external capital funding proposal

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Nordstrom Company external capital funding proposal

Natalia Cardona

Southern New Hampshire University

Nordstrom is a retailer company based in North America which has been in operation for the last few decades. It is a well-known firm due to its provision of high-quality products and services convincing its customers and making them take advantage of the enterprise’s capacity such that they can receive any product or service regardless of their location and time. The primary target of the company’s future is to nationally expand the business by the use of its new sales division outlined as the Nordstrom Rock off sales platform. The use of the newly created system based on customer’s choices in different prices of products and services available to the firm has enabled the company to gain more customer loyalty in various ways.

However, the firm has an objection of expanding its sales to India. Based on the analysis conducted on the expansion issue, the company may not be in a position to achieve these goals even if it has a good sales plans and E-commerce strategies. The failure may result because, if the management decides to team up the sales and logistic space, the act may prove to be less worthy of catching up with the set targets. After careful deliberation, the firm appears to be stable enough intending to focus on Indian expansion objective entirely. Ever since entering the Canadian market, the profit of the company has raised at a very high rate. Expanding its business operations to countries like India would provide a better chance of growing at a global level.

The growth of Nordstrom would pose a challenge to other main e-commerce business competitors which could make them expand their coverage to gain more and have a strong partnership with Nordstrom. As a way of establishing a solid foundation of successful collaboration with other firms from various locations, financing must be prioritized so as to support and supplement the laid plans. Hence, the need for capital funding proposal.

The primary objective of the firm is to expand its sales to India. The primary goal of this expansion is to make sure that our services and products gain a wider global market. Most of the nations are in need of investors where India falls in that category. Hence, the general expansion of Nordstrom retail services provides a better field of brand’s stability and equip Indians with an investor who is more reliable. After considering several positive factors, Nordstrom has decided to expand its services to this country especially after reviewing the market patentability regarding high population growth as well as individual’s increased income rate.

Long-term funding is much necessary for Nordstrom as a way of creating logistic networks. The funds are critical since they provide a backup in the achievement of revenue estimates. The first thing for the firm is to acquire a short term loan. The money will help in the establishment of an online shop necessary to facilitate the operations of the company in the new country and enable it to create a logistic network by related stores in India.

From the cash flow projections, the analysis has indicated that the firm may be in possession of the cash at hand. The act may enable the enterprise to acquire a $ 3 billion long-term funding. Therefore, records show that Nordstrom has higher chances of getting long-term financing deals which may develop some better foundations of cash flow projections. However, the availability and provision of long-term funding will be determined by the available cash at hand useful in the financing the investment. The total cash flow of Nordstrom is likely to be approximate $ 3.5 billion for the whole operation which is enough to support it. The broad expansion of this firm would raise the use of bonds and even loans in funding the whole exercise. Dubai insight expansion provides a platform in that if the company acquires a long-term licensing deal for a 205,000 sq. Foot store, it is likely that an average of 77 million yearly of buyers will be reached and gross revenue of $ 1.5 billion will be collected annually. Hence, a logistic network of about $ 2 billion will be required by the firm for its investment in India.

After financial analysis, it is indicated that long-term set goals can only get achieved if 1.4 million sq. Feet of additional spaces is successfully used for expansion. That is to mean that, if the total estimated space is fully utilized for the period of three years, it will rank the firm in a state that will force it to expand even to other areas such as U.S.A and several countries with potential markets for products.

Through the performed Nordstrom planned expansion analysis, we are in a position to specify what is required to make an expansion in various regions and countries like India. According to the set targets, the firm plans to have seven abroad stores occupying a space of about 146,000 sq. Feet. Hence, by 2018, there is an urgent need to create one open store in India if the local authority approves and licenses it in advance (Chung, 2011). If possible, by 2023, India should have at least two operational retail stores.

III. Justification

According to economists, the current global economy is growing at a very slow rate, but with a few years to come, the growth rate will subsequently go high. A few years ago, U.S formulated a strategy of converting local retail stores into national stores where Nordstrom managed to be a beneficially of the movement. The transformation was made possible through the ways in which the clients consumed products on a global scale. Improved technology also played a crucial role in the same movement and also over the Ecommerce industry at large.

From statistics, Indian economy continues to grow on a daily basis. Within a short period, all its citizens will be rich in discretionary money for spending in buying of products and services, and this may result in the general increase in their wage levels. Most of those developed countries have people of middle or upper class in comparison with India which is still in the stage of growing and expanding its economy. Hence, this development stage is a brilliant chance for Nordstrom Company to get in and invest more. By 2012, the firm targets to be a 20 billion venture (Nordstrom, 2016).

