Blue Nile Study Questions

Marking Scheme Mid Semester Exams Lecturers Anthony Oboe S pool and Robert Amok-LIndsay Section A (40 Marks) Provide bypass and concise answers 1 excuse the term sustainable rivalrous advantage and wherefore it is so serious to a winning business dodge. (5 marks) Suggested Answer A comp whatever achieves sustainable war-ridden advantage when an sweet number or buyers prefer its point of intersections/services over those of rivals and when the basis for this p persona can be keep over time.Competitive advantage could stem from oblation impose expenses than competitors for equivalent benefits or providing unique benefits that to a greater extent than commencement a higher price. (3 marks) Sustainable competitive advantage is necessary for a firm to win in the market place. It is required for a dodge to deliver on strategic and financial objectives (2 marks) 2. Using ex gigantics curtly explain and state the impressiveness of each of the following a) strategic vision Strat egic vision represents the end that precaution seeks to take a firm.Fords vision A car in e actually garage Importance Give the organization a sense of direction Inform company personnel and other stakeholders what mana jewelent wants Its business to look worry Spur company personnel to action Provide managers with a reference point to (2. 5 marks for explanation and any 2 points menti onenessd as importance of strategic vision) b) Strategic delegacy Strategic mission of a firm focuses on its present business purpose. Strategic mission highlight the present products and services, types of customers served and how it intends to do that.Examples Beacon Books To inspire and equip business executives and entrepreneurs with essential information and intimacy they require for professional and personal growth Google To organize the worlds information and make it universally accessible and effectual Importance It focuses the business by identifying the boundaries of the current busine ss It distinguishes a firm from others and gives it an identity of its own. (2. 5 marks) (5 marks) 3. Explain the meaning and significance of each of the following a. Strategic conference use A strategic group is a cluster of firms in an industry with similar competitive approaches and market notes. Strategic group mapping entails plotting firms in n industry on a dickens-variable map using pairs of these differentiating characteristics e. G. Product line breadth, distri scarceion channel use, geographic coverage, price, quality etc. It helps firms to know their points in the industry versus their rivals It helps firms to know which competitors to focus on in their quest to make strategic moves It helps them to know which positions in the market or industry atomic number 18 traceive to players in the market. 2. 5 marks for explanation of strategic group mapping and any of the supra points mentioned) b. ) The talk terms power of suppliers Bargaining power of suppliers de oks the extent to which suppliers of inputs to competing firms in an industry atomic number 18 able to arrange the price, quality, quantity and even timing of supplies to these firms. The talk terms power of suppliers has an impact on the cost, profit self-aggrandizing businessman and a firms ability to satisfy its customers and for that matter its fighting. Powerful 4.Identify and briefly explain any two of the factors that influence the strength or intensity of competitive rivalry among an industry member firms. (5 marks) Factors Competitors argon active in making saucy moves to improve market standing and easiness slaying Slow market growth Number of rivals increases and rivals argon of equal size and competitive capability Buyer costs to switch brands atomic number 18 low pains conditions tempt rivals to use price cuts or other competitive weapons to boost volume e. . Perishable or seasonal A successful strategic move carries a big payoff Outsiders acquire weak firms i n the industry and use their resources to transform tonic firms into major market wrangleers (5 marks for any two of the above factors mentioned and explained) 5 Identify and briefly explain any two factors that lead to strong bargaining power on the mathematical function of suppliers. (5 marks)Industry members incur high costs in switching their purchases to alternative suppliers requisite inputs are in short supply Supplier provides a differentiated input that enhances the quality of performance of sellers products or is a valuable part of sellers production process There are only a few suppliers of a specific input Some suppliers terroren to integrate forward (5 marks for any two of the above factors mentioned and explained) strength and leverage of buyers. 