nordstrom-strategic management

13
Dissension in the Ranks? Mariana P.Monteiro | Joana R.Santos | João Ildefonso

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Nordstrom Case Analysis.Dissension in the ranks?

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Page 1: Nordstrom-Strategic Management

Dissension in the Ranks?

Mariana P.Monteiro | Joana R.Santos | João Ildefonso

Page 2: Nordstrom-Strategic Management

Company’s Background

1901- Founded by John W.Nordstrom

Family Business Shoes

1989- Nation’s leading speciality retailer Apparel Shoes Acessories

59 Department Stores, 6 states

20 years of uninterrupted earnings growth;

Highest profit margins in the Industry;

National Retail Merchants Association Gold Medal

2

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 3: Nordstrom-Strategic Management

Competitive Advantage

Nordstrom Management philosophy: “Offer the customer the best in service, selection, quality and value”

Source of Competitive Advantage:

Superior Customer Service

Decentralized system

Product availabilityNordstrom ImageCustomer loyalty Lofty sales

Sales clerks: “Heroics”; “Nordies”

Extraordinary services Higher salaries Promotion possibilities

3

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 4: Nordstrom-Strategic Management

Competitive Advantage- Nordstrom vs. Competitors

4

Nordstrom Inc. Stock price ( 1988-2000) vs. Macy’s Inc. Stock price ( 1992-1999)

Norstrom Inc.1990 stock price $5,2175

Norstrom Inc.1992 stock price $10,375Macy’s Inc.1992 stock price $6,6875

Source: http://www.google.com/finance

Norstrom Inc.1990 stock price $10,438

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 5: Nordstrom-Strategic Management

Competitive Advantage-Current situation

Source: http://retailsails.com/monthly-sales-summary

Nordstrom’s annual sales

Macy’s annual sales

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 6: Nordstrom-Strategic Management

Management Strategy - Commission System

High-service strategy Incentive compensation system (SPH)

SPH Target = (SALES – MERCHANDISE RETURNED)

Nº HOURS WORKED

Actual SPH >Target SPH 6,75% to 10% commision on net sales Failure to meet target SPH Base hourly wage ($9)

More and better working hours

Less working hours Termination

Incentive to work off the clock rather than report all hours

6

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 7: Nordstrom-Strategic Management

Example : A sales clerk who works 50 hours/week; weekly sales of $8000

a)If hours reported= 40, SPH= $200 Weekly earnings= $540

b) If hours reported= 50, SPH= $160 Weekly earnings= $587,25

Lower SPH reduces clerk’s ranking among peers

Fewer scheduled hoursWorse shifts

Management Strategy - Commission System

7

Different payments for low performers vs. highBackground

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 8: Nordstrom-Strategic Management

Management Strategy – Complementary practices

8

Motivational Methods

Sales contests

Group recognition (praise letters read aloud)

Honor: “Customer service All-Stars”(Discounts + efforts documented)

Employees’ ability to track their performances

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 9: Nordstrom-Strategic Management

9

Sales Force Management - Pros & Cons

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 10: Nordstrom-Strategic Management

Sales Force Management - Pros & Cons

10

Pros

Freedom to make decisions ( decision-making responsibility)

Objectiveness of the sales clerks’ contributionfor the company

“Customer service All-stars”

Opportunities for rapid advancement

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 11: Nordstrom-Strategic Management

11

Cons

Preverse incentive

Disloyal competition“sharking”

Contraditory pressure

“Selling/Non-selling” work time Extra selling hours affect SPH negatively

Equal emphasis to service, profitability and mini-managerial autonomy

“Sharking”: stealing credit for sales made by other staff

Working off the clock. Violating state and federal fair labor standard laws.

Sales Force Management - Pros & Cons

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 12: Nordstrom-Strategic Management

Legal implications and new system procedures

Nordstrom policies and compensation systems became target of:

› Employee complaints› Union allegations› Law suits› Regulatory orders

Strong presence of the Union in Washington

UFCW Local 1001

New procedures

›Back-pay fund › New company pay policies› Sign-out sheets

12

Background

Comission system

CompetitiveAdvantage

Comp. pratices

Pros & Cons

Legal Implications

Page 13: Nordstrom-Strategic Management

Dissension in the Ranks?

Mariana P.Monteiro | Joana R.Santos | João Ildefonso

THANK YOU!