Investment project description

Investment project description

Nordstrom Inc is American retail that offers different clothing products ranging from dresses, shoe sweaters, and accessories. The company was founded in 1901 with the first store in Seattle, United States. The company has successfully provided quality products to its customers through retail stores in the United States, Canada, and Puerto Rico. Nordstrom has over 100 stores across the United States and Canada, which has enhanced its success in delivering products to the customers (Nordstrom Inc, 2020). The development of online retail by the company has facilitated its access to a larger market across the United States and other countries. However, the delivery of products in the Asian market has been ineffective due to the lack of a proper delivery chain. I propose expanding Nordstrom to the Chinese market to create a company store that provides products to the Asian countries and across China supported by online retail.

The Chinese market is one of the world’s largest markets for products, including footwear, clothing, sweaters, and fashion style dresses. China has one of the largest populations across the world, with a rapidly expanding middle-class. The growing economy in China allows for the expansion of the company to reach the target market with reduced competition rates due to the preferences for online retail by the younger generation. Fast fashion and the clothing market in China is estimated at $18 billion based on recent assessments, with leading fashion companies such as Gucci attracting an increasing following (Daxue, 2020). The clothing market and footwear in China are the largest in Asia and across the world due to the population, which is over one billion people.

China is an important expansion opportunity for Nordstrom Inc to operate an effective store that provides different products at an acceptable price and service delivery arrangements. The Chinese market for fashion clothing and accessories is growing at a higher rate than the United States. China is the second-largest economy with low rates of unemployment after the United States. The expansion of Nordstrom into the Chinese market by setting up a larger store to supply products will facilitate easy access to the customers in the country and the Asian neighbors. Other corporations such as Nike, one of the leading shoemaking and sportswear American companies, have successfully invested in the Chinese market with annual revenue of $5.6 billion based on recent data.

The Chinese market is attractive and welcoming to foreign companies with a supportive business environment. Foreign companies with expansions into the Chinese market have successfully set up competitive businesses as the Chinese middle class prefers fashion and high-quality products (Daxue, 2020). Consumer preferences in China are not uniform as each region has different cultural values and expectations from products such as clothing. The Chinese market has an increasing population of individuals with western lifestyles who prefer products from western countries such as clothing for women. Western-style preference is an important opportunity for Nordstrom to expand into the Chinese market to deliver the products to the growing market.

The use of technology in China for business has expanded to reach every sector. The Chinese market has the best technological systems with high rates of acceptance by the population. Online retain in China has been growing over the past five years to reach about 20.7% of the total sales annually (Ma, 2019). The growing online retail in China is an important opportunity for Nordstrom to expand its business through online sales across the Chinese market and other Asian countries. The development of a Nordstrom store in China will provide easy access to the Asian market by incorporating the current technology through online sales and delivery. The Chinese regulations and taxations are also friendly to foreign companies with a 25% business tax (Tax Foundation, 2019). The regulations allow companies to set up businesses and to operate without interference.

Investment project resources

In expanding the Nordstrom in China, which means the company will be venturing into a new market structure that will focus on the sales of the wear online, including dresses, shoes, and accessories, the already existing website will be modified to cover the China market. Besides, local agents, as well as a warehouse, will be a requirement. Since customers will be shopping online, there will be a need for a warehouse where after an order is made, the product is shipped to the pickup location, run by Nordstrom agents who will also apply for the same online hence the need to modify the website. It is paramount to note that some customers will request the goods to be delivered to their doorstep, hence the need for riders, drivers, and company vans responsible for doing the delivery. For small door-to-door delivery, riders will be very effective; hence the company will be required to hire riders and purchase motorbikes for the same purpose. For bulky orders, the vans will be used in delivery. The vans will also be used to deliver products to the agents of customers who wish to pick up their products at the Nordstrom nearby pickup locations. The agents will be commissioned employees of the company who will be paid on a commission basis.

However, the most important resource required for the expansion is the warehouse and a marketing team that will be responsible for introducing the company and its products in the China market. The marketing team will be responsible for penetrating the China market and making sure Nordstrom has been popularized in the country. Notably, with an increase in the market scope, there will be the need to expand the management team for the same, including the customer service team in China, which will handle all the customer concerns in the country. since China is a new market with different culture and expectations from that of the United States, the new customer team in the region will undergo training as well as the employees. The added management team will mainly consist of the Chinese population as they are more versed in the Chinese market and the people’s consumption culture in the country.

The expansion will also require a lot of legal services and consultation as Nordstrom will be venturing into a new market structure and adhere to the government requirements when it comes to operating the business in China, including tax compliance rules well as tariffs that will be applicable. From the name resources required, the business will require a lump sum amount of capital, which we are acquired from the existing business profits and loans from financial institutions such as banks. The whole expansion will amount to $ 1000 million, considering there will also be a need to increase the already stock of the products produced, including the clothing and shoes, to meet the market need and ensure the company does not go short of supply.

Investment project timeframe

Phase 1: September 20th-24th

Website update and settings to include the new market structure

Advertisement of the new positions that will need to be filled and indicate the requirements and interview dates.

