Blue Nile Case Analysis Essay

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Blue Nile Case Analysis

1) Do all the elements in the strategy fit together? Or are there built-in contradictions? The main elements of Blue Niles strategy High quality, competitive price, customization, informative website, good customer service and support, long term supplier contracts, negative cash flow cycle, certification, brand recognition, reliability, convenience and speed of deliveryhave each enabled other it to establish itself its as the number as one a online diamond retailer. Although it has a sound overall strategy, under competitive pressures, certain elements conflict dampening position market leader.

1. Pull back on advertising (purchase of keywords) v/s increase in brand awareness and recognition 2. 3. 4. 5. 6. Outsourcing High Cutting value Increase inventory Customization operations/services sales prices (6 to v/s digit make of fine jewelry v/s maintaining single sales v/s sales) v/s high lean competitive quality high increasing customer gross net v/s operating model pricing service margin income

Blue Niles sells only through the Internet. Pull back on online advertising, due to increased cost; lessen its visibility on search engines, reducing brand identity and recognition. Further increase in product line both in terms of high price and product variety, to attract a large range of customers, can affect their lean operating model increasing inventory costs. Increasing customization options could also affect its competitive pricing increasing operation costs. Even though outsourcing operations and services can help keep a better control but in times of high demand they can be compromised since they are not directly a part of the company. The quality of the service is dependent on the ability of the outsourcing company and not Blue Nile. Further, it set lower gross profit margins on high value sales (just to make the sale) reducing profitability. Aggressive sales based merely on competitive pricing leads to lowering its...

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Blue

Nile

case

study

Intro: We at xxxTech were hired to asses Blue Niles overall situation and recommend a set of actions to improve the companys future prospects. First we will be presenting you with a five forces analysis of the diamond and fine jewelry industry. Then we will present you with a SWOT analysis of Blue Nile within the diamond and fine jewelry industry. We will then review your business strategy and which of the five generic competitive strategies that applies to it. Followed by our assessment of the current business strategy. Then we will review with you your financial performance from 2005-

2009. Followed by our recommendations that we think will strengthen Blue Niles competitive position, Five -Rivalry future strategic, forces amongst and financial performance. analysis: competitors

Rivalry amongst competing sellers in the diamond and fine jewelry market is intense and by far the strongest of the five forces. Many factors like size and number of competitors in the industry, degree of product differentiation, switching costs for the buyers, and exit barriers lead to this determination. Blue Nile has both primary and secondary competitors in this market. Other online retailers like Diamonds.com, Ice.com, Whiteflash.com, and JamesAllen.com are the primary competitors. Secondary competitors include traditional diamond and fine jewelry retailers like Tiffany & CO, Helzberg jewelers, Zales, and other brick and mortar stores. There is no clear market leader in the industry amongst the competitors listed there are also numerous small firms and single location retailers, this increases the competition in the industry. These retailers deal in precious commodities like diamonds, gold, silver, and platinum. Attaining these precious commodities at a low cost becomes a huge part of the competitive environment. The differentiation in the industry comes from aesthetics not purpose or use this leads to high competition as well. With the jewelry...

1. How strong are the competitive forces confronting Blue Nile and other online retail jewelers? Which one of the five competitive forces is the strongest? Do a five-forces analysis to support your Suppliers: suppliers. who Suppliers have very little answer. (weak) bargaining power, since there are many

Suppliers reputations are at stake with the quality of the diamonds they sell. Multiple dont have as much power.

tiers? Whos got the power/doesnt? Suppliers may have more power relative to the wholesalers, Rival Firms: Rivalry, I would say, is fairly strong. Because of the extreme competition within the market as well as the high costs of raw materials, its generally difficult to gain much of an advantage over rivals. Because of the various channels available to consumers when purchasing jewelry (physical stores, online, etc), the competition is even M ORE fierce. It didnt help that a lot of their online competitors copied BNs method of buying gemstones from their suppliers for specific purchases. New Entrants: This is a weak force. When looking at the high costs to enter, as well the significant brand loyalties that already exist, the competition for new entrants keeps most new entrants from being successful. Buyers: This is only a moderate force, since jewelry tends to be custom, and therefore, people expect to pay higher prices than they might for other things. Most jewelry stores prices arent greatly different from others and buyers have very little influence on prices due to the high cost of raw materials to make the products. Substitutes: Substitutes are a relatively strong force, since there are other companies who are willing to create same or similar jewelry at cheaper prices to undercut their competitors. Government: The government plays a smaller but it isnt as impactful as UN... role since the UN restricts the diamonds being sold are mined without conflict (aka Blood Diamonds). Import and export laws may have an effect,

2. online?

