Blue Nile Case Study

sorry Nile Case Study Cristeen McPherson Student Number 326914 BUSA 506 Dr terry Power November 11, 2012 1) The competitive eviscerates confronting sinister Nile and former(a) on edge retail je well(p)ers argon strong suit or weak in intensiveness, with the exception of the strong touch onry among sellers. The emf for new entrants to the jewellery food trade is relatively low referable to the e tapnt be of caudex, the deficiency of differentiation of ingathering and the stag recognition held by the industry leaders. Good substitute products for a persona adamants ar non readily available.There atomic number 18 synthetic gemstones, cubic zirconium and other jewellery options, but the ordinary consumer does not see these as a true substitute for real diamonds. Supplier bargaining office is a mixture of strong and weak factors leaving this force with a median(a) impact on the industry. The diamond supply industry is more(prenominal) tough than the retailers but is having new entrants emerging. Like the Canadian diamond producers Ekati in 1998, Diavik in 2003, Jericho in 2006 and flick Lake-4 in 2007 making Canada now the third elephantinest diamond producer in the world. 1 Two factors contributing to a stronger supplier power are that products are critical to the retailers success and there is a lack of dear(p) substitute products. In contrast, the commodity trading or purchasing process for diamonds contributes to a weaker supplier power as retailers collect palmy ability and low be to switch suppliers. Industry members are in each case now integrating backwards into the supply of the product, Diavik mine is a conjunction venture mingled with Rio Tinto and Harry Winston Diamond Corporation and the De Beers Group owns the Snap Lake-4 mine. 2 Buyer bargaining power is moderately strong cod to first-class honours degree cost of switching between retailers ? Lack of differentiation of product between retailers differentiatio n is more on quality provided than the style or intro of the product ? Large and diverse consumer base ? Buyers ability to be well informed on product information on quality, prices and cost is ontogeny due to internet accessibility ? Buyers are price sensitive The strongest force is the rivalry between the competing retail sellers. Factors relateing competing rivalry ? Buyer take aim is growing slowly jewellery market is mature, with a broad closeure of consumers ?Buyer demand had fallen off in recent geezerhood due to recession legion(predicate) sellers found themselves with slow moving inventory ? Buyer cost to switch brands is low the buyer has no cost to switch to another online retailer, its just a mo wont infiltrate ? Products are weakly differentiated diamonds and jewellery are similar tolerateings between the sellers ? High fixed or storage costs the bricks and mortar (b&m) retailers and many of the online retailers have high inventory costs, which when not turning incur carrying costs (interest etc) negatively impacting cash flow and earnings ?High exit costs the high inventory costs make it difficult to liquidate chop-chop ? Competitors are numerous and diverse in their value proposition, with low value, high volume retailers like Walmart as well as high end prestigious retailers like Tiffany & Co. 2) Some key success factors that result affect the online jewellery retailers in the near future Fine jewellery buyers are looking for a retailer that offers quality product at a competitive price. Retailers must rely on their brand recognition with consumers they demand to build awareness of their product offerings as well as their client service.Retailers must prove they are reputable, reliable and trustworthy. Online retailers have to express this done capturing their online audience with an blue-blooded to navigate website, put forwarding to their activated response and demonstrate other consumers satisfaction and confidence with past purchases. Jewellery retailers must be able to provide surpassing customer service and support. Major purchases of jewellery items, especially a diamond engagement ring, are genuinely emotional to the purchaser. Customer service that acknowledges the significance of the purchase and guides the purchaser hrough the transaction pull up stakes be a necessity for success and gaining consumer loyalty. With the high costs of inventory, retailers request to manage costs of inventory and operations, keeping costs in line with sales and managing cash flow is a key capability for success. A successful retailer is able to match inventory purchases with their consumer sales at a similar rate, maintaining inventory turn e very(prenominal)where and cash flow by dint of the business. Not updating and maintaining their awareness and a high level of market knowledge will put a retailer at a significant competitive dis gain.If they are not recognizing the market trends, striving to f ulfil some product differentiation and preparing to meet customer needs and wants, they will fall behind and lose customer loyalty, sales and market grapple. 3) blue sky Nile is employing a best-cost provider dodge as their competitive approach in the online jewellery business. Their aim is to create competitive benefit by offering a quality product at a competitive price. low Nile is able to do this through their supplier agreements where the diamonds and other gems are not actually purchased by high Nile until they have a consumer order for that grouchy product.This limits lively Niles exposure on inventory costs and the peril of non-selling product. drab Nile as well as relies on strict control of their operating costs expenses for employees, facilities and technology are continuously reviewed to ensure their efficiency and that low costs are maintained. These two components combine to allow blueness Nile to offer comparable to(predicate) quality jewellery at substan tially lower prices than their competitors. 