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NayLinnKo Information Systems Management BIT

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Strategic Evaluation and Consultation Document for Blue Nile Company by Nay Linn Ko

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NayLinnKo Information Systems Management BIT

  1. 1. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 1 Student Name: Nay Linn Ko UOG Student Register ID: 000898709 Coursework Title: Strategic Evaluation Consultation Document for Blue Nile COMP 1646: Information Systems Management Due Date: 22th April 2015 Centre: KMD (Yangon, Myanmar)
  2. 2. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 2 Acknowledgement First of all, I like to acknowledge the responsible persons from University of Greenwich who provide this coursework for students. I would like to thanks to Harvey Kanter, CEO of Blue Nile Company, for his encouragement to develop global e-commerce business. I would like to appreciate the responsible persons from investor.bluenile.com/annual.cfm for uploading the case study. Moreover, I would like to present my appreciation for our lecturer, Daw Moe Pale, for her great and expert lectures and guidelines. Last but not least, I would like to thanks to responsible teachers and staffs from our centre, KMD for providing such a good learning environment.
  3. 3. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 3 Table of Contents Executive Summary.......................................................................................................................5 Chapter-1 Introduction .................................................................................................................6 1.1 Background ............................................................................................................................6 1.2 Financial Performance............................................................................................................6 1.3 Key Products and Services.....................................................................................................7 1.4 Current Situation and Problems .............................................................................................7 Chapter-2 Strategic Evaluation- Situation Analysis...................................................................8 2.1 Introduction ............................................................................................................................8 2.2 SWOT Analysis......................................................................................................................8 2.2.1 Strengths..........................................................................................................................8 2.2.2 Weaknesses......................................................................................................................9 2.2.3 Opportunities.................................................................................................................10 2.2.4 Threats ...........................................................................................................................11 2.3 PEST Analysis......................................................................................................................12 2.3.1 Political Factors.............................................................................................................12 2.3.2 Economical Factors .......................................................................................................12 2.3.3 Social Factors ................................................................................................................13 2.3.4 Technological Factors ...................................................................................................14 2.4 Summary ..............................................................................................................................15 Chapter- 3 E-marketing Strategy...............................................................................................16 3.1 Introduction ..........................................................................................................................16 3.2 E-marketing Strategies that Blue Nile Adopted...................................................................16 3.3 Balancing Online and Offline Promotions...........................................................................19 3.3.1 Online Promotions.........................................................................................................19 3.3.2 Offline Promotions........................................................................................................20 3.3.3 Balancing Online and Offline Promotions ....................................................................20 3.4 Impact Upon Performance of Business................................................................................21 3.5 Summary ..............................................................................................................................22 Chapter-4 Legal and Ethical Issues............................................................................................23 4.1 Introduction ..........................................................................................................................23
  4. 4. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 4 4.2 Issues in Gathering...............................................................................................................23 4.3 Issues in Processing..............................................................................................................23 4.4 Issues in Delivering..............................................................................................................24 4.5 Avoiding from Legal and Ethical Issues..............................................................................24 4.6 Summary ..............................................................................................................................24 Conclusion ....................................................................................................................................25 References......................................................................................................................................26
  5. 5. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 5 Executive Summary This report is about “Strategic Evaluation Consultation Document for Blue Nile Company”. Blue Nile Company is the world biggest pure-play online retailer of high quality diamonds and jewellery. The company is based in Seattle, Washington. The detail of company’s background, key products and services, financial performances, current situation and problems are described in Chapter 1. In Chapter 2, we describe situation analysis of Blue Nile as part of strategic evaluation. Situation analysis includes SWOT analysis and PEST analysis. As part of Chapter 3, we broadly discuss about e-marketing strategy of Blue Nile Company. Along with e-marketing strategy, we research how the management is balancing the Blue Nile online and offline promotion methods. We also consider which kind of impacts could affect by implementing the strategies. In Chapter 4, legal and ethical issues that Blue Nile should need to be aware of are described. We also advice how to avoid the legal and ethical issues deal with the use of information on the internet.
