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Review of the Strategic situation of DeBeer's - Essay Example

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DeBeers’ Diamond Dilemma Instructor Institution Date Executive Summary The diamond mining and processing industry is one of the biggest global economic pillars and forms the back bone of a majority of companies with natural diamond deposits. For a long time, DeBeers, a South African based company has controlled about 85% of the market share of diamond production globally…
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Download file to see previous pages In view of the emerging challenges, DeBeers had to g back to the drawing board and strategize how it would remain relevant in the market, having lost its monopolistic powers and its market share reduced to 60%. The image of the company had also been tainted for engaging in non-business friendly and illegal practices when it was the market leader as it tried to wade off competition. The company had to change its strategy from a ‘buyer of a last resort’ to a more demand driven strategy that bore in mind the need for a good brand image. A good analysis of this strategy indicates that the company is still going to be a relevant contributor to the industry in the foreseeable future amid the challenges it faces. TABLE OF CONTENTS Title page 1 Executive Summary 2 Introduction 4 Body Analysis of business environment 6 Analysis of the Organization’s strategy 8 Appraisal of the strategy 10 Conclusion 10 Reference list 11 Word Count 12 DeBeers’ Diamond Dilemma Introduction Natural diamonds are formed as a result of carbon atoms beneath the surface of the earth bonding in to cubic structures due to excess heat and pressure in a very hard transparent compound. With the discovery of diamond deposits in various parts of the world in the 18th and 19th century, extraction process begun leading to the establishment of the diamond industry as one of the biggest economic sectors of most countries with diamond deposits (Hesse, R. W. 2007). Diamonds are heterogeneous minerals and were initially not considered as commodities in the market like other minerals such as copper and gold. Natural diamonds have widely been used in making jewelry and other precious and coveted ornaments. One of the countries naturally endowed with diamond deposits is South Africa. Other countries with huge deposits of diamond include Angola, Botswana, Democratic republic of Congo, Russia, Australia, and Canada. Together, the seven countries account for about 96% of global production of diamond and about 88% of the value of diamonds produced. Initially the diamond producing countries would export the rough diamond to other countries for processing (Carlson, 2005). Diamond processing involves cutting and polishing the rough diamonds into precious items. India was the most dominant diamond processing country in the beginning, while the situations has now changed since most of the producing countries now have diamond processing plants locally. DeBeers, a diamond extraction company in South Africa has for a long time been the market leader in the global diamond industry, controlling about 80% of total diamond supplies and produced about 45% of global production of diamonds. As a market leader, DeBeers could control the prices of rough diamonds globally by regulating supply. In a bid to expand its market share, the company engaged in various practices that aimed at killing any competition. So9me of the company’s practices were illegal in other jurisdictions and contributed to creation of a negative image of DeBeers on the global scene. From the early 1990s to date, the position of DeBeers as the market leader has been overtaken due to various factors that led to establishment and growth of other competitors as well as the popularity of synthetic diamonds and the shifting of the diamond market to adopt the demand-supply structure as the main price determinants. The dissolution of the Soviet Union led to ...Download file to see next pagesRead More
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