Problem Faced by Blue Nile Company

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Problems

There are several problems that Blue Nile needs to deal with if they wish to remain on top such as:

❖ One of the major problem with web based marketing is maintaining and driving consumer toward the website which will pose blue Nile’s major challenge going into the 21st century so how to attract new consumers.

❖ How should Blue Nile Inc increase consumer awareness and confidence purchasing high value luxury jewelry online?

❖ Blue Nile has very little presence outside of the United States and only offers a limited number of products in United Kingdom and Canada.

❖ The cost to buy keywords on Internet search engines rose significantly in 2005, which result in cutting back on advertising expenditure, which lack in attracting customers.

❖ Traditional jewelry retailers such as Zale’s, Sterling, and Tiffany have begun to sell products online increasing competition for Blue Nile.

❖ Blue Nile’s expenses for sales and cost for general and administrative expense are increasing as a percentage of net sales. This presents a problem because Blue Nile’s competitive advantage in the online jewelry market largely depends on their low costs and low prices.

❖ Blue Nile has an excessive amount of debt, which can damage its credit rating and overall financial condition.

Strategic Issues

Blue Nile needs to address five major strategic issues:

❖ Blue Nile needs to decide how it can further deal with the obstacles associated with online retailing.

❖ Blue Nile needs to decide if it should expand its operations and offer more products outside of the United States.

❖ Blue Nile needs to determine how it can effectively and affordably market its products online.

❖ Blue Nile needs to determine how it can retain its market share when faced with increasing competition in a small industry.

❖ Lastly, Blue Nile needs to address its financial problems before the problems get out of control.

Appendix

I. SWOT Analysis…………………………………………..

II. Porter’s Five-Forces Model of Competition…….….……

III. Industry Driving Forces…………………..……………

IV. Key Success Factors………………………...…………..

V. Competitive Strength Assessment………………....………

VI. Profit Formula…………………………………………..

VII. Financial Ratios………………………………………….

I. SWOT Analysis

Strengths:
❖ Successful strategy of business model
❖ Online jewelry market leader
❖ In-Depth product information and educational information ❖ Low operating costs compared to traditional jewelry retailers ❖ Favorable arrangements with suppliers
❖ Reputation for high quality product and customer service ❖ Grading Report for Diamonds, Automatic Appraisals
❖ Extensive product range
❖ Functional and informative customer friendly website interface ❖ Minimal capital investment required

Weaknesses:
❖ Poor consumer perception and lack of trust purchasing high value jewelry online ❖ Little presence outside of the United States and low sales in U.K. and Canada ❖ Exposed to business model being copied by competitors ❖ Extremely reliant on solid relationship with diamond/ fine jewelry suppliers ❖ Lack of capital to fend off unwanted takeover or buyouts ❖ Low brand awareness in high premium jewelry market

Opportunities:
❖ Further global expansion
❖ Growth Opportunities for Items Other Than Engagement Rings ❖ Massive scope to increase growth taking market share from traditional jewelry retail market ❖ Potential to move into other product segment

❖ Product leveraging with other online sellers
❖ Buyout by major online seller egg. Amazon USA

Threats:
❖ Cost to Buy Keywords on Internet Search Engines Rose Dramatically in 2005 ❖ Increased competition in domestic and new foreign markets ❖ Zale, Tiffany,...
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