Blue Nile

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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.

The companies that are competing in this industry are Blue Nile, Zales, Tiffany's, Online Jewelry Stores (Diamonds.com, etc…), and Local Jewelers. The Rivalry among the competing sellers is strong because there are many competitors and they are basically offering the same product. Also, the costs buyers experience when switching brands are low. Currently, the Potential for New Entrants is moderate. The reason the potential is moderate is because the Jewelry business is an expensive business to get started into. Since most of the product that is sold is expensive (diamonds, gold, etc…) it is hard for any new entrants to come in strong. Also, with the economy in the situation that it is currently in, high priced jewelry is not something that a lot of people have extra money to spend on. When looking at the substitutes, the competitive pressures are weak. When it comes to jewelry, there are not many substitutes besides other stones and fake jewelry. When most people are looking to buy engagement rings, anniversary gifts, or presents, they tend to buy items that contain diamonds. Next in the five-forces model is suppliers. Suppliers have a moderate bargaining power. Diamond suppliers are largely dependent on the sellers for a large portion of their revenues. However, diamonds are not great in supply and are a critical item in the jewelry world. Lastly, buyers bargaining power is weak. The buyers in this industry are couples that are getting engaged, married couples, and females. Since there are not many substitutes, buyers are not very price-sensitive, and supply is insufficient to satisfy buyer demand, buyers have little bargaining power. Rivalry among competing sellers (the arena) is the strongest competitive force. There are many companies competing in this industry, all are offering basically the same thing, and they are all targeting the same market segments.

2. What key factors will determine a company’s success in the online jewelry business in the next 3-5 years?

Key factors that will determine a company's success in the online jewelry business in the upcoming years will be reputation of product, customer service and support, project line, international markets, marketing, convincing customers that you can buy product online without actually having to see/try it on in person, and having enough appeal to customers that make them want to buy online, rather than go to a brick-and-mortar store.

3. What is Blue Nile’s strategy? Which of the five generic competitive strategies discussed 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 is to attract customers by offering high-quality diamonds and fine jewelry at competitively attractive prices and provide jewelry shopper with a host of useful information and trusted guidance throughout the purchasing process. Blue Nile wants to continue to gain the trust of its customers and wants its customers to think of them when it comes to buying high quality diamonds and fine jewelry. Blue Nile is taking a best-cost provider strategy when it comes to their competitive approach. By suppling customers with a high quality product at low prices, allowing customers to create their own designs, and having a quick turn around time, this is giving Blue Nile a competitive advantage over bring-and-mortar stores and other online stores.

4. What do you like and dislike about Blue Nile’s business model?

There are many things that I like about Blue Nile's business model including: Competitive pricing, lean costs, supply chain efficiency, educational information, certification, order fulfillment operations, customer service, support, return policy, free...
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