5 marks) Buyer switching costs to competing brands or substitutes are low Buyers are large and can get concessions Large-volume purchases by buyers are important to sellers Buyer demand is weak or declining Only a few bu yers exists Identity of buyer adds prestige to sellers list of customers quantity and quality of information available to buyers improves Buyers have ability to postpone purchases until later Buyers threaten to integrate returning(prenominal) (5 marks for any two of the above factors mentioned and discussed) 7.Using examples explain the difference between a core competence, and a distinctive competence. A core competence is a well-performed internal action at law central to a companys battle and profitability. It tends to relate to a firms ability to perform activities that are critical for success in an industry e. G. A better after-sale service capability A distinctive competence is a competitively valuable activity a company performs better than its rivals.For example Toasts low cost, high quality manufacturing of automobiles Lean Production is cold superior to that of other automakers, (5 marks for explanation and establishing the difference between core competence and disti nctive competence) 8. What is benchmarking and wherefore is it a strategically important analytical tool? (5 marks) Benchmark focuses on cross-company comparisons of how certain activities are meliorate and costs associated with these activities. It looks at things such as purchase of materials, management of inventories, getting new products to the market and so on. 2 marks) Identify best and most efficient means of performing various value cooking stove activities Learn what is the best way to perform a particular activity from those companies who have demonstrated that they are best-in-industry or best-in-world at performing the activity Learn what other firms do to perform an activity at disdain cost Figure out what actions to take to improve a companys own cost competitiveness (3 marks for NY 2 points identified and explained) Section B (80 marks 1 . Analyze the competitive forces confronting stern Nile and other online retail jewelers.Do a five-forces analysis to support your answer. State the relative strength of each competitive force. Below is a representative five-forces model of competition for the online jewelry business Rivalry among online Jewelers?a curb to strong competitive force that is likely to intensify in the years ahead. Students should conclude that rivalry among bluish Nile and other online Jewelers is normal to moderate, but it is likely to grow ore intense (owing to the success that blueweed Nile is enjoying).Rivalry is centered on such factors as Price and value delivered to customers Selection and breadth/variety of product offerings Ability to sew and customization options The caliber and trustworthiness of the information/guidance provided to online shoppers (educational information, in-depth product information, access to professional grading reports, and so on) chassis/reputation Customer service User friendliness of web site?search functionality, ease of browsing through all the selections, finding and guessing th e information provided, etc.Refund and return policies Advertising and promotion?Much of the denote/promotion is being done online, but the online jewelry business is not one that is a heartbreaking user of TV, radio, and newspaper advertising on a regular basis. Word-of-mouth is a slightly big factor Most online jewelry competitors pursued either a differentiation strategy to try to dress out themselves apart or else tried to attract shoppers via the appeal of very low prices (which entailed employing a low-cost strategy).Some rivals cerebrate their efforts narrowly on particular jewellery items/product categories while others had broad reduce lines. Several factors were operative to affect rivalry among industry participants All rivals calculate to be actively and busily trying to attract jewellery shoppers to their websites, partly via online advertising and promotional initiatives (including search engine listings)?fresh strategic initiatives on the part of various riva ls heightens rivalry. Low switching costs on the part of buyers?it is simple for people shopping for jewellery online to locate and visit competitor web sites.Rivalry decreases when the rate of market growth rises? gross gross revenue of jewellery online seem o be suppuration briskly (with the sales increases coming at the expense of brick-and mortar jewelry retailers). There is reason to suspect that the online jewelry segment of the overall retail jewelry industry is in its infancy (an emerging business or industry in its own right) hence, online sales of Jewelry are likely to grow faster than sales of Jewelry in general?a condition which impart act to contain rivalry among online jewelers.Rivalry increases when one or more rivals are dissatisfied with their market position and launch moves to dramatise their standing at the expense of rivals. A case can be Dade that good-for-nothing Nile and most all of its online rivals are dissatisfied and thus are likely to make further moves to bolster their market standing, image, and sales. Rivalry increases as the product offerings of rivals be cum more standardized? many a(prenominal) of the online Jewelers seems to be offering shopper many of the same things? wide selection, customization, educational information, access to grading reports, and so on.We see the differentiation among online Jewelry rivals as growing smaller/ weaker, not larger/stronger?with the possible exception of reputation/image, where