1. Financial Impact

To succeed in the retail business expansion, Nordstrom has a responsibility of adhering to its foundation principles so as to also aim at making India a strategic financial business platform after the expansion. From the logistic perspective, an area for investment in India ought to be in a position that is easy to access. All possible services that are offered on that platform should be defined to ensure that there is a full achievement of company’s objectives. From the previous experience, the firm failed in some expansion areas such as Canada which has made the management to be cautious enough to avoid such occurrences in future (Flannery, 2012). Therefore, the company is much confident that the outcomes from Indian expansion being the first prioritized nation will yield positive results as per our expectation.

2. Expansion

Before Nordstrom massive expansion project commences, the firm should first consider if India will provide and equilibrium measure of incentives as well as the required workforce. Since most Indians fall into the category of either middle or upper middle class, the platform will be a better venture for expansion with a proper foundation for retail store’s growth. The surplus and available off-price market in India will be an excellent opportunity for development and growth of Nordstrom business operations. Analysis of tax mechanism in India is an important act which should be performed before any establishment. This activity may help in identifying how the tax regulatory bodies of India works. In so doing, the firm managers will be aware of all possible impacts that may be introduced to them due to taxation as foreign investors (Miyagiwa & Sato, 2014). If the analysis indicates that the Indian tax system promotes business developments and trade, Nordstrom will be able to cope in such environment and offer the best products and services.

3. Competitive advantages

Nordstrom Company has targeted to promote the business culture in India since most of the sales from the firm are based on multi-retail channel. The channel favors Nordstrom in comparison with other main competitors since the enterprise has some licensing agreements as an added advantage. All services offered by Nordstrom Company has been proved to be of high standard, and due to its quality production, the firm has a better chance to reach a large number of customers in India. Our commodity prices are more customer friendly, and through our retail outlets, Indians has an opportunity to get the products of their choice at any time. Through E-commerce, the firm has an opportunity to cement its presence in India and provide more satisfying products in the different market industry.

4. Opportunities

The description of opportunities

E-commerce portals may be used to ensure an entire establishment of the brand in India. Going with simple analysis, since India is a developing country, the enterprise has a better chance to attain the set expansion objective by 2019 or 2022 (Reuvid, 2012). To quickly adjust into business in the foreign nation, the firm intends to use licensing agreement program and create few store as per the set strategy.

1. Location of opportunities

In development and location of better marketing opportunities, the company will target those well-established countries as well as the developing nations such as the Southeast of Asia regions and India as the primary target.

5. Reasoning for expansion

The primary focus of the company is those individuals who belong to the level of middle-income class in India. The main advantage of concentrating with this country is that the nation is developing and most of its citizens may fall in this class with time. With enough discretionary money to spend in buying of goods and services, there are high chances of more expansion in such a region resulting in an increase in profit yields.

6. Internal related risks

Based on the set target, the company aimed at achieving a twenty billion dollars target by the year 2021. The Rack off-price was in operation as a segment which targeted at reinforcing the brand and promoting the off-price outlet of the primary segment. Both main and rack stores have been overlapping each other at an off-price of about 10% to 20%. After the development of E-commerce sector, the primary set retailer store emerged as the most developed in the market but considered too risky for the business to venture in at full capacity (Simons, 2016).

7. Cultural and external risks

Before setting out any business project in another nation, a good manager must put any risks associated with the culture of citizens of that country into consideration. From the word go, Nordstrom should first pay attention to the Indian business culture in several ways. The management should consider if there are any physical restrictions to conduct business especially for foreigners, the available expressions and the values of those people, the mode of communication among other things. Again, the firm should enquire more on the laws which govern bribery in India as well as whether it is allowed to provide free product samples to the citizens.

8. Natural phenomenon

The stores should be strategically positioned in that in case of any occurrence of a natural phenomenon, most of the products can be saved from any damage. The natural phenomenon is a global issue, and hence, during the development of stores, the factor should be considered since it is a natural event which can occur anywhere.

9. Microeconomic factors which include:

1. The elasticity of price- Nordstrom Company has a responsibility of keeping the price of its product close to the Ecommerce price level so as to make it easy for the firm to successfully survive in the country of India and the whole of Asia at large.
2. Competition- the firm has an opportunity to offer its retail services in India making it to out-do its other competitors who might not have developed an idea of branching into the country (Yoshikawa, 2014). However, the firm needs to invest more in E-commerce as a way of sustaining and creating a strong foundation in the continent.
3. The decrease in sales- if by any chance the firm experiences a drop in sales in India which is accompanied by the stock adjustment, then the necessity of additional adjustment on expenses may arise due to the incurred losses during the process of making products ready for shipment.
4. Significant increase in sales- the firm has a sufficient leverage with a cash flow of about $ 3 billion. The substantial amount provides an opportunity for the management to choose whether to invest in India or to engage in a domestic partnership.

