Blue Nile Case Study

– Blue Nile

1. What is Blue Nile's strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence from the 10-K supports your conclusion?

Blue Nile looks to be implementing and mix of strategies, in that they are responding to the individuals needs on the type of diamond they want, but they are doing it at a heavily discounted price compared to the competition. This would be a combination of the customer intimacy and the operational excellence strategies. The evidence that supports this can be found on page 3 of the 10-k report:

“We have developed an efficient online cost structure and a unique supply solution that eliminates traditional layers of diamond wholesalers and brokers, which allows us to generally purchase most of our product offerings at lower prices by avoiding mark-ups imposed by those intermediaries. Our supply solution generally enables us to purchase only those diamonds that our customers have ordered. As a result, we are able to minimize the costs associated with carrying diamond inventory and limit our risk of potential mark-downs..”

2. What business risks does Blue Nile face that may threaten its ability to satisfy stockholder expectations? What are some examples of control activities that the company could use to reduce these risks? (Hint: Focus on pages 8-19 of the 10-K.) Are some of the risks faced by Blue Nile difficult to reduce through control activities? Explain.

Risk: Purchasers of diamonds and fine jewelry may not choose to shop online, which would prevent us from increasing net sales.

Control activities: Make available only independently certified diamonds and have this be the main focus of the marketing material. Also, granting customers easily access to information about the specific products that they are interested in purchasing via the website.

Risk: This is a luxury product, and customarily...