Achmad Faizal Azmi (361160)

1. What is each companys value proposition as defined in Chapter 2 of this textbook?

Nordstrom Type of value proposition that Nordstrom using is customer solutions value
proposition. The characteristics of this value proposition are build bond with customer and
provide them with the complete bundle of products and services they need. In this company,
salespersons at the Nordstrom department store attempt to learn their customers tastes, sizes,
and budgets so that they can suggest entire wardrobes, fully accessorized. This selling
strategy generates high customer loyalty and higher average revenue per sales transaction.
Nordstrom uses customer solutions focused on making customers feel that the company
understands them and is capable of providing them with customized products and services
tailored to their needs. They value customers and want shopping to be pleasurable whether
it's done in store or online.

Saks Fifth Avenue Type of value proposition that Nordstrom using is customer solutions
value proposition. By offering the finest quality men's and women's fashions, as well as an
extraordinary program of customer services, Saks Fifth Avenue has become the byword for
taste and elegance. As a department store, Saks delivers a high standard of personal service to
its customers and works to build lasting relationships with them. Saks conveniently offers
internationally recognized designer brands locally and at a price that prohibits just anyone
from being able to afford to purchase them. The high-prices plus the internationally sourced
product helps maintain some exclusivity for the store as well as segregates its regular
clientele from the average consumer. It is the apparent exclusive access to these brands that
preserves their status in the luxury brand category and in the mind of the consumer.

2. What measures did Nordstrom take to reduce costs? How might these reductions
affect Nordstroms ability to fulfill its value proposition?

Nordstrom centralized purchasing in an attempt to leverage its buying power. Previously,

Nordstroms buying transpired through more than 12 offices. Nordstrom negotiated with
suppliers to reduce markups on merchandise. These measures should reduce Nordstroms
costs without adversely affecting the companys ability to fulfill its value proposition.
Nordstrom also laid off 2,500 employees between September 1 and October 19, 2001.
Mindful of the importance of its sales staff, Nordstroms layoffs focused on back-office
employees. Retaining most of the sales staff would help Nordstrom continue to fulfill its
value proposition. Nevertheless, a retail analyst noted that Nordstrom needed to dramatically
cut costs, pointing out that Nordstroms annual selling, general, and administrative expenses
of approximately $100 per square foot overshadowed the $60 industry average
 3. What fixed costs did Nordstrom incur in hopes of long-term benefits? Have these
benefits been realized?

Nordstrom invested in computerized inventory-tracking systems. The previous system relied

partly on sales staffs handwritten notes in loose-leaf binders. In addition to inventory
management, new technology was introduced to improve customer service. By installing point-
of-sale software on its registers, Nordstrom intends to quicken transaction times of credit and
debit cards, and implement new "personal book" software to store the personal information the
sales staff keeps on its regular customers. The database, which customers must choose to join,
puts into electronic form the birthdays, sizes and due dates for alterations and shipping that
Nordstrom's commission-based salespeople have always kept via handwritten notes.
Customers also can elect to be called when new shipments of specific collections arrive or
markdowns are made.

4. How did Nordstroms efforts affect the costvolumeprofit elements of sales prices,
variable costs, fixed costs, and volume of sales?

As stated in the case, Nordstrom is adding more low-priced goods and asking manufacturers
to work with the retailer to reduce merchandise markups. In an effort to move excess
inventory, Nordstrom ran a clearance sale, unusual for the company. Nordstrom also altered
its product mix by expanding its offerings of lower-priced merchandise.

5. How did each company attempt to expand its customer base and how successful were
the efforts? Were any opportunity costs associated with Nordstroms Reinvent
Yourself campaign or Saks Fifth Avenues Wild about Cashmere campaign?

Reinvent Yourself was an advertising campaign that began in February 2000. The
advertising campaign was Nordstroms first national television advertising campaign and
targeted younger shoppers than its traditional clientele, concurrent with Nordstroms push to
appeal to a younger clientele with flashing lights and funky clothes and store columns
painted orange for a more youthful look The ads did not emphasize Nordstroms customer
service. Instead, Nordstrom planned to impress customers with its service once they had
ventured into the store.

Saks garnered the sneers of the fashion community with its "Wild About Cashmere"
campaign, which attempted an irreverent approach to the luxurious fabric by dotting sales
floors with goat-shaped mannequins. The awnings of its New York store depicted goats
nibbling at the "S" in the Saks Fifth Avenue logo, and audio of goats bleating was played
outside the Fifth Avenue store windows. The campaign fell flat when many customers,
unaware that cashmere comes from the combing of goats, didn't understand why barnyard
animals flooded the stores. Such moves failed to help Saks keep pace with its competition.
Saks's sales at stores open at least a year have consistently lagged behind the rest of the
luxury sector.