The updated website will also include products available and the location for pickup, and the contact details.

Phase 2: September 25-30th

Locate the physical store where the warehouse will be located. Assembling of the required materials, which include motorbikes and vans for delivery, will also be done during this period

Phase 3: November 1-10th

Compliance with China regulatory authority when it comes to setting a business, including tax compliance

Phase 4:  12th -15th

Conduct the interview and hire the required employees, which will be followed by a one week of training and induction of the team

The company’s marketing and its products will take place for a month in the China market where social media platforms will be utilized, and broadcasting media and specific television for visual purposes will be used.

Phase 5:  20th -30th October

This is the period when everything will be set in place, including the agents and the riders’ meeting. A meeting of the staff in China will be organized, and the company mission and goals will be well stipulated. Final planning will also take place at this phase.

Phase 6: 2nd December

The company’s official launch in China will take place where various influencers and marketers, and other brands are invited for the launching party, which will follow the first official operational day in China for the company.

There will be no exit duration for the company in the new market.

Justification, why now

As stated earlier, China is among the most attractive locations globally as it has proven its economic stability over the years. The country is also among the nations in Asia with a high population, which means the market is wider. The rise in China to become one of the strongest powers has increased international business in the country. Over the years, the legal system in China has too improved. It is the right time to venture into the China market as the size of the market is wide enough and diverse, ensuring the business thrives very well in the new market.

Additionally, China has growth potential as it continues to rise in terms of technological and economic growth, hence providing a good opportunity for the business to grow together with the country’s economy. Most of the China population is literate, which means, as an online store, Nordstrom will thrive in the market. Currently, people in the country prefer to shop online to avoid wasting time and reduce human contact. This means that Nordstrom will serve the purpose of the customers by promoting its growth. Arguably, China has become increasingly integrated with other parts of the world as it has opened it to an array of cross-border economic activities in terms of government regulations. China’s government is open to new technology businesses globally as it is fully becoming integrated into the digital era. The country also lacks high and strict tariffs laws in the country.

As highlighted by studies, over the past five years, China’s economy has experienced a significant growth rate of its DGP as reports indicate that China continues to excel at this rate and soon surpass the United States GDP. Additionally, the country has a potential urban development, which has also played a crucial role in developing China’s economy. Urban growth and development will be a crucial factor in Nordstrom’s growth as with the rise of urban growth. Individuals are becoming more attached to technology when it comes to running errands like shopping.

For the past five years or more, politically, China has experienced political stability hence making it easy to venture in there and expand the business. Additionally, the current government is encouraging investors, especially when it comes to technology-related investment, to thrive in the country hence assuring that Nordstrom will thrive. In terms of social factors, China’s social and cultural aspects play a crucial role in the growth of the business. However, it is paramount to note that China’s demographics are constantly changing as the population growth and age distribution fluctuates. However, it is also important to note that China is a collectivistic culture. However, an online shopping platform for clothes will thrive in the country as China’s literacy rate is over 90%. The government has placed a lot of emphasis on education, and most of the nation is literate. As posed by studies, there are 420 million internet users in China, and since there is internet access, Chinese people are often shopping online.

Justification: strategic fit priorities

As a business that has operated in the United States market over the years, it is time for Nordstrom as a business enterprise that sells clothes, which include dresses, shirts, shoes, and accessories, to expand its market scope. Additionally, with globalization and the growth of the business in the United States, it is time to expand the scope of the business, venture into new markets and take risks. for the past five years, Nordstrom has experienced immense growth in the United States, taking competing with bigger clothing brands that operate online. In terms of profit, the business has been able to double the profits and is now seeking to expand its market share and increase its sales and profitability. Additionally, Nordstrom seeks to create economies of scale in its production by venturing into the Chinese market, which is in Asia. As the business grows, Nordstrom seeks to create new jobs and enlarge its customer base.

Justification: strategic fit microeconomics

Over the years, shopping has changed, as many businesses have taken the online route. Individuals at the middle-class level now prefer shopping online as it helps save time and allows convenience on their side. Nordstrom venturing into the China market where it will provide an online platform where customers can shop their products, which mainly involves clothing ware and have them delivered at their doorstep, aligns with the change in the global microeconomic environment. Additionally, customers are looking to have a wide selection of products hence prefer shopping abroad. Since Nordstrom is based in the United States and their products are tailored there, the company will meet the needs of most middle-class and upper-class consumers. The latter want to shop abroad but lack time when it comes to traveling.

Justification: Strategic fit comparative advantage

Nordstrom as a business has several core competencies, including flexibility and adaptability, which is what the new venture in China will be providing for the Chinese market with flexibility in shopping and promoting the adaptability of the business in a new market venture. The business also stands for diversification and venturing into China as a market will provide a chance to diverse for the business from its usually United States market. This will help in spreading the risks as well as increasing business sales. The new venture will also help leverage technology, which is one of the company’s core competencies, and creates a platform and tools for people that include the agents.