  6. 6. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 6 Chapter-1 | Introduction Blue Nile Company is a pure-play online retailer of high quality jewelleries. The Company is based in Seattle, Washington and offers jewellery products for sale through Blue Nile Website in over 40 countries and territories. Currently, the company is the biggest online retailer of diamonds in the world. Blue Nile website provides more than 100,000 fine diamonds and jewelleries. Harvey Kanter is the current CEO of the company. 1.1 Background Doug Williams of Williams and Son Inc started The Delaware Corporation, former name of Blue Nile Company, in 1995. The Delaware Corporation was selling diamonds online. In 1999, Mark C. Vadon bought 85% of the company share. Later, the name of the company was changed to Blue Nile in November 1999. Currently, Blue Nile has following subsidiaries.  Blue Nile LLC Company  Blue Nile Worldwide Inc.  Blue Nile Jewellery Ltd. Blue Nile LLC Company provides services for the customers in the United States, Canada and Asia-Pacific. Blue Nile Worldwide Inc serves the customers in Europe and Blue Nile Jewellery Ltd provides customer service and fulfilment centre in Dublin, Ireland. 1.2 Financial Performance In 2000, the company got $44 million revenue, but spent $40 million in television advertising. In 2006, the sales reached $210 million with 40 percent annual growth. To get the revenue of $210 million in jewellery industry, a traditional retailer needs 200 stores and approximate 1800 of employees. But Blue Nile did it with one big warehouse and 115 employees. Because of the cost effectiveness of Blue Nile products, 465 physical jewellery stores in the United States closed in 2003 alone. On October 4, 2005, Blue Nile launched of its United Kingdom website. (Ref: www.wikipedia.org/wiki/Blue_Nile_%28company%29 )
  7. 7. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 7 1.3 Key Products and Services Blue Nile Products can be categorised into engagement and non-engagement products. Engagement products consist of gold or platinum engagement rings with a diamond centre stone. Non-engagement products consist of wedding bands, earrings, necklaces, pendants, bracelets, gifts and accessories containing precious metals, diamonds, gemstones, or pearls. Blue Nile core business is engagement category. Blue Nile trusts that customer service is important as part of customer relationship management. Blue Nile website provides diamonds and jewellery consultant online. The guarantees and policies of Blue Nile make improvements of customer satisfaction. 1.4 Current Situation and Problems Since Blue Nile formation, the company has been competed with a number of online and offline jewellery retailers. Traditional jewellery stores such as Tiffany Co.Ltd and online retailer such as James Allen are huge competitors of Blue Nile. Other potential competitors include online jewellery auction sites and internet shopping clubs. According to the case study, Blue Nile has three potential initiatives in order to surpass its competitors. They are-  To promote user experience when a customer is buying online  To innovate new jewellery products  To expand International Market To receive more revenue, Blue Nile needs to operate these three missions successfully. But, on the other hand, there are a number of possible issues which can affect these initiatives. In order to analyse the issues, we will make SWOT analysis and PEST analysis.
  8. 8. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 8 Chapter- 2 | Strategic Evaluation – Situation Analysis 2.1 Introduction In this chapter, the strategic evaluation of Blue Nile would be analysed. SWOT analysis is a kind of situation analysis method that analyse the company’s internal strengths and weaknesses, and external opportunities and threats. PEST analysis is also a situation analysis tool, but unlike with SWOT analysis, all the factors such as political factors and economical factors are external that impact a business. The following are referenced from http://www.bluenile.com/about-blue-nile. (Accessed Date : 9th March 2015) 2.2 SWOT Analysis 2.2.1 Strengths 1. Cost Effectiveness The main business strategically strength of Blue Nile is cost effectiveness. Normally, a diamond can pass through a lot of intermediaries before reaching a retailer. But Blue Nile deals with original suppliers such as Thaigem.com. Therefore, Blue Nile can reduce jewellery prices as there are no intermediaries. Moreover, the company do not need to rent or buy a physical store to sell diamonds. Therefore, the company can reduce the diamond prices more than its competitors. 2. Exclusive Supplier Relationship According to the case study, Blue Nile Company has successfully built exclusive diamond supplier relationships. Some of the suppliers allow the company to display their diamond inventories on the Blue Nile website for sale to consumers. In this case, Blue Nile does not need to hold the diamonds in their own inventory until the product is ordered by consumers.
