Nordstrom Inc. Investment Opportunity Proposal

Description of the Investment Project 

Nordstrom lags on African fashion. The popularity of Afro beats, the Black Lives Matter movement and African music in both Europe and Canada provide an opportunity for Nordstrom to invest in such a fashion trend. Engaging in African fashion means that Nordstrom Inc. will expand in both Europe and Africa, which are major markets, which are not exploited by the company’s competitors, thus an opportunity for a good revenue stream. Africa is a low-cost destination that the company can expand to without many expenses. Additionally, the area is well endowed with raw materials, which are easily accessible due to their good infrastructure system. Nordstrom's investment in African fashion is a good move because garment production is prioritized in these countries as a way to drive growth and industrialization. For instance, the government in a country like Kenya is providing subsidies to lure textile manufacturers. In another African country, Ghana, the fashion industry is gradually declining, having less than a dozen factories operating in the area. 

Nordstrom Inc. has a chance of increasing its revenue by investing in the African market because of low labor costs. The African market is attractive to labor-intensive garment manufacturing because of the large low-skilled and unskilled labor pool (BSR, 2017). United Nations projected that Africa in the next 20 years will have the highest working-age population (BSR, 2017). Thus, by 2035, the African region is expected to have more than 900 million people of working age. More so, the wages are low in the African region with a worker earning 21 U.S dollars a month, because there is no minimum wage for the fashion sector. According to the World Bank reports, the African employees’ productivity can be compared to that of the workers in Vietnam and China (BSR, 2017). Another advantage that Nordstrom Inc. is likely to enjoy by venturing into the African market is the accessibility of the Western markets. Availability of trade agreements, which allow quota-free and duty-free access to the Western markets will allow the garments produced in the African countries shipped into the European markets. 

Nordstrom Inc. could also enjoy having an integrated value chain by investing in African fashion. Africa is highly endowed with high-quality cottonseed, which Nordstrom Company can access by investing in the area (BSR, 2017). Additionally, much of the ecologically suitable land is not currently exploited. More so, Nordstrom Inc. is likely to gain a competitive advantage over the local fashion industries because of the company’s business management and technical sophistication. Africa is huge with a large population that Nordstrom Inc. can invest in meeting their needs. For instance, the company can start by attending to the needs of the youths who are the majority in this area. These people have a sense of fashion and consume the counterfeits, which are produced in these areas. Therefore, the area is welcoming to a highly developed company because the fashion industry is not well tapped. 

As a way of examining, the company's progress and success in African fashion both personal and organizational success indicators will be measured. The personal success indicators comprise the non-organizational goals such as the employees' self-realization, personal fulfillment, and work-related social relationships (Wach, 2010). The company’s success indicators include profits, sales, cash flow, and the number of employees in the area. More so, the company’s growth in this particular area is an indicator of success. To inform about Nordstrom’s progress, researchers will gather objective financial and accounting market information (Wach, 2010). Additionally, reports on the following economic parameters such as sales, profits, and company growth, in terms of employees will show the organization's success in the area. Nonetheless, the company’s performance in terms of market share or its position compared to its rivals will also indicate success. 

Resources 

By expanding into the African market, Nordstrom Inc. will require the establishment of brick-and-mortar stores, which require less funding and are easy to establish. African countries have a large market of middle-class individuals, who are fashion sensitive. Now that the company targets to increase its sales to 20 billion dollars by 2022, it can use the brick and mortar stores to reach out to African customers, who never trust the internet to make their purchases (Richard Kestenbaum, 2019). By establishing brick-and-mortar stores, Nordstrom Inc. will be able to compete successfully with other large retail businesses that are established in the African big cities. These stores will allow the individuals that order their garments online to easily access them within a short while. At the beginning of the project, Nordstrom can lease the stores, after which they can build theirs. Therefore, the necessary cash will be for leasing the stores now. 

The company will require new employees to serve in these brick-and-mortar stores. As a way to ensuring that all the customers’ needs are attended to, most of the employees will be hired from these regions. Thus with the majority of employees being low-skilled and, non-skilled training is required. Being a new area, the management team can be a combination of the existing managers and new staff, who understand the new market better. Other types of equipment that will be required are working telephone lines, effective marketing materials, and adequate information systems. Venturing into the new market could be a challenging endeavor, which can demotivate managers, especially if the employees in the African countries do not meet their expectations. Thus, a mentor will be necessary to act as a support system to individuals that may be demotivated by the working of the employees. 

