is one of
the primary sources of revenue for the enterprise. The establishment of these outlets have
exposed the retail giant to the world, and different environments and the fact that it
receives customers from all the social and economic groups makes the company
profitable. The decision of the company to establish operations in the United Kingdom
market would be perfectly in line with the business’s strategy. Besides, the company
decided while taking full cognizance of the fact that these racks have been hugely
attractive to the young customers. It recognizes that young customers always seek deals
from the retailers with regards to prices and fashion choices. The decision, therefore, fits
perfectly into Nordstrom’s strategy.
Global microeconomic environment fit
The world is undergoing economic changes. The traditional economic giants such
as the United States, Germany, France and the United Kingdom seem to have stagnated
somewhere. However, there are a few regions that have woken from their economic
slumber and are currently experiencing glimpses of economic resuscitation. The areas
include some parts of Asia and Africa. Statistics indicate that the middle-income groups
in most developed countries are shrinking and the trend is not different across the globe.
In the face of these realities, it is incumbent upon commercial organizations to seek
strategies that would deliver the best results.
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Nordstrom, Inc – Funding Request
To counter the economic burden that these changes have brought, Nordstrom
resorted a small reduction of the prices of the items so that it can increase the volumes of
sales. In that regard, the economic changes would not affect the ability of the customers
to afford the products of Nordstrom. In the proposed move to the United Kingdom,
Nordstrom seeks to make the prices of the commodities affordable and enhance the
capacity of the customers to afford its products. About the pricing strategies that it has
established, the company would not find problems fitting into the new operational
environment.
Fit with Nordstrom’s core competencies
Core competencies are the organization’s internal capabilities that provide it with
a competitive edge over its rivals. When an organization makes a strategic decision, it is
advisable to ensure that the decisions and courses of action do not dilute the core
competencies. Instead, the core competencies should be the yardstick around which the
decisions will be made. One of the core competencies of Nordstrom is the availability of
a competent group of experts who improve the quality of decision-making process (Loeb,
2015). The presence of technically accomplished individuals in an organization is one of
the contributors to success among institutions. The fact that Nordstrom has competent
employees is essential in enabling it to carry out its activities effectively.
Additionally, Nordstrom has put in place internal control mechanisms that allow it
to have its operations conducted in an orderly fashion. The presence of these controls has
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Nordstrom, Inc – Funding Request
made it possible for the organization to make sure that the employees do not perform
their activities in a manner that does not correspond with the desires of the group. There
are multiple cases in which the strategic decisions made by organizations have
contributed to the decline of agencies by diluting the core competencies of the institution.
Instructively, systems become competitive in an environment when they have superior
core competencies. An examination of the agenda of Nordstrom in the United Kingdom
indicates that it is not likely to affect the core competencies of the enterprise.
Justification
Below are the projections for the next seven years for Nordstrom, Inc. These numbers
are in billions of dollars:
Missing Rubric sections:
Project the incremental, annual, and cumulative cash benefits and outflows associated with the
proposed expansion for the next seven to 10 years, using a spreadsheet or other relevant
presentation vehicle to support your narrative. Be sure to justify your assumptions and
methodology based on sound microeconomic and financial principles. For example, what
assumptions have you made about demand, price, volume, capital purchase costs, incremental
hiring, and so on?
2018
2019
2020
2021
2022
2023
2024
TOTAL REVENUE 1.8
4.7
7.9
8
11.1
14.2
16.4
PRE-TAX PROFITS (0.3)
1.7
3.2
4.6
7.1
8.2
9.4
TAX
–
0.4
1.0
1.6
2.4
2.7
3.1
NET PROFITS
(0.4)
1.3
2.2
3.0
4.7
5.5
6.4
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Nordstrom, Inc – Funding Request
As expected with expansion – there will be a slow entry into the market for the
2018 year with Nordstrom trying to break into the UK. Depending on when they are able
to begin operations, they may see a slight change either up or down for the year. Being
able to use existing merchandise, the exchange rate being in favor of the US dollar and
being the “new kid on the block” in the area, the hope is that entering into 2019 onto
2020 – Nordstrom sees a large boost to take on the existing market as they do in the US
and Canada.
1. Project the incremental, annual, and cumulative cash benefits and outflows associated with the proposed
expansion for the next seven to 10 years, using a spreadsheet or other relevant presentation vehicle to
support your narrative. Be sure to justify your assumptions and methodology based on sound
microeconomic and financial principles. For example, what assumptions have you made about demand,
price, volume, capital purchase costs, incremental hiring, and so on?