  9. 9. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 9 3. Outstanding Customer Relationship Management (E-CRM) Another strength of the company is that the company provides outstanding customer relationship management (E-CRM). When a customer visits the website, he can call a toll free number to get assistance on the phone. Online-live chats are also provided that allows a customer to get assistance by conversation with well trained diamond and jewellery consultant. A consultant can guide all steps in the process of buying jewelleries, such as selecting an appropriate item, the purchase of that item, financing and payment alternatives, and shipping services. Moreover, the Blue Nile Credit Card provides various financing options to the customers and is a vehicle for other unique offers to cardholders. 4. Multiple Technology Platforms Blue Nile website can be used across multiple platforms and operating systems. Third-party software is applied to monitor the website. And an on-call team is ready to respond any emergencies case or unauthorized access in the website. 2.2.2Weaknesses 1. Weak Brand Recognition Blue Nile brand is not very recognised as national brand in the United States. The company is well known in San Francisco and Seattle area but it still has to raise its brand. Competitors such as Tiffany Co., Ltd already got strong brand awareness internationally and can attract more customers. Blue Nile should find ways to promote the brand recognition. Advertising with famous celebrities could be one of the solutions. 2. Difficult Payment Transaction Though Blue Nile provides different payment methods through its website, some customers still have problems in payment transaction. Some of the problems are different currencies and credit cards. As the result, many consumers cannot buy although they want to buy jewellery from Blue Nile.
  10. 10. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 10 3. Risk of Theft and Being Damaged Blue Nile has experienced theft or being damaged of jewellery products while delivering to the consumers. However the company have made jewellery insurance, this would impact company’s reputation and brand recognition. 4. IT Systems Vulnerability One of the main weaknesses of the company is deal with IT systems vulnerability. As the development of hacking technologies, more unauthorized accesses are faced. The website should be enhanced encryption and authentication technology licensed from third parties to provide secure transmission of confidential information, including credit card numbers. 2.2.3 Opportunities 1. Increasing Internet Users The number of people who access internet through different devices is increased dramatically in the past few years. This would lead Blue Nile to get more potential consumers. Therefore, increasing internet users worldwide makes the opportunity for the Blue Nile Company. 2. Expanding International Market Blue Nile Company is currently selling jewellery products in over 40 countries and territories. If the company can expand its international market, the amount of revenue will be increased although there are a lot of restrictions and barriers. 3. Innovating New Jewellery Products Innovating new jewellery products is also an opportunity for the Blue Nile. As consumer needs are always changing, creating jewellery products with new designs will improve reputation and popularity of the company.
  11. 11. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 11 4. High Real-Estate Prices As the prices of real estate markets are increasing globally, it is difficult to rent or expensive to buy a space for physical jewellery retailers. As the result, a physical or traditional jewellery retailer cannot reduce jewellery prices as Blue Nile. This is a huge opportunity for Blue Nile Company. 2.2.4 Threats 1. Taxes Blue Nile Company may be negatively affected if there is required to collect additional taxes on sales. Currently, the company collects indirect taxes on sales from customers located in State of Washington, State of New York and some of the countries. If the other states in US or foreign countries impose to collect additional indirect taxes from customers, the company has to face with a big problem since IT systems of the company have to upgrade for tax transaction and customer do not want to pay tax. 2. Purchasers do not choose to shop online. Another threat is that some purchasers of diamonds and fine jewellery do not choose to shop online. A number of potential consumers do not want to buy jewellery over the internet. Many consumers concerns about buying luxury products such as diamonds without a physical storefront. Customers want face-to-face interaction with sales staff. Psychologically, consumers want to touch or handle and examine products physically. This is one of the big threats of Blue Nile Company. 3. Increasing Competitors The retail jewellery industry is very competitive. There are a lot of emerging motor-and-brick jewellery stores and click-and-brick jewellery stores. Large traditional jewellery stores such as Tiffany may expand their market online. The suppliers of jewellery products could also sell jewellery to consumers directly.
  12. 12. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 12 4. Hacking and Cyber Attacks The confidential data of Blue Nile can be hacked or hijacked any time. The data are very important and confidential. It is very important to monitor and secure the systems otherwise the company could decline. 2.3 PEST Analysis 2.3.1 Political Factors The following are referenced from http://webspier.com/essay/496322 (Accessed Date: 5th March 2015) 1. New Regulations Related to Conflict Minerals According to the case study, there are new regulations adopted in some countries. The regulations contain provisions to improve transparency and accountability in finding the certain minerals, known as conflict minerals. These regulations would adversely affect the suppliers of Blue Nile Company. As a result, the price of minerals used in Blue Nile products would be increased. Moreover, if certain products of Blue Nile contain minerals which are conflict minerals or are illegally traded, the company might face the reputational challenges. 2. Trademarks Confusion In some countries and territories, trade secret and copyrights laws afford only limited protection. Therefore, some competitors of Blue Nile have or may have copied the company’s website images and trademarks. In some cases, Blue Nile could not be able to sue them. This kind of trademarks confusion could damage the reputation and consumer trust of Blue Nile Company. 3. Weak Governments’ Regulations of Internet and E-commerce There are no certain laws or regulations for internet and e-commerce in some countries. This means taxation, advertising and intellectual property rights are legally free on the internet. This would bring both opportunities and threats for the Blue Nile Company.