Explore

www.bluenile.com

Describe the safety measures do the company take to make it safe for people to buy diamonds

Blue Nile have taken measures to guarantee all orders will be secure and safe, they are using the latest in security technology to ensure your credit card information stay safe, as well as maintain the utmost respect for your personal information and guarantee that we will never sell it to a third party and once an order is shipped, it is insured until it reaches your door.

When a customer uses their credit card to make a purchase through Blue Nile, the information you provide is protected by Secure Sockets Layer (SSL) encryption technology. This technology ensures that your personal information is protected from outside parties when transmitted from your computer to our server. Blue Nile participates in the Verified by Visa and the MasterCard SecureCode programs which help you maintain even tighter security with an additional password when purchasing with your Visa card or MasterCard online. If you are a Verified by Visa or MasterCard SecureCode participant, you will be prompted for your password when you purchase at Blue Nile.

Blue Nile also provide safe purchases over the phone, the phone lines are being manage by trustworthy Blue Nile diamond and jewellery consultants which Blue Nile have employed and if theres any complications, Blue Nile insures all orders in shipment. That means until your purchase reaches your door, your purchase is under our protection.

1. What key factors will determine a companys success in the online jewelry business in the next 3-5 years?

The online jewelry business will be highly dependent technology. They will also need to keep good relationships with the organizations that certify their diamonds. They need to give their customer a safe, comfortable environment in which to make high dollar purchases. Educational information will have to be easily and readily available to the customer to help them make their decisions. They need to prove to the customer that they can provide (near) equal shopping experience as a brick and mortar jewelry store while providing better prices.

2. What is Blue Niles strategy? competitive advantage

Which of the four generic competitive strategies discussed in What type of achieve? is Blue Nile trying to

Chapter 1 most closely fit the competitive approach that Blue Nile is taking?

Blue Nile strives to offer high quality jewelry and competitive prices and also provide information about their products and provide guidance through the purchase process. They are trying to create a cost-based competitive advantage by having cheaper prices on their high-quality jewelry compared 3. What do you to like and dislike traditional about Blue Niles business retailers. model?

I like Blue Nile carrying a low amount of inventory. By not buying a gem from a supplier until a

customer purchases it, it strongly limits the amount of risk and cash tied up at any point. I also like that they have a very lean supply chain that strives to eliminate middle men, keep costs low. This allows them to sell their products to the customer at very competitive prices.

I do not like their marketing aspect being completely based upon the internet. A non-internet based campaign would increase legitimacy of the business and possibly promote it to a much...

Blue What 1. are Blue

Nile Blue Niles Niles

SWOT three low top

Analysis strengths? prices.

Blue Nile sells exclusively online and this allows them to offer competitively lower prices than companies with physical stores. Blue Niles supply chain efficiency allows them to have lower operating costs. Blue Nile bypasses the wholesalers and brokers, which gives them a great opportunity to obtain a more cost-efficient product. Blue Nile and their suppliers also have multiyear agreements whereby Blue Nile only purchases diamonds and gems when a customer places an order. The low operating cost allows Blue Nile to offer their customers discounted prices at 2. about 20% Blue to 35% Niles less than the traditionally established to stores. quality. Blue Niles commitment

Blue Nile attracts their customers by offering top quality diamonds and fine jewelry.

strategy to provide jewelry shoppers with a wealth of information educates them on the things to look for in choosing diamonds. The information entails such things as the 4 Cs (cut, color, clarity and 3. carat) which helps Blue ease the customers fears offering about online of jewelry shopping. Niles Customization. Customers select the diamond. key weaknesses? An online customer

Blue Nile specializes in customization of diamond jewelry with a Build your own feature, which allows the customer to design their own rings, pendants and earrings. characteristics Which are of Blue Niles each diamond and can choose from a variety of settings, which are designed to match the

1. One of Blue Niles key weaknesses is that it does not have a physical store. does not experience the touch and feel of the product. proposition for many customers.

