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Blue Nile Inc. in 2010: Will Its Strategy to Remain Number O

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Jack Coyne

on 24 October 2013

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Transcript of Blue Nile Inc. in 2010: Will Its Strategy to Remain Number O

Blue Nile Inc. in 2010: Will Its Strategy to Remain Number One in Online Diamond Retailing Work?

Group 1

Key Success Factors in the next 3-5 Years:
Keeping competitive prices
Fast turnaround
Providing useful information and guidance throughout the purchasing process
Supply chain efficiency
Blue Nile's Strategy and Competitive Advantage:
2 Core Elements:
Offer high-quality diamonds and fine jewelry at competitively attractive prices
Provide jewelry shoppers with a host of useful information and trusted guidance throughout their purchasing plan

Links best with the focused differentiation competitive strategy
Blue Nile's Business Model:
Supply chain/ minimal inventory
Low price
Advantage in selling diamonds
Low operating cost
Superior customer service
No physical stores
Low brand recognition
Blue Nile's Financial Performance:
High revenue and earnings growth on a historical basis. (27% in 2009)
Strong recovery from Financial Crisis
Outstanding cash flow
Sound balance sheet
Accounts payable to suppliers is 58% of total assets
Inventory turnover is 12%, which is very low compared with industry peers
EPS: $1.04 in 2007, $0.75 in 2008, $0.84 in 2009
Strategic Issues and Problems:
Poor Economic Conditions
How to compete with brick-and-mortar jewelers that had begun selling online
How to get a greater share of jewelry customers to shop online
How aggressively Blue Nile should pursue expansion into international markets
Increase advertising
Consider opening stores
Expand product offering for repeat customers
Increase global market share
5 Competitive Forces:
1. Rivalry Among Competing Sellers
Other internet jewelers like JamesAllen.com, Whiteflash.com, Ice.com, Diamonds.com
Independent jewlery stores
Brick and mortar jewlery stores like Zale, Sterling, and Tiffany
2. Supplier Power
Limited supplier power
No dependence on one supplier
Top 3 suppliers accounted for only 24% of Blue Nile purchases in 2009
Strong relationships with their suppliers
3. Buyer Power
Minimal buyer power
Prices are set by suppliers and Blue Nile depending on the quality of the diamond/setting based on the 5 C's.
Buyer power among competing sellers
4. Threat of New Entry
Emerging websites
Brick and mortar jewelers expanding to the online market
5. Firms Offering Substitute Products
Other gemstones like rubys, sapphires, emeralds, etc.
Alternatives to diamond engagement rings.
Non-certified, cheaper alternatives (GIA, AGSL, GCAL)
SWOT Analysis:
Impressive management
Competitive pricing
Wide variety of jewels
Detailed displays and descriptions
Comparative charts
No brick and mortar stores
Increased web-advertising expense
Go "offline"
Increase international sales
Additional advertising
Increasing number of brick-and-mortar stores moving to online sales
Increasing number of competing online retailers
Competitive Strength Assessment:
Full transcript