  13. 13. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 13 2.3.2 Economic Factors 1. Foreign Exchange Rate Fluctuations Foreign exchange rate fluctuation is a huge impact for Blue Nile Company. The results may differ from expectation while translation from foreign currencies from international sales to US dollars. The foreign exchange rate fluctuation makes significant gains or losses for the Blue Nile Company. Moreover, the company set prices of diamonds based on US dollars. Therefore, when US dollar strengths, the prices of the products in international markets will become more expensive and sales may reach decline. 2. Increased Costs Increased commodity prices such as higher costs of labour, higher shipping costs, inflation and increased taxes may also affect the revenue of Blue Nile Company. As the result, the company would need to raise the prices of the products to recover the revenue. Therefore, any significant increases in costs may affect the financial conditions and results of operations of the Blue Nile Company. 3. Changing Consumer Demand The market of luxury products such as diamonds, the consumer demand could be changed very easily. The jewellery market is mostly depending on the conditions in residential real estate market and stock exchange market. These economic factors would affect the consumer spending or buying habits for jewellery products. 2.3.3 Social Factors 1. Reduced Rate of Marriages In some developed countries, the rate of marriages is becoming record-breaking low. Blue Nile net sales and results of operations are highly dependent on the demand of engagement rings. If demand of Blue Nile engagement rings declined, the company net sales would be harmed.
  14. 14. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 14 2. Different Customs Diamond engagement rings are not a custom or trend in some traditions. Therefore, Blue Nile would need to struggle while expanding market in countries with those traditions. Moreover, in some cases, diamonds are believed to be used to fund terrorist activities. Therefore, some people do not choose diamonds as their jewellery accessories. 3. Demography The world’s population continues to grow and today there are over 7 billion people on earth. The world population is expected to reach over 9 billion in 40 years. Most of the population growth takes place in Africa and Asia-Pacific. Therefore, as a long term plan, Blue Nile should expand its market in marketplaces where high population growth occurs. Distribution of income based on age is also need to be considered. People born between 1946 and 1964 are considered to be the generation with the biggest purchasing power in every country. This is because most of them were saved up money and all major investments like buying cars and educating the children were done. Therefore, Blue Nile needs to focus on the generation who born between 1946 and 1964 as the target audience while innovating and advertising jewellery products. Countries like Japan have the older population who born between 1946 and 1964 than younger population. 2.3.4 Technological Factors 1. New Information Systems are required to build. As Blue Nile is a public reporting company, international accounting and reporting requirements are critical to comply. Therefore, additional finance and accounting systems might be required to implement. If Blue Nile financial reportings are not so effective for the investors in international market, they could lose confidence in the company, and as a result, this could adversely affect the company stock price. 2. System Interruption Blue Nile Company is famous for the satisfactory performance, reliability and availability of its website. But any future system interruption, down time of severs and technical difficulties could make unavailability of Blue Nile Website. As a result, the reputation and brand of Blue Nile Company could be damaged and results of operation would be declined.
  15. 15. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 15 3. Human Errors and Natural Disasters Blue Nile website and operations are vulnerable to damage or interruption from human error, fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, break-ins, and similar events. The critical data and customer information should be back up regularly, otherwise the company could decline when it meets natural disasters. 2.4 Summary SWOT and PEST analysis were made as situation analysis. According to SWOT analysis, Blue Nile currently has both strengths such as exclusive supplier relationships and weaknesses such as IT systems vulnerability. The company currently face with some opportunities and threats. Political, economical, social and technological factors that can affect Blue Nile Company were also analysed.