gritty Nile seems to be the standout attraction. Threat of entry?a moderate to strong competitive force benighted Niles success and growing reputation allow almost certainly lift out more competitors into online Jewelry sales. The barriers to entry into the online segment of the Jewelry industry are moderately The costs of developing a Web site. exploitation supply chain relationships Developing order fulfillment capability and achieving short delivery times Expenditures for advertising and promotion needed to draw visitors to a web site and build a trustworthy reputation/image. In addition, students should see that the pool of entry candidates is probably fairly rage?especially for brick-and-mortar retailers already in the Jewelry business. Hence, the entry threat in upcoming years should be viewed as fairly strong. There would seem to be ample opportunity for new entrants to gain a market foothold and to achieve a level of sales high to be profitable.But the longer a company delays entry, the harder it volition be to compete effectively against online Jewelers like Blue Nile that have built a clientele and that have formidable images/reputations. Competition from substitute sellers of Jewelry?a very strong competitive force. Obviously, Jewelry shoppers have many other options for purchasing Jewelry than from online retailers. Traditional brick-and-mortar Jewelry retailers have the lions handle of the market and currently are the retailers of choice for the big legal age of Jewelry shoppers. Hence, the competition that online Jewelers face from other Jewelry retailers is quite formidable.In addition, there are hordes of possible substitutes for Jewelry altogether (but most people are flimsy to see these alternatives as replete(p) substitutes). Consequently, students should conclude that substitutes for buying Jewelry online re a strong competitive force, given that Acceptable substitute sources for purchasing Jewelry are readily available and the prices charged by some of these substitute types of Jewelers are reasonably competitive Buyer costs to switch to substitute types of Jewelry retailers are relatively low Many consumers are familiar with and comfortable with buying Jewelry from other than online Jewelry retailers.The bargaining power and leverage of suppliers to the online Jewelry retailers and jeweler-supplier quislingism?a moderately strong competitive force, especially as encores the suppliers of infields/gems and other Jewelry items. S tudents should have a go at it that the suppliers of gems/diamonds/leery items have considerable bargaining power and leverage in determining the prices and terms at which they will supply their products.Yes, there are many alternative suppliers, and it would seem relatively easy for a it is in question(p) that suppliers compete aggressively with one another on price?in other words, switching suppliers is unlikely to lead to acquiring a particular gem of particular quality at a land price.There is no evidence in the case that suppliers of monads/gems compete with one another on the basis of price (indeed, with the exception of Blue Nile and other online Jewelers, there is little evidence that price competition is active in the market for fine Jewelry?that is, rival Jewelers are not aggressively trying to compete with one another by selling a diamond of given cut, clarity, grade, etc. At a light price than their rivals). Blue Niles lower prices stem from its lower costs of doing business, not from the fact that it obtains diamonds/ gems at lower prices than do traditional retail Jewelers.What is important for students to recognize here is that Blue Niles close elaboration with its diamond/gem suppliers has resulted in giving it a lower cost value chain as compared to traditional primary(prenominal) Street Jewelers. The distinctive feature of Blue Niles supply chain was its arrangements with leading diamond and gem suppliers that allowed it to display the suppliers diamonds and gems on its web site some of these arrangement entailed multi-year agreements whereby designated diamonds of the suppliers were offered to online consumers only at Blue Niles websites.Blue Niles suppliers delineate more than half of the total supply of high-quality diamonds in the U. S. Blue Nile did not actually purchase a diamond or gem from these suppliers until an order was placed by a customer this enabled Blue Nile to decrease the costs associated with carrying large inventori es and limited its risk of potential mark-downs. Other online Jewelers seem to have similar cooperative arrangements with their diamond/gem suppliers.These collaborative arrangements offer a sizable cost advantage over Main Street Jewelers?these cost- saving arrangements put added competitive pressure on traditional topical anaesthetic anesthetic Jewelers because such collaboration (and the resulting lower cost business model) puts them t a cost disadvantage. The bargaining power and leverage of Jewelry shoppers?a weak competitive force Individuals have little power to bargain for a lower price on the Jewelry items they are looking to purchase (except perhaps in the case of very expensive items where