Time Frame 

Scheduling is important to any business venture. The scheduling process comprises of creation of a timetable of all the projects' activities. Scheduling's main goal is fitting the project final work plan to a particular time scale that lays the time of every activity to be carried out. A well-crafted schedule is necessary for this business venture to aid in bringing the project from an idea to completion. This project has already started with identifying Nordstrom's need to venture into the African market. The second phase of the project is the planning process, which will take approximately three months to carry out the environmental study, and preliminary design of the brick and mortar stores. In this phase, the project will continue into the detailed phase of renting or buying certain stores in the African stores. The stores are set to begin functioning in a period of six months. The success of the business in the new venture will be evaluated after six months after it resumes operations. 

After one year the business management will use key performance indicators to measure and analyze the financial progress of the business venture against the set short-term goals. Some of the financial performance measures that will be assessed against the short goals include the gross profit margin. The gross profit margin refers to the revenue percentage that is left after subtracting the costs of all the goods sold. Gross profit margin measures the profitability of the items without taking into accounts all the operating costs, such as taxes, interest, and operating expenses. Another metric to inform about the progress of the business venture is the results of the net profit margin. Net profit margin refers to the profitability ratio that assesses the percentage of revenue remaining after the subtraction of all business costs including interest, goods sold, costs, taxes, and operating expenses. 

Additionally, the working capital is a metric, which measures the business entity's available operating liquidity, which can finance all its operations. If the new business venture's gross profit margin and net profit margins are high above 10% the business will continue with its operations after which it will be assessed again after six months. However, if there are no profits at all, but the working capital is available the business operations will continue for another three months with close monitoring. However, if the business makes no profits with the operating expenses and taxes being very high the business is likely to begin closing some of the retail brick and mortar stores in different parts of Africa. 

Reasons why Investing in African Fashion now is a Good Idea 

Covid-19 disruption on the global value chains is evident. For instance, in Africa, Covid-19 resulted in the closure of many businesses. Additionally, the travel restrictions in various countries and border closures interrupted supply chains, leaving the lowest paid individuals in the fashion industry highly vulnerable. In 2020, the economic activities in the African region have been estimated to have contracted by 2% (OECD, 2020). The young population and swift containment measures are the major reasons for the low mortality and infection rates. As an approach to mitigate the economic damages in the African region, governments are adopting various measures such as easing monetary and macroprudential rules, offering fiscal packages, and providing adequate cash to firms. More so, the first recovery in the commodity prices played a role in reducing the contraction activities. More so, the governments in various African countries are adopting a variety of approaches to aid in their economic growth. 

The easing on the lockdown restrictions in most countries investments are stabilizing, exports increasing and private consumptions slowing. However, Covid-19 second wave, which was more contagious that occurred in late 2020 made many governments impose restrictions on economic activities (OECD, 2020). Therefore, currently, most of the African countries are pushing their economies to sustain their populations. For instance, most African countries are implementing integration measures and accelerating their progress to reach a productive transformation by making the African Continent a free trade area. As an approach to make Africa a free trade area, many changes are being implemented on the competition policy, investment, e-commerce, and intellectual property rights (OECD, 2020). More so, African countries are engaging in coordinated actions to attract foreign direct investment. Therefore, Nordstrom Inc. needs to venture into the African markets when most of the countries are making policy changes to attract foreign direct investment to aid in their economic recovery processes. 

How the Investment Project aligns with the organizational and financial Priorities 

Nordstrom's vision is to meet the needs of all its stakeholders in everything they do. More so, the company seeks to secure long-term profitability by establishing a consistent brand globally. Additionally, the company values the richness and diversity in its workforce, which aids in making the company stronger. By venturing into the African market, Nordstrom will be in the process of establishing a consistent brand globally, which is one of its main goals. More so, by investing in the African market, Nordstrom Inc. will secure long germ profitability because there is less competition, especially after most of the business entities in the area were greatly affected by Covid-19 which resulted in their closures. Thus opening new brick and mortar stores in the Africa region, Nordstrom Inc. will have a significant presence in the area, which important to the corporation's growth. 

