Nordstrom Company
Stephanie Kimber
Milestone one
Investment Project and Justification
MBA 640
April 27, 2017
Nordstrom Company
Introduction
Nordstrom has remained a competitive organization in the world market through provision of a wide variety of quality products to consumers. The company is currently operating with more than 100 stores across the globe. The company has continuously increased its performance over years and this has ensured that its profit margin increases every year. The company also has a stable financial position where there is an increase in income every year. Nordstrom operates in a competitive environment and this has facilitated its need to expand to other different states where it will have the ability to diversify its investment activities and reduce risks associated with its different operations (Nordstrom, 2007). Expansion to Africa will be an expansion opportunity that will enable the company has improved performance. The venture will be valuable to the organization since there is no other branch in the nation. In addition, there are no other competitive stores that have their operations in this nation. As a result, Nordstrom will have a competitive advantage over all the other stores that may be in existence in the region. Nordstrom will have to gather adequate information on the investment opportunity so as to have the right measures of implementing the investment opportunity. The company will also have to make guided decisions on how viable the investment activity will be done and the best method to apply while making the venture.
Description of the investment project
Investment in Africa will require the company to open up a new store that will provide products to customers. The company will have to ensure that there is a variety of products availed to customers at fair prices. The main aim of the investment opportunity will be to increase the sales volumes of the company by creating a wide market for its products. In this case, the investment opportunity will have a chance of expanding Nordstrom, a creation of a wide customer base and create customer relations within the new region of operations (Callaghy, 2001). However, before making the venture, the company will have to gather the correct information related to the new nation where a branch will be established. In this case, the company will have to determine the costs associated with the venture, sources of finances and some of the factors that may affect its business operations in the nation. This understanding is vital as it will ensure that the company knows the kind of business environment that it will venture in and the factors that may affect its operations either positively or negatively.
Based on the fact that there is competition in its industry of operations, Nordstrom has found it necessary to enlarge its customer base by expanding its business activity to other parts of the world where previously it did not operate. The market need for Nordstrom will be to have an operating environment that will have less competition and one that will enable the company to increase its profit margin in the long run. However, before venturing into Africa, the company will have to value the cost of the venture activity and weigh it against the revenue that will be earned once it is successful (Nordstrom, 2004). For instance, the estimated sales and expenses will assist the organization in making a decision on whether to move on with the project or have another country where it will make its operations. The financial projections from the nation will be weighed against the expected income of the firm and where the company is satisfied with the gains, then the investment activity will be carried out without uncertainties. The success of the investment project should thus be determined through the expected returns at the end of a given period of time.
Investment project resources
The investment project will require the use of resources that will be availed by the organization. Since the company may not have adequate resources of making the investment, it will be of importance to find new sources of capital that will be used in making the investment. In this case, the company will have to source for outside financing through getting a loan from a financial institution or bank. The company’s financial statement shows that there is growth in income earned every year and the trend seems to be continuous all through. As a result, the company’s bank account will not have challenges of being in a position to borrow adequate money for the investment activity. However, the loan will not be the only source of finances that will be used by the organization (Rowe & Dato-on, 2013). The company will utilize some of its profits in making the investment and this will ensure that the amount of loan borrowed is highly reduced. Borrowing a loan from a financial institution should be done to add onto the already available capital from the organization and the company should ensure that the loan has favorable interest rates thus will be repayable without strain. In addition, the company may decide to get funding from investors by getting listed in the stock market where it will sell its stock. This method of capital generation will enable the organization to reduce the amount of money borrowed from the financial institutions. The final decision on the sources of capital will be made by the management but will have to be fit for the organizational activities in the new country.
Investment project time frame
The project will be started as soon as the management has adequate resources of making the venture. It is expected that the project will start in 2018 and should be completed by April of the same year. The planning process will take more time as there will be the need to have a viable business investment project that will not cause constraints to the organization’s resources. The company will also have to ensure that all the information related to the new location is gathered, critically analyzed and used to make guided decisions on how to undertake the investment. By 2018, Nordstrom will have increased its profits and there will also be a reduction in the expenses in other branches where the company is located. In addition, by this time, the company will have sourced adequate capital either through stock selling or borrow a loan from financial institutions (Martin & Winters, 1995). There will be the possibility of having more capital than required given the fact that the profit margin will have increased by 2018 meaning that the company will have the ability to generate more revenue. In addition, the company will venture into Africa while having the mind of profit maximization through increased sales. The main aim of the organization is to take its products close to customers where they can access them and this will, in turn, increase the sales volume of the company. On the other hand, the company will be determined to carry out its operations for as long as the investment project generates the projected revenue at the end of every year. Exit from the market may only happen if the branch does not perform well and is making losses instead of profits or where there is no sign of future success for the company.
