The anticipated response to the threat posed by Blue Nile would be to counter it by providing wider and more affordable range than Blue Nile.
They look forward to giving Blue Nile a stiff competition in the field of custom-made jewelry as well as building a larger client base through their return policy and upgrade incentives. Their strategy that seems to work for them now is having flexible terms for the client as far as payment as well as possibility of returning for an upgrade is concerned.
From the industry analysis, it is still attractive to invest within the industry since the sales turnover and the profit margins are attractive and can sustain the business. The participants are not many as well hence the chance to keep the profit margins considerably higher.
III. Internal Organization analysis
The key competence that gives Blue Nile a competitive edge over the other traders in the same field is the expertise that they have gathered over a long period of time as they have been dealing in the same. The wide clientele that they have developed over the years plus the trust of quality that they have earned are yet other strengths that they have over the competition in the market.
Value chain diagram of Blue Nile Company
Blue Nile SWOT analysis
Strengths: the company has had a mass resource base of multi-million dollars since the inception in 1999 hence is able to bankroll its operations, however large they may be, without necessarily seeking external intervention. The company has also garnered a solid client base over the last one decade that gives it the ready market through repeat purchases or references.
Weaknesses: there is less variety of jewelry as the company started off with the trend of custom engagement rings only. This allowed other jewelers to take advantage of the gap and diversify more than Blue Nile. The recession of the 2007 to 2009 badly affected the company in terms of their profit margin like several other companies, weakening the global operations.
Opportunities: there being relatively few jewelers of the magnitude and size that exist it is an opportunity to explore more the advantage of the name and brand they have established. The vastness presented by the internet is an opportunity to ensure the brand name is realized across the globe even to the developing countries where majority of the diamond originally come from.
Threats: the vastness of the internet marketing allows competitors to learn their secrets of trade and use it to up their marketing strategy as well. The strict regulations by governments in a bid to forestall blood diamond make the process of acquiring diamond at times unnecessarily expensive and tedious.
From the SWOT analysis, it is apparent that the jewelry market is still ripe and there is potential for getting ample profits particularly for companies like Blue Nile that have had years of experience within the market.
The Blue Nile finance has exhibited a stable trend since the early 2004 and has remained so throughout. Despite the recession period that affected even the competitors, Blue Nile rebounded in 2010 and made net sales increase of 10% from the previous year. It generated $36.7 million in free cash flow in 2009 and a significant increase of $39.8 million in 2010. It is estimated that Blue Nile has $113.1 million cash flow and $151.8 million total assets. The financial position of Blue Nile indicates stability within the market and a prospect of upward growth.
IV. Strategy analysis
Blue Nile corporate-level strategies are majorly two. The company has adopted the vertical integration and the growth strategies. The Blue Nile Company has plans to continue dealing in the same items but have distributorships across the globe and open up new areas that have not been delved into.
The business-level strategy that has been adopted by Blue Nile Company is the differentiation. This is a strategy where the business focuses on the uniqueness of the products with a large customer base target or broad target market. Price is usually not a prime consideration and that is the strategy that Blue Nile is operating under.
The Blue Nile marketing strategy as seen in the case is geared towards brand recognition, generating consumer traffic, acquiring customers, building a loyal customer base and promotes repeat purchases. This is based on the belief that their customers constantly look for highly valued and genuine diamond.
The production of the merchandise that Blue Nile deals in is predominantly on an order basis. They receive and order and get it from the supplier then customize it to the specifications of the client within as short as 42 hours duration. They also have overseas dealings where they do productions for overseas clients and have the items delivered.
Strategic issue I
The major strategic issues for Blue Nile Company are to enhance and innovate the customer experience through empowering them with knowledge and god customer support through the purchasing process.
The first strategic alternative action to achieve the above would be to be more responsive to the ideas and comments forwarded by their clients. The advantage of this is that through it the company will come to get insights into what the clients and potential clients think of their products and well as knowing what the competition is doing right without much toil in research work. The disadvantage is that it may not lead to comprehensive details as most clients will give their emotional reaction to products and service. It can also give too many scattered suggestions that it may be impossible to implement all of them.
The second alternative action is to institute a department that would be specifically concerned with looking and carrying out research on the trends of diamond jewelry consumption within the targeted markets. This will enhance the knowledge of the customer needs and even be in a position to advice clients on jewelry issues better. The disadvantage is that constituting such a department will cost a lot of money and even the research process will as well cost the company.
The most efficient alternative here would be the alternative on client comments. This option will provide the company efficient data from their clients. The clients who go out of their way to give the feedback are most likely repeat clients hence their opinions must be highly valued. The collection of the various opinions from clients will give the design team an idea of what the market trend is in the diamond jewelry market which they can use to fashion their jewelry accordingly.
The challenge with implementation of the above alternative will be the employment of more staff who will concentrate on communicating with the vast clientele who will be contacted for their suggestions. This will also mean additional capital will be required for the setting up of such a liaison department.
Strategic issue II
The Blue Nile intends to expand further the international markets with an aim of transacting through 22 more currencies. This is a bid to get more footing in the ever increasing globalized world. The trend of the demands and orders they have over the internet allows the company to know exactly where their products are needed yet they have not set foot there.
The first alternative would be to establish shops and outlets in the main areas where there is high potential for markets of their products. This will enable them reach the market in a shorter duration and in a bigger number than the current number. The problem with such an approach is that it will need much in terms of investment as well time in research.
The other alternative is to engage distributors and establish outlet agents within the potential market. This approach has the advantage of getting the people who are more familiar with the market handle the goods for Blue Nile and the investment will not be as heavy as the first alternative. The challenge with this would be that the profit margins will have to be lower since the distributors will also need to have their share. It is also a process that could be prone to abuse since the outlets may be stocking products from other sources and selling it under the name of Blue Nile.
The best alternative here would be to use the distributors in the initial stages as the Blue Nile Company still studies the market and the consumer trend rather than venturing directly into this market.
In order to venture into the new markets, the company will have to part with more capital in the transportation process and other associated logistics. There will also be need to have more employees to be concerned with the exportation to the identified markets. There will also be need to have a strategy put in place to facilitate this new measure.