Sight unseen online ordering is a scary

Customers making a big investment purchase in diamonds

prefer to do it person. The majority of purchases made on Blue Nile website are below $5,000. Customers are more comfortable spending large...

Blue Case diamonds Model and of fine jewelry Analysis:

Nile

Inc. Analysis

Background: Founded in 1999, Blue Nile Inc. is the worlds largest online retailer of certified and has been public Sweet since 2004. Spot Strategic

Problem: In the jewelry industry there is lots of markups, closeout sales, and it could be difficult for Blue Nile to get online shoppers comfortable with purchasing a diamond sight-unseen over the internet. Recommendation: The only thing that I believe would benefit the company is to expand more. Make it known to the public and get your name out there. I had never heard of them before this

report and now that I have visited their website, I will consider them dearly in the future. Analysis: The main problem with other businesses in the jewelry industry is that they lack many types of in store varieties. They may not have exactly what youre looking for and they may also only provide you with certain types. Meaning that there is no way to customize your own diamond. The sweet spot of the company is how they make it more comfortable for shoppers online to feel they are not getting cheated. Blue Nile is always assuring customers online or through operator phone calls that the company is there for you. From reading, and from visiting the website, I saw nothing that would steer me away from the company. They seemed fair and had plenty of statistics and offered everything in which a non educated jewelry buyer could use in order to obtain what he wanted and feel confident in his purchase. With Blue Nile the main thing to their company is customer satisfaction and making sure you know you control what you want and if youre satisfie d. I found this from their website; At Blue Nile you'll find high-quality diamonds certified by the most respected independent diamond grading labs. You can create your own jewelry choose the right diamond and we'll set it in your favorite earring, pendant, or ring design. Every order is shipped free, guaranteed...

Q 2. How strong are the competitive forces confronting Blue Nile and other online retail jewelers? Which one of the five competitive forces is the strongest? Do a five-forces analysis to support your Suppliers: suppliers. who Suppliers have very little answer. (weak) bargaining power, since there are many

Suppliers reputations are at stake with the quality of the diamonds they sell. Multiple dont have as much power.

tiers? Whos got the power/doesnt? Suppliers may have more power relative to the wholesalers, Rival Firms: Rivalry, I would say, is fairly strong. Because of the extreme competition within the market as well as the high costs of raw materials, its generally difficult to gain much of an advantage over rivals. Because of the various channels available to consumers when purchasing jewelry (physical stores, online, etc), the competition is even MORE fierce. It didnt help that a lot of their online competitors copied BNs me thod of buying gemstones from their suppliers for specific purchases. New Entrants: This is a weak force. When looking at the high costs to enter, as well the significant brand loyalties that already exist, the competition for new entrants keeps most new entrants from being successful. Buyers: This is only a moderate force, since jewelry tends to be custom, and therefore, people expect to pay higher prices than they might for other things. Most jewelry stores prices arent greatly different from others and buyers have very little influence on prices due to the high cost of raw materials to make the products. Substitutes: Substitutes are a relatively strong force, since there are other companies who are willing to create same or similar jewelry at cheaper prices to undercut their competitors. Government: The government plays a smaller but it isnt as impactful as UN... role since the UN restricts the diamonds being sold are mined without conflict (aka Blood Diamonds). Import and export laws may have an effect,