  16. 16. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 16 Chapter- 3 | E-marketing Strategy 3.1 Introduction In this chapter, we would evaluate the e-marketing strategies that Blue Nile adopted or planning to adopt. And, how the management is balancing online and offline promotion methods would also be described. The objective of this chapter is to consider which kind of impact would affect the business performance of Blue Nile by implementing the strategies. 3.2 E-marketing Strategies that Blue Nile Adopted There are some of E-marketing strategies that Blue Nile Company adopted. The following are referenced from http://www.alexa.com/siteinfo/bluenile.com (Accessed Date: 10th March 2015). 1. Brand Recognition Blue Nile brand is not very recognised in the United States. Therefore, the company is trying to raise the reputation of its brand, especially for the engagement rings. By advertising with famous celebrities, the company is hoping to improve its brand. Advertising on social websites and popular search engines like Google can be beneficial for Blue Nile Company. 2. Online Customer Loyalty Marketing The company is endeavouring to build a loyal customer base and promote repeat purchases. But there is still no specific loyalty program that the company adopted. Some of online promotions such as e-coupons (see page 19 for detail) and 30day money back guarantee services makes customer loyalty. (Ref: Blue Nile Annual_Report_2012_FINAL.pdf) 3. Advertising both online and offline According to case study, online advertising includes advertising on search engines, affiliate programs, and advertising on social websites. Blue Nile Company also makes an online direct marketing through their website. Offline advertising includes advertising on televisions, print media and billboards.
  17. 17. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 17 4. Expanding Market Blue Nile website is currently selling diamonds online in over 40 countries and territories. By deploying marketing to reach more customers, the company is hoping to improve the revenue. Therefore, Blue Nile is trying to achieve legally allowance to sell jewellery online in new countries and territories. 5. Providing Cheaper Price The concept of the supply chain of Blue Nile transforms the cheaper price of jewellery of the company. Originally, a diamond can pass through five or more middlemen before reaching a retailer. But the Blue Nile deals directly with original supplier such as Thaigem.com. Reducing the steps of intermediaries means that reducing the price of jewellery. 6. 30-day Money Back Guarantee One of the most important marketing strategies of Blue Nile is 30-day money back guarantee. The guarantee is that if a customer who bought jewellery wants to get his money back, Blue Nile allow to exchange within 30 days without charging a fee. This provides customers a comfort level against fraud and gives Blue Nile a competitive edge against stores that take the stones back but charge a fee to do so. (Ref: http://www.bluenile.com/about-blue- nile) 7. Online Education Guides Prospective customers can start by going to Blue Nile to learn about diamonds. The site offers the commonly known 4 Cs information about a diamond – colour, cut, clarity and carat, but also information about the shape and certification of the diamond. Blue Nile wants to make the purchase of a diamond an easy and fun experience for the customer. The company offers educational pages such as types of jewellery, diamond characteristics, and metal comparisons. The site also offers price comparison with other online jewellery stores such as Diamond.com. Because of these online education guides, Blue Nile received more than doubled the number of customers.
  18. 18. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 18 8. E-CRM Based Marketing Many customers might think that buying expensive goods online, such as jewellery, is not as convenience as buying in a store. But Blue Nile serves its customers the best it can by offering different features on its website. In addition to educational guides, many other helpful tools are provided on the website. More e-marketing strategies such as affiliate programs, e-coupons, credit card marketing and various customer loyalty marketing have been adopted or are planning to adopt.
  19. 19. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 19 3.3 Balancing Online and Offline Promotion Methods 3.3.1 Online Promotions 1. Blue Nile Coupons Fig. Promotion Coupons on Blue Nile Website Blue Nile provides e-coupons as one of their online promotion methods. By using e-coupons, customers can enjoy discounts and free shipping for a limited time. Some kinds of coupons attract the customers to buy jewellery at Blue Nile website again and again. For example, if a customer bought jewellery up to 3000US dollars within a month, he would receive a coupon which saves up to 300US dollars to buy an another diamond ring. This kind of promotion makes customer loyalty. 2. Blue Nile Credit Card The Blue Nile credit card offers a broad range of compelling financing options and flexible to pay over time. By using Blue Nile credit card, the member can get benefits such as convenient payment options, no annual fees and special access to card member-only offers and promotions. Moreover, Blue Nile credit card offers member 25 days grace period. But if the purchase balance is not paid in full within 6 or 12 months, interest will be charged to member account.
