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De Beers

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Bhavit Bhatia

on 6 August 2013

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Transcript of De Beers

Thank you for your attention!
One can note that there are one of two possible factors that could affect the company in the future.

Future Demand: There is already a high demand for diamonds in the developing countries which is going to continue growing over the next years. De Beers already has opened retail stores in these countries (currently has 21 in Asia, 10 more stores than it has in the USA) and therefore will benefit from ‘first mover’ advantages.

Future Supply: If the diamond supply is going to increase suddenly due to intense competition, this will lead to a devaluation of diamonds in the market with further effects of decreasing demand and price. De Beers should therefore invest in a R&D join ventures with other companies in order to find alternative uses for diamonds and diversify their product range.
Diamond material properties which can be developed: hardness, electrical conductivity, chemical stability, etc
In the Future...
Thus, one can note that De Beers has moved to become a more vertically oriented firm; controlling extraction, processing and distribution of diamonds.
It has faced various challanges like new competition, change in consumer preferences and anti trust issues. However, the company has changed its strategy over the years to adapt to these changes.
PESTEL Analysis (1)
PESTEL Analysis

PESTEL Analysis

PESTEL Analysis (4)
The issue of ''conflict diamonds'' (anti trust regulators, blood diamonds)
De Beers adopted the ''supplier of choice'' policy since 2003 which was the key player in bringing together the kimberley process.
Kimberley process certification scheme has been very successful in stemming the flow of conflict diamonds with over 99% of global supply of rough diamonds estimated to be conflict free by world diamond council.
Suppliers enjoy collective bargaining power.
Porter's 5 Forces

In such an industry usually barriers to entry and exit are very high.
Even though diamonds are plentiful, it is hard for competitors to enter the industry as the industry is protected by a cartel.
However, the emergence of markets outside the cartel is probable new entrants.
Now, De Beers controls only 40% of world diamond extraction and distribution.
Porter's 5 Forces


Growing market for substitutes such as other gems, other luxury items, imitation diamonds and synthetic diamonds.
Porter's 5 Forces (3)
Value-Chain Analysis
SWOT Analysis (2)
SWOT Analysis (1)
Sustainability Risk Matrix
1. Economic
2. Ethics
3. Employees
4. Community
5. Environment
Economics Employees
As diamonds are a finite resource, the sustainability of diamond mining is measured by its ability to stimulate the economic and social development of the host country:

Close partnership with host governments to create shared value from diamonds
Driving local growth e.g. employing only local people
De Beers believe that key to sustainability of current and future strategies is to make sure that right people are on the right place:

Managing changes to the size of the workforce
Attracting and retaining talents
HIV and Aids management
De Beers' current strategy at different levels
External Business Environment
a) PESTEL Framework
b) Porter's 5 Forces
Internal Business Environment
a) SWOT analysis
b) Value Chain Analysis
Sustainability: Sustainability risk matrix
Alternative future scenarios
De Beers' strategy at different levels
De Beers was established in 1888
It is the world's leading diamond company with unrivalled expertise in exploration, mining and marketing.
During the 20th century, through their cartel, De Beers controlled between 80-90% of the global diamond supply.
In 2005, De Beers had to settle several anti-trust lawsuits by paying $295 million and complying with the anti-trust legislation (which in practice meant giving up their cartel and working with sight holders and third party producers)
As a result of that, De Beers experienced a radical change in strategy and organizational structure
'Our commitment to the highest ethical standrds is founded on our aspiration to live up to the unique qualities of diamonds'

Kimberley Process and System of Warranties credibility
Product security
Maintaining pipeline and sector standards
PESTEL Analysis
Porter's 5 Forces
Bargaining power of suppliers
: Low to moderate
Threat of new entrants
: Low
Threat of substitutes
: High
With the Porter's 5 forces model it can be concluded that De Beers operates in an oligopolistic industry as there are only few firms dominating the industry e.g. Alrosa , BHP Billion, Rio Tinto group. Though De Beers is facing potential risks it remains dominant in the industry.
: Converging industries (other gems and synthetic diamonds), ignores other addictional forces (other stakeholders, government)
Full transcript