4) Blue Nile has a very deep and deplore knowledge of their customer and market.This enables them to tailor their website to their customers needs, offer superior service and educational aspects for the consumer, effectively establishing trust with their consumers. This knowledge overly 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 unless available via Blue Nile because of their exclusive supply contracts. In order to stretch out out competitive, Blue Nile must be diligent in maintaining and updating their market knowledge.The ability to accurately predict market trends and proactively alter business strategy is vital to ongoing success. For instance, many of the online retailers are contemporaryly relying on their educational information to garner the customers trust and loyalty. With every retailer working to accession the knowledge of the consumer, this strategy will lose effectiveness over snip as the consumer becomes more knowledgeable. The ease of switching retailers is very high and Blue Nile must be ready to offer another compelling evidence to remain loyal.Blue Nile must besides 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 drawing string value and risk significant increases in inventory costs. 5) SWOT Analysis Blue Nile Table 1 pic Although Blue Nile has many company strengths that propel their current success, the many competitors in the online and b&m jewellery industry have many of the same strengths.Blue Nile needs to improve and expand their marketing reason and strengthen their brand recognition. They also need to develop a be after to offer more product differentiation. One suggestion to incorporate some(prenominal) these needs might be to develop a strategic bond certificate with a well-known jewellery power and offer custom design service online using the designer name and reputation. 6) Blue Nile posted exceptional double-digit sales growth over the six twelvemonths 2002-2007, the recession of 2008 cut off their growth trend actualizing a 7. % loss on sales course of study over year. They have since achieved moderate sales increases ranging from 2. 3% to 10. 18%. Blue Nile shows a steady gross margin averaging about 21. 7% over the last 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 inflation of salaries and input costs. Consequently, their EBT margin is also very healthy, averaging 7. 0% earnings return on sales. Blue Nile has larger cash reserves and very little long-term iabilities, their liquidity ratios are very healthy. Their current ratio averages 1. 51 over the last ten years. With their cost control and supply chain management, Blue Nile has very positive results for the performance/efficiency ratios. Their cash conversion is excellent due to the payables terms of supplier agreements they have a positive cash float of about 40 days from the collection of sales revenue to the payment for goods. 7) Weighted Competitive Strength Assessment 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 cold superior giving the advantage of greater efficiency and lower costs as compared to the other online retailers. ) In order to develop a more sustaina ble competitive advantage Blue Nile will need to use their market knowledge to develop a stronger marketing plan to take up their brand recognition, product differentiation and develop greater customer loyalty. Blue Nile also needs to address the future erosion of market share due to the growing strength of competitors, and the capableness of the loss on exclusivity from their product suppliers. 9) Recommendations pic The components of the marketing plan and the strategic alliance 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 future. Blue Niles current geographic expansion has shown success, continued expansion will need to be founded on research into the jewellery customs of target locations, to use the websites appeal to th e emotional purchase of jewellery. Low costs of online expansion are advantageous, firearm care must be taken to ensure language and destination are respected.Selective expansion will help to retain competitive advantage for the medium range future 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 tighten market share growth for the mid range future via acquisitions. The potential to acquire a competitor would take longer to evaluate on the whole but is still a viable 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 complete the acquisition. While the strategic alliance with a diamond producer/mine would secure long-term guarantees of the supply of quality, exclusive product at very competitive costs, the timeline to complete such a project is lengthy. Th e cost could also be prohibitive 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 juveniles, Canadas Diamond Rush, http//www. cbc. ca/ intelligence service/background/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 Study Analysis and Writers Handbook. Toronto Nelson. Appendices Current strategic Group Map High Price/Quality Low a few(prenominal) Locations Geographic Coverage Many Locations Market Share Chart for hap 20 Jewellery Retailers pic financial Information Growth Profitability and Financial Ratios for Blue Nil e, Inc. Financials Ratios downloaded November 9, 2012 1 CBC News, Canadas Diamond Rush, http//www. cbc. ca/news/background/diamonds/, Last Updated September 20, 2007, accessed November 9, 2012 2 Ibid WalmartSterling Jewelers Zale Corporation Costco, Target Blue Nile QVC, Sears, JC Penney, Fred Meyer jewellery TV, HSN Macys East & 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%