Blue Nile Case Study

gamy Nile Case survey Cristeen McPherson Student Number 326914 BUSA 506 Dr Terry indicant November 11, 2012 1) The hawkish jampacks confronting unconsecrated Nile and other on delimitate retail je salubrio purposers be medium or half-hearted in strength, with the exception of the strong argument between sellers. The po ecstasytial for new entrants to the jewelry commercialize is relatively low delinquent to the naughty cost of farm animal, the lack of speciality of harvest-home and the brand scholarship held by the industry leaders. Good substitute yields for a fibre baseball fields atomic number 18 non pronto available.There are synthetic gemstones, cubic atomic number 40 and other jewelry plectrons, merely the oecumenical consumer does not see these as a true substitute for real diamonds. provider bargaining agent is a mixed bag of strong and weak factors leaving this force with a medium impact on the industry. The diamond submit industry is more(pr enominal) than(prenominal) concentrated than the retailers but is having new entrants emerging. standardised the Canadian diamond producers Ekati in 1998, Diavik in 2003, Jericho in 2006 and pass Lake-4 in 2007 slay Canada now the third largest diamond producer in the world. 1 Two factors contributing to a stronger supplier power are that results are critical to the retailers success and there is a lack of upright substitute reapings. In contrast, the commodity trading or purchasing process for diamonds contributes to a weaker supplier power as retailers father belatedly cleverness and low be to switch suppliers. intentness members are excessively now integrating backwards into the supply of the product, Diavik exploit is a joint venture between Rio Tinto and set upon Winston rhomb Corpo proportionalityn and the De Beers throng owns the Snap Lake-4 mine. 2 emptor bargaining power is slightly strong all over out-of-pocket to Low be of reverse between retaile rs ? Lack of preeminence of product between retailers specialization is more on persona provided than the style or presentation of the product ? Large and various(a) consumer base ? Buyers ability to be well informed on product tuition on quality, footings and be is waxing collect to internet accessibility ? Buyers are price sensitive The strongest force is the rivalry between the competing retail sellers. Factors altering competing rivalry ? Buyer demand is growing slowly jewelry food merchandise is mature, with a broad lam of consumers ?Buyer demand had fallen by in recent forms due to niche m some(prenominal) sellers found themselves with slow moving neckcloth ? Buyer cost to switch brands is low the buyer has no cost to switch to another(prenominal) online retailer, its just a mouse tick off ? Products are weakly differentiated diamonds and jewelry are equal offerings between the sellers ? eminent fixed or storage cost the bricks and mortar (b&m) ret ailers and m whatsoever of the online retailers keep tall livestock costs, which when not turning fuck off carrying costs (interest etc) negatively impacting capital bleed and earnings ?High exit costs the high inventory costs make it difficult to liquidate quickly ? Competitors are numerous and diverse in their protect proposition, with low jimmy, high volume retailers care Walmart as well as high end prestigious retailers like Tiffany & Co. 2) around key success factors that volition affect the online jewelry retailers in the near in store(predicate) exquisite jewelry buyers are looking at for a retailer that offers quality product at a war-ridden price. Retailers essential rely on their brand recognition with consumers they need to build sense of their product offerings as well as their node overhaul.Retailers moldinessiness prove they are reputable, undeviating and trustworthy. Online retailers withstand to express this with capturing their online hea ring with an easy to navigate website, appealing to their aflame response and showing other consumers happiness and confidence with past purchases. Jewellery retailers moldiness be able to provide surpassing client service and support. Major purchases of jewellery items, especially a diamond liaison ring, are truly frantic to the vendee. customer service that ac knowledges the significance of the purchase and guides the purchaser hrough the transaction allow for be a necessity for success and gaining consumer loyalty. With the high costs of inventory, retailers need to manage costs of inventory and operations, keeping costs in line with sales and managing cash accrue is a key capability for success. A made retailer is able to match inventory purchases with their consumer sales at a similar rate, maintaining inventory turnover and cash flow through the business. Not updating and maintaining their awareness and a high level of trade knowledge give put a retailer at a po rtentous matched dis favour.If they are not recognizing the grocery trends, striving to achieve some product differentiation and preparing to meet customer necessarily and wants, they will fall behind and support customer loyalty, sales and market helping. 3) blueness Nile is employing a best-cost provider dodge as their free-enterprise(a) approach in the online jewellery business. Their aim is to create competitive profit by offering a quality product at a competitive price. disconsolate Nile is able to do this through their supplier agreements where the diamonds and other gems are not actually purchased by good-for-nothing Nile until they have a consumer shape for that particular product.This limits spirited Niles exposure on inventory costs and the take a chance of non-selling product. blue sky Nile overly relies on strict consider of their run costs expenses for employees, facilities and technology are unceasingly reviewed to ensure their efficiency and that low costs are maintained. These two components combine to grant Blue Nile to offer comparable quality jewellery at substantially disappoint prices than their contentions. 4) Blue Nile has a rattling mystic and keen knowledge of their customer and market.This enables them to reduce their website to their customers needs, offer superior service and educational aspects for the consumer, effectively establishing trust with their consumers. This knowledge also gave them the ability to strike very good supply agreements with multiple providers for the quality product they sell online. Many of the diamonds and other jewellery are only available via Blue Nile because of their scoop supply contracts. In range to remain competitive, Blue Nile moldiness be diligent in maintaining and updating their market knowledge.The ability to accurately predict market trends and proactively alter business strategy is resilient to ongoing success. For instance, many of the online retailers are presen tly relying on their educational information to amass the customers trust and loyalty. With every retailer working to plus the knowledge of the consumer, this strategy will escape effectiveness over clock as the consumer becomes more knowledgeable. The ease of switching retailers is very high and Blue Nile must be ready to offer another compelling reason to remain loyal.Blue Nile must also be aware of any changes in their suppliers and the diamond market, if new diamond suppliers reach similar supply agreements with any of Blue Niles competitors, they may lose their supply cosmic string benefit and risk significant increases in inventory costs. 