C.

The plan targets to see that the firm expands beyond North America. However, as a way of ensuring total success in India, the company ought to create and establish more revenues which may force it to make the selling of their products beyond India so as to achieve this target.

VI. Track Record

Based on documented records, the company has used any available techniques to ensure the achievement of a growing trend (Chen, Han, & Zeng, 2016). The strategies have enabled it to avoid weak sales in the past few years resulting to an increase in total revenue and profit.

2. Ethical behaviors

While ensuring all employees remain ethical in the firm, the company has an already established code of ethics clearly outlined in the handbook. The codes of ethics clarify that all employees should maintain customer’s confidentiality and should remain honest in every movement that they make with the customers.

Legal behaviors

Nordstrom Company has been involved in solving several labor based disputes, price issues, and other material claims. Through the set code of ethics, the company has been able to handle the cases well without further claiming more complications.

The financial analysis

1. Nordstrom’s five years income statement.

	2018	2017	2016	2015	2014
Sales revenue	15400	15100	14660	14440	13506
Cost of the sold goods	9480	9340	9250	9170	8410
Selling, admin expenses and general usage.	4060	4130	4200	4170	3780
Operating expenses (total)	13540	13470	13450	13340	12190
EBIT	1862	1640	1230	1101	1325
Interest Expenses	200	114	107	125	138
EBIT	182	996	906	977	1185
Taxes	584	361	341	377	466
Net income	898	605	565	600	719
EPS	4.95	3.25	2.87	3.25	4.30
DPS	1.35	1.15	1.05	1.48	1.19
BKV/share	19.00	16.00	15.00	16.40	19.09
Price of stock	49.00	51.20	46.01	84.01	81.02
Outstanding shares	352	370	372	378	384

1. A balance sheet for 5 years projections

	2019/31/1	2018/31/1	2017/31/1	2016/31/1	2015/31/1
Current assets	$	$	$	$	$
Cash and cash equivalent	705000	605000	530000	597000	829000
Short term investments	$	$	$	$	$
Receivables	366000	351000	276000	197000	2562000
Stock	2095552	2045477	1994630	1740000	1944000
Other Assets	340000	320000	300000	282000	103000
Total current assets	2801552	2716477	2570630	2219000	4609000
Long term Assets	$	$	$	$	$
Fixed Assets	4070430	3930380	3830380	3740000	3345000
Goodwill	435000	435000	435000	435000	435000
Intangible Assets	$	$	$	$	$
Other assets	530000	480000	465000	515000	246000
Total Assets	8515980	8145560	7813000	7698000	9246200
Current liabilities	$	$	$	$	$
Payables	1630000	165000	1800000	1745000	1746000
Short term Debt	18000	14500	12400	10200	8900
Others	1240068	1220860	1185320	1165200	1050000
Total liabilities	2890070	2820874	2993320	2290000	2787100

References

Chen, Z., Han, B., & Zeng, Y. (2016). Financial Hedging and Firm Performance: Evidence from Cross-border Mergers and Acquisitions. European Financial Management, 45(5), 23-60. doi:10.1111/eufm.12103

Chung, M. (2011). Cultural obstacles to negotiations: new research in China and India. Doing Business Successfully in China and India, 25(5), 127-154. doi:10.1016/b978-1-84334-549-7.50008-0

Flannery, R. (2012, January 16). How Risky Is Your Company? Retrieved from https://hbr.org/1999/05/how-risky-is-your-company

Miyagiwa, K., & Sato, Y. (2014). Free entry and regulatory competition in a global economy. Journal of Public Economics, 118(2), 1-14. doi:10.1016/j.jpubeco.2014.06.005

Nordstrom-2020 Investment Funding Proposal Sources: Nordstrom 2015 Company Review, (2016). Seattle, Nordstrom. Reviewed June 8, 2016 from http://shop.bordstrom.com/c/nordstrom-company-review?original=leftnave

Reuvid, J. (2012). Managing business risk: A practical guide to protecting your business. London, California: Kogan Page.

Simons, R. (2016, February 15). California Transparency in Supply Chains Act Disclosure | Nordstrom. Retrieved from http://shop.nordstrom.com/c/nordstrom-cares-ctsc-disclosure

Yoshikawa, H. (2014). Fixed Investment in Japan and India. Microeconomic Studies, 26(2), 29-51. doi:10.1007/978-3-642-48748-4_3

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