Investing in the African market will provide an opportunity for Nordstrom Inc. to compete with organizations, which have grown at the national level. Expanding into the African market is a financially wise decision for Nordstrom because most of the people are earning. Thus with the company hoping to increase its sales to 20 billion dollars by 2022, their expansion to Africa could help (Richard Kestenbaum, 2019). Some of the Covid-19 effects on Nordstrom Inc. was that the company's profits fell drastically, although they are predicted to continue improving slowly with the increased vaccination. The net profits fell to 351.00 in 2020, but they are anticipated to increase to 2824.623457 in 2021. In 2022, the net profits are anticipated to increase to 2919.435186, while the operating expenses are expected to continue decreasing. Therefore, by venturing into African countries, where, the cost of labor is low, and countries charge low taxes as an approach to encourage more foreign investments in the region, Nordstrom will be able to achieve their profit goal and minimize the expenses as predicted. 

How the Project Fits in the Global Macroeconomic Environment 

Macroeconomics deals with price levels, spending, and aggregate production, which affects greatly companies that are dependent on the economy's overall health. Macroeconomic factors mainly affect the cyclical industries involving travel and luxury goods. Companies require an analysis to ensure that it is serving its customers effectively and the economy. The global macro economy is affected by ecological, demographic, economic, political, technological, and socio-cultural factors. As an approach to ensure that Nordstrom Inc. venture into the African market fits into the macroeconomic environment, a DEPEST analysis is carried out. Ultimately, businesses operate to fulfill the demographic needs. Therefore, Nordstrom Inc.'s venture into the African region seeks to meet the fashion needs of these people, which are yet to be attended to by global companies. 

Nordstrom Inc. is a company that seeks to increase the employment rates in the African region. Covid-19 led to the closure of several companies in Africa, which reduced a person’s disposable income. Therefore, providing employments to these people will increase their disposable income and increase their spending. More so, with the closing of many fashion industries due to Covid-19, Nordstrom Inc. will fill the current market niche. Therefore, by investing in the African region, Nordstrom will increase the consumers' purchasing power as well as close the market gap that was created by Covid-19. 

Comparative Advantage of the Company brought about by the new Venture 

Comparative advantage refers to a business’ entities ability to provide produce certain goods at a lower cost compared to the rivals. A comparative advantage enables a company to sell its goods at low prices thus realizing strong sale margins. The organization of labor more effectively could help an organization increase the levels of value production and increase its comparative advantage. For instance, the human skills available in the African region will offer the company a comparative advantage. Availability of cheap labor and lack of minimum wage laws is an advantage for Nordstrom's Inc. (Gupta, 2015). Additionally, resource endowment in the African region will offer Nordstrom Inc. a competitive advantage. Currently, many African countries are prioritizing investment in garments and textile manufacturing as an approach to increase growth and industrialization. For instance, governments in a country like Kenya are offering a substantial subsidy to their textile manufacturers to increase growth. Additionally, the national policies towards infrastructure, training, and education advocated for in the African region will also increase the comparative advantage of Nordstrom Inc. 

References 

BSR. (2017). Women’s Economic Empowerment in Sub-Saharan Africa: Recommendations for the Apparel Sector. William and Flora Hewlett Foundation. 

Daphne Howland. (2021, February 5).  Nordstrom leans on off-price, digital to chase customers and profits . Retail Dive. Retrieved June 5, 2021, from  https://www.retaildive.com/news/nordstrom-leans-on-off-price-digital-to-chase-customers-and-profits/594604/ 

Gupta, S. (2015). Comparative advantage and competitive advantage: An economics perspective and synthesis. Athens Journal of Business and Economics, 1(1), 9-22. 

Richard Kestenbaum. (2019). Forbes. Retrieved June 5, 2021, from  https://www.forbes.com/sites/richardkestenbaum/2019/05/02/nordstrom-local-expansion-saks-neiman-marcus/?sh=404eeab51890 

Wach, D. (2010). Defining and measuring entrepreneurial success. M. Lukes & M. Laguna in Entrepreneurship: A psychological approach. Oeconomica.