some price haggling is often fairly normal).Individuals can, of course, choose to buy or not buy at the marked price but no one separate is usually in a position to enter into direct negotiations over the terms and conditions under which he or she will purchase a diamond ring or othe r Jewelry item from an online retailer. Any individual an certainly opt to buy from one retailer rather than another, but this does not equate to bargaining and exerting leverage.Conclusions concerning the overall strength of competitive forces Competitive pressures in online Jewelry retail are strong but not overwhelming so (the best evidence for this is Blue Niles record of attracting new customers and growing its sales at a rapid clip?a convincing sign that it is able to successfully contend with the prevailing competitive forces). Currently, we see competition from substitute types of forces.The entry of new competitors could also prove to be significant, if one or more f the new entrants have a well-recognized and trusted brand image and if such entrants opt to price their products competitively versus the prices charged by Blue Nile. Moreover, while competition is fairly strong, it is not so strong as to prevent companies like Blue Nile from being profitable. The online Jewel ry retailing portion of the Jewelry industry is rather attractive from the standpoint of promising growth and attractive long-run profitability?Blue Nile is demonstrating that its business model and strategy are quite attractive.This is the big reason why new entry can be expected. But online sales of fine Jewelry is likely to rest a relatively small fraction of total sales of fine Jewelry for years to come?traditional brick-and-mortar local jewelers are not going to be driven out of business by online Jewelers in the foreseeable future. (5 Marks for each point well discussed with the appropriate verdict or demonstration on each competitive force) 2. Do a SOOT analysis of Blue Nile. What are mainstay conclusions you can draw about the its situation?Blue Niles Resource Strengths and Competitive Assets the current market leader in the online retail Jewelry segment by a wide margin abdominal aortic aneurysm coggle known brand name and reputation than rivals AAA first-rate strategy and business model AAA broad and attractive product line from customers to choose from AAA user-friendly web site with good search functionality and very good educational information A sizable and competitively potent cost advantage over traditional local Jewelry stores due to lean operating costs and a cost-effective supply chain Its collaborative partnership arrangements with important diamond/gem suppliers Good product customization and order fulfillment capabilities (core competencies) Blue Niles ability o grow sales with very little incremental capital investment Blue Niles Resource Weaknesses and Competitive Liabilities Limited brand name recognition?many shoppers for fine Jewelry have never heard of Blue Nile Limited financial resources relative to big and better-known retail Jewelry chains There is nothing proprietary about Blue Niles strategy and business model?both are subject to imitation by rivals Market Opportunities Geographic involution?entry into the markets of fo reign countries Lots of room to grow the business by attracting customers away(predicate) from traditional local Jewelry stores in the U. S. ?Blue Nile still has such a relatively small market share of the total market for fine Jewelry in the U. S. That it can continue to employ its current strategy for many years. The more that the word spreads about Blue Niles attractive prices and quality the more it stands to steal away customers from traditional local Jewelers.Product line expansion External Threats to Blue Niles Future Well-Being The entry of more online Jewelry rivals that opt to employ much the same strategy and business model?especially if these new entrants should be retailers that have a brand name that is more widely recognized and trusted than Blue Niles. Diamond/ gem suppliers either become less willing for Blue Nile to display their inventories on Blue Niles web site or decide not to renew their multi-year agreements with Blue Nile whereby certain designated diamonds in their inventories are offered to online consumers only at Blue Niles websites. (Blue Niles suppliers represented more than half of the total supply of high-quality diamonds in the U. S. much(prenominal) numbers of people shopping for fine Jewelry are very leery of buying fine Jewel online and thus are not likely to ever be customers of Blue Nile Key Pointed and Conclusions Blue Niles strategy, business model, resource strengths, and competitive capabilities put it in a very strong market position to succeed in the online retail Jewelry business in the upcoming years?it is easy to understand why the company has been extremely successful in growing its sales over the past some(prenominal) years. Blue Nile would seem to have a sustainable cost advantage over traditional brick-and mortar retailers of fine Jewelry. Blue Nile has no resource weaknesses that make it highly vulnerable to competitive attack from local Jewelers.