Justification for the right time
At this time, Nordstrom has a wide variety of products that are in line with the new trends in fashion and style. As a result, the organization has a high chance of being successful in Africa given the fact that most of the people in this nation have realized the need to keep in trend with new fashion. On the other hand, Nordstrom has a strong financial position at this time and is still competitive. The competitive advantage of Nordstrom is enhanced by the establishment of many branches across the world thus diversifying risks. As a result, since there is adequate capital that can be applied in making the organization successful through the new venture, it would be important to expand its activities (Nordstrom, 2007). This is a good time for Nordstrom to start operating in a new location since there is growing competition in the regions where the company already has branches. In addition, there is political stability in Africa so that it would be a safe moment for Nordstrom to make its venture. The economy of Africa is at this time starting to pick and there is the possibility of the continued rise in the economic status. Africans have also embraced technology so that it would be possible for Nordstrom to perform its business operations without facing many challenges. Therefore, there is an appropriate business environment in Africa that will enhance the productivity of Nordstrom Company.
Justification for strategic fit
From the company’s financial statements, there is a projected income that should be earned by 2018 and 2019. All the business activities of Nordstrom are guided by these projections as a way of ensuring that the organization is headed towards the right direction. The investment opportunity will only be accepted if it will serve the needs of the company by increasing its income and the amount of revenue generated from the activities in the new region (Callaghy, 2001). The company has prioritized on increasing its profit margin every year and this has to be continued over a long period of time. Making the new investment will expand the sources of income for the company and this will also ensure that there is increased income over the years. In addition, since the investment activity will use the already available capital in the organization, it will be possible to have an increased amount of returns, especially where the company will be embraced in the new market. In this case, the company will have the ability to increase its sales volume and at the same time create a wide customer base that will be promising in the long run. The investment opportunity will thus align with the plans of the organization and the financial priorities that the organization has in place. From the company’s financial statements, the main aim of the business activities is to meet the needs of shareholders through wealth maximization. This is only achieved when an organization has the ability to increase its operations and diversify risks and this will be facilitated by making its investments in a new location.
Justification for microeconomic strategic fitness
In the short term, Nordstrom will be determined to increase its sales. However, in the long-term, the company will aim at having a wide customer base and have a way of retaining these customers while still attracting many others. In the microeconomic perspective, the company will aim at having many customers who will be satisfied with the type of products availed to them as they will be of high quality. When customers are satisfied, it is more likely that Nordstrom will manage to incorporate other products and services that will add onto the amount of satisfaction that customers achieve once they use the products. In the global microeconomic environment, organizations are determined to be competitive in order to attract more customers and retain them within the organization (Nordstrom, 2004). The investment opportunity by Nordstrom will ensure that buyers are satisfied with the quality products that will be availed to them and that they will also yearn for more that the company will provide. In the long run, Nordstrom will have benefited from the customers for having met their needs. Investing in Africa is promising since the countries here are making upward steps in their economic positions. There is the possibility of having an increased sales amount every year in Nordstrom where the people in these countries will keep moving with new trends that are introduced by the company. As a result, it is more likely that people in Africa will enable the company to grow its operations for fully supporting its activities through being loyal. In most cases, the success of a company in the global microeconomic environment is dependent on the number of customers and their loyalty to the company.
Justification for comparative advantage
The investment activity by Nordstrom will have a chance of utilizing its resources in the right way by having created a wide customer base. The investment project will build on the core competencies of the organization by ensuring that its financial needs are met as well as attracting and retaining loyal customers. The core business of Nordstrom is to have as many customers as possible and ensuring that each of their needs is met through the products and services that are provided by the organization. as compared to other companies in the same industry, Nordstrom shows potential by having the right investment opportunities and in viable locations. Diversifying investments is vital for the success of a business organization. in addition, through the investment project, the company will have the ability to align its activities with the strategic and corporate goals that are already put in place. Nordstrom Company aims at having a customer base that is wide and one that will be promising in terms of having increased rate of consumption. The project will create a wide market for the products of the organization a reason why the company should undertake it and ensure that it meets the goals of customers. The investment opportunity will also be value adding to the organization as it will align with some of the objectives such as maximization of shareholder’s value and increasing the income generated by the company. The success of an organization is determined by its ability to meet its financial needs and sustain its customers by providing them with quality products and services. Therefore, the investment opportunity will take Nordstrom closer to its strategic goals as stated in the company’s strategic plan.
References
Nordstrom, C. (2007). A different kind of war story. Philadelphia: Univ. of Pennsylvania Press. Retrieved from http://www.worldcat.org/title/different-kind-of-war-story/oclc/243879629
Callaghy, T. M. (2001). Intervention and transnationalism in Africa: Global-local networks of power. Cambridge [u.a.: Cambridge Univ. Press. Retrieved from http://www.worldcat.org/title/intervention-and-transnationalism-in-africa-global-local-networks-of-power/oclc/231894516
Nordstrom, C. (2004). Shadows of war: Violence, power, and international profiteering in the twenty-first century. Berkeley: University of California Press. Retrieved from http://www.worldcat.org/title/shadows-of-war-violence-power-and-international-profiteering-in-the-twenty-first-century/oclc/475930441
Rowe, W. G., & Dato-on, M. C. (2013). Introduction to nonprofit management: Text and cases. Los Angeles: SAGE. Retrieved from http://www.worldcat.org/title/introduction-to-nonprofit-management-text-and-cases/oclc/740631395
Martin, W. J., & Winters, L. A. (1995). The Uruguay Round and the developing economies. Washington, DC. Retrieved from http://www.worldcat.org/title/uruguay-round-and-the-developing-economies/oclc/246751449
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