Question

Blue Nile and Diamond Retailing

Read the Case Study titled, "Blue Nile and Diamond Retailing," on pages 103–107 in the textbook, and answer the following questions in your discussion post:

What advice would you give to each of the three companies regarding their strategy and structure?

Answer 1

The three companies in the case are Blue Nile, Zales and Tiffany.

Tiffany has a strong brand image. As a result, pricing pressure at retail is likely to hit Tiffany higher than its competitors. In addition the growth of Blue Nile and other retailers’ entry into the market also means that the company is under pressure. Especially considering the global financial situation. The correct strategic path at this point for Tiffany will be to reduce costs at different stages and ride out the economic turmoil. Meanwhile they need to maintain their brand image throughout this tough period. In addition, it could explore wholesale diamond business as it may provide the company with a new direction that is cost effective without hurting their brand.

Zales is just coming back off a failed strategy in the high-end market. Also considering that the company is not very lean, it may face the most difficult time during this period. The success of Zales so far has been from the perception that it was providing good value for money diamonds. However, with their attempt to be high-end, event that image has taken a hit. Zales need to handle its logistics to maintain financial solvency. One of the key things that the strategy needs to keep in mind is that, the company should make sure that the higher-end items are available to all the stores as well as the lower-end items. While this is operationally challenging, a centralized distribution center with efficient logistic system may help.

Blue Nile’s strategy has always been to provide lower priced diamonds. Considering that the company focuses on affordable diamond rather than high-end brand image of its competitors, they can actually thrive in the difficult market. The 2009 financial crisis may lower the overall industry earnings but provides a unique opportunity for Blue Nile to increase their market share. Strategically they should be more aggressive when it comes to marketing. The perception they need to create is that their diamonds are just as good as Tiffany and Zales but are more affordable.