CASE A Blue Diamond 1. What is Blue Diamonds business model? Briefly elaborate on the components of this model. Note: A firms business model is the framework the firm uses to earn profits. To figure out a firms business model you need to figure out how, and where, profit is generated. The key word here is profit, a different concept than sales. Of course we have to have sales to generate a profit. 2. Does Blue Niles business model result in a winning strategy? Blue Niles business model involves selling high quality diamonds at low prices online. The first hurdle for them was to make the buyer feel comfortable buying a high ticket item that has many characteristics that could affect the products quality. They effectively alleviate the consumers concerns by providing them with information and guidance during their shopping experience. The consumer is then able to educate themselves about what determines a diamonds quality and value. They can then compare different stones to look at these differences and make informed decisions regarding size, weight, cut, color, clarity and price. Blue Nile also provides a high level of customer service and support. Customers can also call or email questions to consultants who could guide them through their purchase. Through arrangements with suppliers, they are able to offer a large inventory of loose diamonds at low prices. Until a customer orders a stone, Blue Nile does not have to purchase it. Besides being able to have small inventories, this set up allows them to be paid by the customer before they have to pay suppliers. Using this cost saving supply chain also gave them the advantage of being able to set a markup price lower than competitors. The nature of their business model enabled them to enter the fairly new online market and compete based on lower prices. Because of their low prices, service and support Blue Nile has been able to compete successfully in the online market to become...

Business Strategy In a short period of time Blue Nile has become the largest Online Diamond retailer in the World. Their approach to online retailing was much different to the approach that other retailers had chosen. Blue Nile felt that many people would be initially extremely hesitant about buying jewelry online because this is generally a high touch purchase. So they developed a website that had a lot of information on the site to make the buying process easier for the customer. They decided that providing a complete education experience would be extremely beneficial to their online customers. Also they set up strategic alliances with distributors in order to receive diamonds in only a day from their warehouses. This benefits the customer by allowing them to get their product in only a few days. Lastly they carried very little inventory which allowed them to have lower costs and they were able to past this savings along to their customers. This significant savings made it a great competitor in an industry that was dominated by individually owned shops. Other retailers had a more than a 100% markup on their products. Blue Nile only had a 33% markup on their diamonds and was more profitable then most of the other companies. However, with the immense success there is always room for improvement. The opportunities that Blue Nile had were expanding into other countries, expanding their product lines and capitalizing on their markets that they had already moved into. Expanding into other countries was a new untapped strategy for Blue Nile. This was a new market that could have two different types of results. This could be extremely successful and produce many more sales to this already successful company. Or it could fail and waste the time and effort of many people and take away from their core business in the United States. If Blue Nile wants to move into new markets, they must do this strategically. They...

Blue Nile 1. What is Blue Nile's strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence from the 10-K supports your conclusion? Blue Nile looks to be implementing and mix of strategies, in that they are responding to the individuals needs on the type of diamond they want, but they are doing it at a heavily discounted price compared to the competition. This would be a combination of the customer intimacy and the operational excellence strategies. The evidence that supports this can be found on page 3 of the 10-k report: We have developed an efficient online cost structure and a unique supply solution that eliminates traditional layers of diamond wholesalers and brokers, which allows us to generally purchase most of our product offerings at lower prices by avoiding mark-ups imposed by those intermediaries. Our supply solution generally enables us to purchase only those diamonds that our customers have ordered. As a result, we are able to minimize the costs associated with carrying diamond inventory and limit our risk of potential mark-downs.. 2. What business risks does Blue Nile face that may threaten its ability to satisfy stockholder expectations? What are some examples of control activities that the company could use to reduce these risks? (Hint: Focus on pages 8-19 of the 10-K.) Are some of the risks faced by Blue Nile difficult to reduce through control activities? Explain. Risk: Purchasers of diamonds and fine jewelry may not choose to shop online, which would prevent us from increasing net sales. Control activities: Make available only independently certified diamonds and have this be the main focus of the marketing material. Also, granting customers easily access to information about the specific products that they are interested in purchasing via the website. Risk: This is a luxury product, and customarily...