  20. 20. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 20 3.3.2 Offline Promotions The following were referenced from http://www.idexonline.com (Accessed Date: 15th March 2015). 1. Price-based Promotion Blue Nile has adopted a promotion strategy that many traditional jewellers use when sales slow. The company cuts retail prices of jewellery products. In 2011, the company’s gross margin fell to 20.5 percent from 22.0 percent. Therefore, the company began to reduce jewellery prices in mid-February, and the gross margin was increased. Blue Nile got successful achievement because of its price-based promotion. Because of the ineffectiveness of some of Blue Nile’s online marketing strategies, the management made the decision to cut prices rather than to increase marketing spend. 3.3.3 Balancing Online and Offline Promotions As Blue Nile Company is a pure-play online jewellery retailer, their promotion methods are very online dependent. According to 2012 statistics, Blue Nile found that some of their online promotion methods are ineffective. Therefore, the management reduced the jewellery prices rather than spending money at online promotions. The management said that promoting to 22 percent gross margin with a 6 percent marketing spend was likely to be less effective than promoting to 20 percent gross margin with a 4 percent marketing spend. Because of the huge costs of online promotions and advertising, Blue Nile Company should think to open a physical store, which is more convenient for users to buy expensive jewellery. For Blue Nile, physical stores might be a kind of offline promotion method. In conclusion, Blue Nile should provide more offline promotions rather than online promotions.
  21. 21. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 21 3.4 Impacts upon Performance of Business The following are referenced from http://www.diamonds.net/News/NewsItem.aspx?ArticleID=41543 . (Accessed Date: 16th march 2015) Blue Nile’s expanding to international market has good impacts upon performance of Business. In 2011, China alone represented a $100 million business for Blue Nile Company. Therefore, we could say that the e-marketing strategy of expanding international market is a successful strategy. Fig. Blue Nile Quarterly Sales Revenue before internationa l expansion Revenue after internationa l expansion
  22. 22. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 22 Advertising on search engines such as google and yahoo makes more visitors to visit Blue Nile Website. Blue Nile advertises top keywords such as “engagement rings”, “Blue Nile” and “diamond” on the search engines. According to 2012 Blue Nile Annual Report, 21.10% of visitors who visited Blue Nile Website came from a search engine. Advertising on search engines costs a lot, but at the same time, it makes a great improvement for the company. Fig. Advertising on Search Engines We have to consider about the price-based promotion strategy of the Blue Nile Company. According to the price-based promotion strategy, the company reduces the prices of jewellery products when the sales slow. This strategy makes improvements in sales growth rate of Blue Nile Company, but it affects the net profit of the company at the same time. Net profit is the most important for a company to stand in the market. Therefore, the management needs to consider the impacts of price-based promotion strategy that they are using. 3.5 Summary Some of e-marketing strategies of Blue Nile such as brand recognition, online customer loyalty marketing, advertising, promotions and online education guides were described. As Blue Nile is pure-play online jewellery retailer, most of their marketing strategies and promotions are very online dependent. We described how the management is balancing online and offline promotion methods. Impacts of e-marketing strategies of Blue Nile were also described.
  23. 23. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 23 Chapter- 4 | Legal and Ethical Issues 4.1 Introduction In this part, we would discuss about legal and ethical issues that Blue Nile need to consider. Major ethical and legal issues are occurred deal with Privacy, Intellectual property rights, censorship, Consumer and merchant protection against fraud. The following are referenced from www.bluenile.com/de/ploicies/privacy . (Accessed Date: 4th April 2015) 4.2 Issues in Gathering Blue Nile website collects the personal information of customers. The personal information includes name, physical address, E-mail address, gender, phone number, occupation, information of purchases, birthday, anniversary, interests, credit card information and many more. Some of the information are confidential and need to have privacy. Some of these confidential data are collected through cookies files and these cookies might be used by business partners of Blue Nile without permission from customer. However the customers can decline cookies on their browsers, third-parties organization might still be able to obtain their personal information because in some cases, Blue Nile shares the data to its third-parties. In fact, Blue Nile should not share or aggregate the personal information of customers without permission. Therefore, there would be an ethical issue deal with gathering information from customer. 4.3 Issues in Processing The employees of Blue Nile especially diamond consultants might or could access the personal information of the customer through the website, via e-mail and over the telephone. They could embezzle the customer information to pretend as a customer themselves. According to recent researches, 80% of computer criminals or unauthorized accesses were carried out by employees rather than outsiders. Blue Nile should consider how to process the confidential information of customer within the company securely. Some employees in Blue Nile might waste time while surfing non-work-related websites during working hours is also a concerned ethical issue.
