Pov Analysis Debeers
POV ANALYSIS #1 De Beers Diamonds Corrin Wigren 10/10/11 Situation: The De Beers name has always been synonymous with diamonds due largely impart to the fact that in order for anyone to deal in the diamond business, at some point they will have to deal with at least one of our subsidiary companies, retailers or distributors. De Beers owns 43% of the worlds’ market shares of rough diamonds, but this is way down from the 80% we were at in the 80’s.
The diamond demand is at the mercy of an extremely volatile market which is largely based off of the consumer’s disposable income and with the current recession and cutbacks in consumer spending, it is important that we find a way to maintain a competitive hold on the market. SWOT Analysis: Strengths: De Beers mines remain the most consistent, reliable and considerable source of diamond distribution in the world, owns 43% of the rough diamond market and has unparalleled expertise in the diamond industry. Weaknesses: Low brand recognition and falling Market Shares.Opportunities: Emerging markets in China and India and the new Forevermark Diamond creating brand recognition. Threats: Synthetic Diamonds, emerging competition from Canada and other areas and the high cost of producing synthetics and abrasive wheels.
During the last economic downturn it was the internationalization of the diamond trade that truly kept it afloat. Diamonds are an easily portable and liquid asset that can are bought and sold in most foreign markets and the same is true today. There are many emerging markets to be aware of; China and India are two to take a look at.With a newly emerging middle class armed with strong disposable incomes, the proper market research and advertising to encourage brand recognition, there is a whole untapped resource within the confines of China and India. Problem: The Problem is that De Beers has dropped its market shares from 80% down to 43% in the last 20 years. For a hundred years De Beers managed to maintain mass market share of the world’s rough diamonds in order to control the availability of supply and fix the prices in the long-run.
However with new technology and more demand for other types of diamonds rather than just polished “cultural” stones or abrasive wheels, the entrance of synthetic diamonds and more competition has brought down our market shares almost in half in less than a twenty year span. Causes: New emerging competitors into the diamond market. The lowered cost of doing business from new technology, have allowed many new entrants into the market. There is little to no brand recognition for the private client. When talking with private consumers about where their diamonds came from, most didn’t know past the retail shop they got it from.
De Beers was so concerned with maintaining market share and price controls, that little to no advertising was done to increase private consumer awareness of the brand name. In order to fix prices and maintain market share we have been indiscriminately buying diamonds on the open market and stock piling them in large quantities. With the emerging public awareness of “conflict diamonds” and the vast need for quality and luxury rather than quantity, DeBeers strategy of diamonds as a commodity is dying. Alternative Solutions: Alternative solution one is to continue doing what we have been doing and continue to watch our market share plummet.To continue on this path is the easy thing to do, it costs nothing to remain here and 43% is still a good foothold on the market.
The second solution is to penetrate the emerging markets of China and India with a luxury diamond line to create high brand recognition of the De Beers name. Thanks to the globalization of business, China and India have a new emerging middle class which is highly attracted to “American Luxury Items” and releasing a new diamond line in this market could lead to untapped resource potential.Heavy advertising costs will be incurred in order to penetrate the Chinese market but already Diamond imports to China are up %14 and are expected to rise. The third solution is to begin cultivating and competing in the Synthetic Diamond market. Synthetic diamonds are flawless, have no correlation in the public mind with “conflict diamonds”, they are easy to make and if manufactured for abrasive wheels, they can be grown in a few days in a lab.However the technology to grow a diamond big enough to be used for polished jewelry still is not quite there.
The procedures and equipment are not yet time or cost effective. In order to enter the jewelry market with the right synthetics would cost the average consumer too much. Decision: We have decided to penetrate the emerging markets of China and India with a new line of luxury diamonds created with a special serial number and inscriptions bearing the name of the special promotional line that they will be a part of and the De Beers logo.To restructure ourselves as a private-type luxury brand retailer in the Chinese and Indian markets, we expect to harvest new growth opportunities and profit potential. Synthetic diamond creation is fine for small sizes to be marketed as saw blades and abrasive wheels but that sector represents only a small percentage of the need for diamond production.
The cost is too high to manufacture a larger size diamond for the jewelry consumer. To continue on the path that we are on is not a valid option because the market, the demand and the consumer are all changing with the times.To stay stagnant against growth and opportunity is ineffectual with stockpiles of diamonds decreasing and demand increasing globally now is the time to change the way De Beers markets itself and competes. Action Plan: The first line of action is to comprise a team made up of the vice-president of marketing, vice-president of finance, two leading members of our advertising team and a member from cultural affairs. We will put together a marketing plan, a budget and an advertising campaign in order to break into our new market.We expect the first year budget to be upwards of 36 million dollars.
25% will be spent on social and digital networking, 35% will be spent on television, 22% on tangible advertising and 18% to be delegated to other smaller miscellaneous forms of advertising such as mailing and radio formatting. We can expect opposition from most of our American retailers who will assume that they will be losing much of the more precious gems and better cut options to China and India; however we will be adding a campaign for our private American consumers as well.Not only will the same “Luxury Line” run in America, we will run a public campaign offering American retailers first pick of prime cuts and “cultural” stone selections. We can also expect opposition from some of our upper management who already assume that market share is now an irrelevant issue as we are now making profit off of quality, rather than quantity. We used to trade diamonds as a commodity, now we sell smaller amounts at a higher value. We will explain that China and India are untapped resource potential; that 36 million dollar investment will create a projected return of over 9 billion in the first year alone.