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. a.
Buyer bargaining power: This is one of the strongest competitive forces because the buyer has other options, Blue Nile’s competitors, who offer the products for lower prices. Buyers have several alternative channels for purchasing the desired product. Since, the cost of switching to alternatives is low, buyers have the advantage of negotiating the price of the product or switching the retailers.b.
Substitute products: Substitutes for this product are low, when you compare the quality, cut, and carat of the diamond. Even though there are many competitors in the market, not everyone would have the same quality like Blue Nile. c. Supplier bargaining power: Supplier bargaining power is weak in this industry. Blue Nile’s economical supply chain and comparatively low operating costs allowed it to sell comparable-quality jewelry at substantially lower prices than the leading competitor.
Blue Nile has exclusively arrangements with the suppliers that allows them to put their products on the company’s website. These arrangements included multi-year agreements where the diamonds are only ordered once they receive an order from the customers. This limits the dependence on particular supplier. It also reduce the amount of inventory stored compared to their competitors.
d. New entrants into the market: It is one of the weakest competitive forces in the industry.There are many barriers to enter this industry such as high cost, difficulty of networking with distributors and suppliers, and the policies. e.
Rivalry among competing sellers: Rivalry is one of the strongest forces in the industry because there are many other small companies and stores that sell the similar type of products as Blue Nile. Since Blue Nile is an online jeweler, there are many other jewelers that lets the customers look at the rings in person and try them on. This one of the disadvantages for Blue Nile.The competition will keep increasing in the future as the technology is taking over the market. f.
Analysis: Buyer bargaining power and rivalry amongst competitors seems to the strongest competitive forces in the industry. Since the buyers have the option to switch the retailers based on the comparable data for the products, it makes them the strongest competitive force in all. New entrants into the market and supplier bargaining power are the lowest competitive forces. Blue Nile uses the strategy of buying the inventory only when its been ordered by the customers gives the supplier low bargaining power.
As we move forward in the future, there are more likely to be more rivals in the industry since the technology is taking over many businesses. 2. What key factors will determine a company’s success in the online jewelry business in the next 3-5years? The online jewelry business will be highly dependent on technology. They will need to keep good relationships with the organizations that certify their diamonds. The company would also need to give their customers a better additional educational information on their diamonds.
This would help their customers understand the product and make better decisions. They also need to give their customers a safe, comfortable environment in which to make high dollar purchases. 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 attractive prices. They would also need to make improvements in their research and development department and try to reduce the costs associated with improving their products.
3. What is Blue Nile’s strategy? Which of the five generic competitive strategies discusses in Chapter 5 most closely fit the competitive approach that Blue Nile is taking? What type of competitive advantage is Blue Nile trying to achieve? Blue Nile’s strategy to attract customers had two core elements. The first was offering high-quality diamonds and fine jewelry at competitively attractive prices. The second entailed providing jewelry shoppers with a host of useful information and trusted guidance through-out their purchasing process.
Top management believed that Blue Nile’s strategy of providing educational information, in-depth product information, and grading reports, coupled with its wide product selection and attractive prices,were the key drivers of the company’s success and, ideally, would lead to customers looking on Blue Nile as their jeweler for life. Their mission statement is: “We have established and are continuing to develop a brand based on trust, guidance and value, and we believe our customers view Blue Nile as a trusted authority on diamonds and fine jewelry.Our goal is for consumers to seek out the Blue Nile brand whenever they purchase high quality diamonds and fine jewelry. ” (314) Out of the five generic competitive strategies, the one that most closely fit the competitive approach that Blue Nile is taking is the best-cost provider strategy. They give the customers more value for the money by satisfying buyer’s expectations on key quality, features, performance, service attributes while beating elements of low-cost provider and differentiation strategies.
They aim to have the lowest (best) costs and prices among sellers offering products with comparable differentiating attributes. Some of the key elements to Blue Nile’s strategy were: 30-day return policy, offering free shipping within U. S, automatically providing an appraisal. 4.
What do you like and dislike about Blue Nile’s business model? Some of the things I like about Blue Nile’s business model are, they don’t carry large amounts of inventory which reduces their risk and limits the amount of cash tied up at any point.What I also like is their highly trained and qualified employees working at customer service who help you understand the product more precisely and clearly before you buy it. Also the wait time for their customer service is no longer than 10 seconds, which is huge advantage. The things I dislike about Blue Nile’s business model is that they are entirely online jewelers.
It would be better for the company itself if they open up some stores. This would reach out to more broader market who are unaware of the online businesses.A non-internet based campaign would increase legitimacy of the business and possibly promote it to a much bigger market. 5. What does a SWOT analysis of Blue Nile reveal about the overall attractiveness of its situation? A SWOT analysis is a simple but powerful tool for sizing up a company’s internal strengths and competitive deficiencies, it’s market opportunities, and the external threats to it’s well-being (Gamble, 75).
In looking at the Blue Nile case there are a large number of things to consider in the SWOT analysis. The first part of the SWOT analysis that we will look at is Blue Nile’s internal strengths.The text defines strengths as: “determining whether [a company’s] competitive power will be impressively strong or disappointingly weak” (75). When we look at Blue Nile one of the first internal strengths that stand out is it’s excellent supply chain management capabilities.
This is evidenced in the case analysis when the authors state, “Blue Nile’s supply chain savings give it a significant pricing advantage…” (315). Blue Nile has a very impressive supply chain management model which allows it to “…sell comparable quality diamonds, gemstones, and fine jewelry pieces at substantially lower prices…” (315).Blue Nile’s model is that of a ‘just-in-time’ basis from suppliers. Blue Nile doesn’t actually put the order in to the suppliers until the customer has made the purchase. This is somewhat similar to what some companies like Wal-Mart try to do so that they can exercise a relative cost advantage. Another internal strength of Blue Nile would be it’s great customer service capabilities.
Blue Nile’s customers can call the ‘prominently displayed’ toll-free number or email Blue Nile and expect to be answered within 10 seconds and replied to in short order (321).This is a huge strength for Blue Nile that could ultimately be a huge competitive advantage over rivals as the other online retailers might not be able to match this level of efficiency and effectiveness without considerable investment. Customer service capability is further enhanced by the fact that sales personnel are working on salary-based compensation plans that do not create incentives for sales people to put pressure on customers to purchase products with the highest commissions (321).One final internal strength that deserves mentioning is Blue Nile’s wide geographic coverage and it’s strong global distribution capability. Blue Nile’s international presence is a strength that helps set it apart from other online jewelry retailers and Blue Nile “…increased it’s number of international markets to 40” in April 2010 (322).
This allows Blue Nile to build its reputation and brand globally which could set the company up to replicate it’s success in the United States all across the globe. CEO Diane Irvine even stated, “Over the long term, we believe international will be half or more of our total business. ” (322).