5) trick up Analysis Blue Nile Table 1 pic Although Blue Nile has many company strengths that drive their occurrent success, the many competitors in the online and b&m jewellery industry have many of the same strengths.Blue Nile needs to emend and expand their marketing campaign and sanction their brand recognition. They also ne ed to breach a program to offer more product differentiation. One suggestion to bear both these needs might be to develop a strategic compact with a well-known jewellery former and offer custom design service online using the designer name and reputation. 6) Blue Nile posted exceptional double-digit sales growth over the six years 2002-2007, the recession of 2008 interrupted their growth trend actualizing a 7. % divergence on sales year over year. They have since achieved moderate sales increases ranging from 2. 3% to 10. 18%. Blue Nile shows a unshakable gross margin averaging closely 21. 7% over the work ten years. They also show very steady levels of selling, general and administrative expenses that have a slight increase each year most likely due to pompousness of salaries and input costs. Consequently, their EBT margin is also very healthy, averaging 7. 0% earnings return on sales. Blue Nile has large cash reserves and very little long-term iabilities, their runnines s ratios are very healthy. Their current ratio averages 1. 51 over the last ten years. With their cost verify and supply chain management, Blue Nile has very collateral results for the performance/efficiency ratios. Their cash conversion is excellent due to the payables terms of supplier agreements they have a incontrovertible cash float of about 40 old age from the collection of sales revenue to the stipend for goods. 7) Weighted Competitive Strength judging Table 2 Blue Nile does have enough strength to remain competitive against its rivals.Their main rival based on pricing, quality and market knowledge is JamesAllen. com. Blue Nile is the strongest in terms of cost control and inventory control/supply chain management. Currently Blue Nile does have a sustainable competitive advantage over its rivals. Their product offerings are very similar, as are their websites and customer service policies, but Blue Niles cost control is far superior giving the advantage of greater effi ciency and lower costs as compared to the other online retailers. ) In order to develop a more sustainable competitive advantage Blue Nile will need to use their market knowledge to develop a stronger marketing contrive to drive their brand recognition, product differentiation and develop greater customer loyalty. Blue Nile also needs to address the hereafter erosion of market share due to the growing strength of competitors, and the potential of the loss on exclusivity from their product suppliers. 9) Recommendations pic The components of the marketing aim and the strategic bond with a jewellery designer fit together very well and should be quite easy and quick for Blue Nile to develop and execute.The value that would be seen via the increased brand recognition, customer loyalty and product differentiation would increase their competitive strength and be sustainable for the near approaching. Blue Niles current geographic blowup has shown success, continued blowup will need t o be founded on research into the jewellery customs of head locations, to use the websites appeal to the emotional purchase of jewellery. Low costs of online expansion are advantageous, while care must be taken to ensure lecture and culture are respected.Selective expansion will help to retain competitive advantage for the medium range future tense and grow market share internationally. With their keen market knowledge, Blue Nile is positioned to take advantage of the weaker competitors in their market and secure market share growth for the mid range future via acquisitions. The potential to acquire a competitor would take longer to evaluate completely but is still a executable option to gain large portions of market share and increased sales.Blue Nile does have positive cash flow, good cash reserves and available credit facility to use to accomplish the acquisition. While the strategic alliance with a diamond producer/mine would secure long-term guarantees of the supply of qua lity, exclusive product at very competitive costs, the timeline to complete such a task is lengthy. The cost could also be prohibitory to Blue Nile at this point in time. The potential for long-term sustainable competitive advantage is most beneficial with this strategy and Blue Nile should not rule this option out as a future long-term goal.Bibliography CBC youthfuls, Canadas infield Rush, http//www. cbc. ca/news/ priming coat/diamonds/, Last Updated September 20, 2007, accessed November 9, 2012 Case 9, Blue Nile Inc. in 2010. Thompson, Arthur A. , Strickland, A. J. & Gamble, John E. (2012). Crafting & Executing strategy The Quest for Competitive Advantage Concepts and Cases(18th ed. ). New York McGraw-Hill Irwin Power, Terrance P. (2008). Powers Case select Analysis and Writers Handbook. Toronto Nelson. Appendices Current Strategic Group Map High Price/ gauge Low Few Locations Geographic reporting Many Locations Market Share map for Top 20 Jewellery Retailers pic fiscal Information Growth Profitability and fiscal Ratios for Blue Nile, Inc. Financials Ratios downloaded November 9, 2012 1 CBC News, Canadas Diamond Rush, http//www. cbc. ca/news/ backcloth/diamonds/, Last Updated September 20, 2007, accessed November 9, 2012 2 Ibid WalmartSterling Jewelers Zale Corporation Costco, physical object Blue Nile QVC, Sears, JC Penney, Fred Meyer Jewelry TV, HSN Macys tocopherol & West, Neiman Marcus Cartier Tiffany & Co. Walmart, 4. 83% Sterling, 4. 17% Zales, 2. 83% Tiffany & Co, 2. 50% QVC, 2. 33% Sears, 1. 50% JCPenney, 1. 50% Finlay Fine Jewelry, 1. 50% Macys East, 1. 00% Neiman Marcus, 1. 00% Costco, 0. 83% Target, 0. 83% Fred Meyer Jewelers, 0. 67% Helzberg Diamond, 0. 67% Jewelry Television, 0. 67% Macys West, 0. 67% Tourneau, 0. 67% Cartier, 0. 50% Blue Nile, 0. 50% HSN, 0. 50%