2. Develop a consolidated financial projection of revenue, pretax income, and cash flow for the overall
business, over that same number of years, both with and without the proposed investment. Use a
spreadsheet or other relevant presentation vehicle to support your narrative, being sure to describe any
relevant assumptions.
Missing Section of the Rubric:
2. Develop a consolidated financial projection of revenue, pretax income, and cash flow for the overall
business, over that same number of years, both with and without the proposed investment. Use a
spreadsheet or other relevant presentation vehicle to support your narrative, being sure to describe any
relevant assumptions.
Section IV Risks:
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Nordstrom, Inc – Funding Request
Expanding in the international market carries risk even for a well-established company
such as Nordstrom. Being able to identify, plan and ultimately react and adjust to situations will
play a huge part in the success of Nordstrom, INC. and their expansion of their brand into the
UK. One thing to keep in consideration is that there are two types of risks that they will need to
deal with. Internal risks, which they can control and adjust to more efficiently and swiftly in
most cases as well as external risks which in many situations they will have no control over.
Being as prepared as possible going into expansion and having options in place will be
necessary.
Internal
One main risk that Nordstrom will have to face before the expansion even gets of the group is a
shift/change in company structure. A company that is considering expansion needs to look into
all aspects that need to restructure. “Well-defined organizational structures establish the roles
and norms that enable large companies to get things done. Therefore, when growth plans call
for doing things that are entirely new—say, expanding into new geographies or adding
products—it’s well worth the leadership’s time to examine existing organizational structures to
see if they’re flexible enough to support the new initiatives. Sometimes they won’t be.”
(Dewhurst, M). Changes may be needed such as adding employees, managers and offices which
in this case would not only be domestically, but there will be a need for resources in the UK. In
this case, it will be important that key executives or management are sent order to oversee the
expansion from picking locations to ultimately the hiring of the teams. The challenge will be
finding those people in the company that are able to uproot and move, carry the company
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Nordstrom, Inc – Funding Request
values that you want to see implemented as well as making sure that filling their void
domestically can be done with minimal disruptions.
The Corporate Culture at Nordstrom is something that is embedded in their employees and the
market here in the US and Canada. They have two core beliefs that carry the company and
making sure that they are taken into the expansion will be a key factor in the success. According
to Carrerbliss.com, Customers and Employees carry the company values and are attributed to
their success as stated below from the blog:
Customers at the top:
Our organizational chart is an inverted pyramid, with our customers at the top and our
executive team at the bottom. It reminds us that our customers are the most important and our
frontline employees, those who take care of the customer, are the most important people in the
company.
Employee Empowerment:
We believe in empowering our employees and creating a competitive environment. We want
our people to have the ability to solve problems and be heroes to their customers, and we want
them to treat the business as if their name was on the front door.
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Nordstrom, Inc – Funding Request
The challenge that expansion will bring is the risk of not being able to onboard the right type of
employees that have the investment in Nordstrom, Inc. Management would do best if they can
hunt out existing customers that they could bring into the company as they understand the
companies values. This will roll into the employee empowerment and building a team that
values the success of the company as much as individual success.
Financially, having the right employees in place may potentially cost more money to the
company especially when talking about getting the expansion off the ground. The cost of living
in the UK as well as compensation to employees that may/may not have to permanently have to
relocate for an unknown amount of time could drive costs up more than what was initially
expected. Other factors to consider are the cost of property as well as the difference in
compensation for store employees that differ greatly from the US. The UK ranks 8th in the world
for minimum wage however depending on where in the UK the expansion takes place, this good
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Nordstrom, Inc – Funding Request
range from $8-$10 which is a big jump from the $7 average in the US. (Jamieson, 2015) Once
Nordstrom, INC expands into the UK, they will need to make sure that they take note of the
compensation differences in Europe to budget and plan for the differences.
External
Being able to adapt to the region that expansion is happening in will be something that
Nordstrom will need to take into consideration in order to be successful. Expansion is not new
to major brands and they could take a page out of McDonald’s which can be found all over the
globe. They are famous for customizing its menus to local demand: In seafood-loving Hong
Kong, for example, McDonald’s offers a “shrimp burger.” This is just as important for midsize
companies, who are typically quite adept at innovating deeply on fewer products or services,
carefully tailoring their offerings to their customer’s demands (Leddy, 2013) …
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