1. How strong are the competitive forces confronting Blue Nile and other online retail jewelers? Which one of the five competitive forces is the strongest? Do a five-forces analysis to support your answer. The competitive forces that are confronting Blue Nile and other online jewelers are very intense and competitive because online jewelers are very competitive. There are more product selections, quality, price, customer service and support and reliability. Moreover, customers can compare prices of online jewelers with their local jewelry stores to see which one is better buy. The buyers are the strongest competitive force because online retailer jewelers are all about customers first. Rivalry among various online jewelry retailers is centered on attractive price, selection and variety of products, the certification and trustworthiness of the information/guidance provided to online shoppers (education information, in dept product information, access to professional grading reports.). They research links with Google and other browses. The

strength of the rivalry among online jewelry retailers is affected by the online jewelry segment of the overall retail jewelry industry is rapidly maturing, this will increase rivalry. Rivalry among online retail jewelers is a moderate source of competitive pressure that is likely to intensify over time. Buyers have low switching cost, it is simple for consumers to find and visit competitor websites this increases rivalry. Most of online jewelrys compete on fast delivery, this weaken the strength of the rivalry. The barriers to entry into the online segment of the jewelry industry are defined by the cost of developing a Web site, and the cost of developing order fulfillment capability and achieving short delivery times. Expenditure for advertising and promotion needed to draw visitors to the web site and build a trustworthy reputation and image. The factors affecting the...

Blue Nile Inc. in 2010 1. Looking at the five forces analysis it was clear that competition is prevalent in this industry. There is not much concern for people offering substitute products because in an online market a diamond is either of quality or not of quality. In their supply chain they are able to reduce cost greatly. They skip over a lot of the middle men that other companies have to deal with. This gives them a cost advantage in supply. The new entrants are established jewelry retailers that are attempting to enter the online market. They are a threat but not as much as a new company entering the market for the first time in the online market. Buyers are always interested in quality and ease of purchase. They offer several tools that encourage their buyers to use their service. They also offer a full refund in 30 days if a customer is not satisfied. This gives them some competitive advantage in the buyer market. Most of their competition comes from rivals in the same market. These rivals had the same advantages as Blue Nile because they all sell through the internet. This is a shop from home type service. Blue Nile is able to succeed due to their lean business practices but some other companies have many years experience and this gives them quite an advantage. 2. In order to survive the next 3-5 years they need to maintain their lean practices. Reducing their cost during this time will greatly help them. They also need to maintain their website daily; constantly keeping the customer intrigued with new product designs and format. Any advertising they can do will also greatly help bring more attention to their business. That is one problem with online retailers; many people just dont know they exist. 3. I am choosing the Best-Cost provider strategy for a close match to their strategy. They offer a high quality product at a great cost. They do this by effective management through lean practices. They also like to educate their customers so...

Blue Nile Case Study How strong are the competitive forces confronting Blue Nile and other online retail jewellers? Do a five-forces analysis to support your answer. I) Rivalry among online jewelers (Figure 3.4 P.57)

a) Rivalry among various online jewellery retailers is centered on; attractive price, selection and variety of products, the calibre and trustworthiness of the information/guidance provided to online shoppers (education information, in dept product information, access to professional grading reports.), Research links with Google and other browses. B) The strength of the rivalry among online jewellery retailers is affected by; The Online jewellery segment of the overall retail jewellery industry is rapidly maturing, this will increase rivalry. Buyers have low switching cost, it is simple for consumers to find and visit competitor websites-this increases rivalry. Most of online jewellers compete on fast delivery (this weaken the strength of the rivalry). C) Conclusion; Rivalry among online retail jewellers is a moderate source of competitive pressure that is likely to intensify over time. II) Threat of entry (Figure 3.5 p.61) A) The barriers to entry into the online segment of the jewelry industry is defined by; The cost of developing a Web site. The cost of developing order fulfillment capability and achieving short delivery times. Expenditure for advertising and promotion needed to draw visitors to the web site and build a trustworthy reputation and image. B) the factors affecting the threat of entry; Barriers to entry are relatively high. The pool entry candidates are relatively small. The growth and profitability prospects entry into the online jewelry retailing is a moderate source of competitive pressure. C) Conclusion; The threat of additional entry into the online jewelry retailing is moderate source of competitive pressure III) Competition from substitute sellers of jewelry (Figure 3.6 p.65) The costs to the...