  24. 24. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 24 4.4 Issues in Distribution There is a legal issue deals with distribution information about conflict diamonds. Conflict diamonds are diamonds where its history contains at least one worker who was not treated fairly or the diamond is illegally produced. Blue Nile has a zero-tolerance policy toward conflict diamonds. Therefore, Blue Nile follows Kimberley Process which is tracking diamonds from mining stage to final retailing stage. According to Kimberley Process, when Blue Nile sells a diamond product, the company provides the “diamond certificate” to customer to ensure that the diamond is conflict-free. There would be legal issue if one of the suppliers or intermediaries of Blue Nile imitated the diamond certificate to pretend that the diamond is conflict-free. Moreover, some of Blue Nile employees could copy a diamond certificate and then distribute the copy to illegal diamond traders for their personal advantage. Therefore, Blue Nile needs to consider how to distribute the sensitive information like diamond certificates. 4.5 Avoiding from Legal and Ethical Issues To protect unauthorized access and embezzlement of confidential data, secured technologies such as software firewalls and hardware firewalls should be used. Virtual Private Network (VPN) could also be applied to protect the confidential information of customers from some employees and hackers. Some encryption methods should be used in processing and distribution of sensitive data such as diamond certificates. The regulations of privacy, intellectual property rights and censorships on the internet are different from one country to another. Blue Nile should aware the laws and regulations of each country in which the company exists. Any legal or ethical problems can impact the reputation and brand recognition of the company, consequently, the revenue of the company. 4.6 Summary Through this chapter, we discussed about legal and ethical issues that Blue Nile need to be aware of. Legal and ethical issues deal with gathering, processing, distribution and the use of information on the internet were critically discussed. And, some advices were given to avoid from the legal and ethical issues.
  25. 25. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 25 Conclusion Blue Nile is the biggest pure-play online retailer of diamonds in the world. The company is based in Seattle, Washington and offers jewellery products in over 40 countries and territories. The current initiatives or missions that Blue Nile focuses are to promote user experience, to innovate new jewellery products and to expand international market. The strengths of Blue Nile Company are cost effectiveness, exclusive supplier relationships, outstanding customer relationship management (E-CRM) and multiple technology platforms. Some weaknesses such as weak brand recognition and IT systems vulnerability should be enhanced. At the same time, political, economical, social and technological aspects which were mentioned above are also needed to be aware of. The e-marketing strategies that Blue Nile adopted or planning to be adopted are brand recognition, online customer loyalty marketing, advertising both online and offline, expanding market, providing cheaper price, promotions and E-CRM based marketing. As Blue Nile is pure-play online retailer, their promotion methods are very online dependent. Therefore, the management should improve the offline promotion methods rather than online promotions. Legal and ethical issues that can impact Blue Nile while gathering, processing, and delivering and the use of information on the internet were discussed in chapter (4). Some of the ways to avoid from legal and ethical issues were also described.
  26. 26. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 26 References Book References Efraim Turban, (2008) Electronic Commerce A Managerial Perspective Available from: www.pearsoned.co.uk (Accessed Date: 1st March 2015) Harvey Kanter, (2013) Blue Nile 2013 Annual Report Available from: investor.bluenile.com/annual.cfm (Accessed Date: 4th March 2015) University of Greenwich, B.Sc (BIT) COMP 1464, Information Systems Management Website References Blue Nile Inc World Largest Online Diamond Retailer http://www.studymode.com/subjects/blue-nile-inc-world-s-largest-online-diamond-retailer- page1.html (Accessed Date: 6th March 2015) Blue Nile Effect http://www.diamonds.net/News/NewsItem.aspx?ArticleID=41543 (Accessed Date: 6th March 2015) Blue Nile CEO says click-and-bricks jewellery retailing test working well. http://www.geekwire.com/2014/blue-nile-ceo-discusses-nordstrom-deal-says-clicks-bricks-test- working-well (Accessed Date: 9th March 2015)
  27. 27. INFORMATION SYSTEMS MANAGEMENT COMP- 1646 Page 27 About Us | Blue Nile http://www.bluenile.com/about-blue-nile (Accessed Date: 9th March 2015) Blue Nile Credit Card http://www.bluenile.com/services/blue-nile-credit-card (Accessed Date: 9th March 2015) Blue Nile Overview http://www.alexa.com/siteinfo/bluenile.com (Accessed Date: 10th March 2015) Blue Nile goes Responsive Website http://mashable.com/2013/12/15/blue-nile-metrics

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