A look into De Beers’ Strategies

Presented bySrikanth Kumar. TSonu. T. Sekharan

Introduction

• Founded by Cecil Rhodes in the year 1888• Controlled over 90% of world’s diamond

production.• Headquarters – Johannesburg, SA• De Beers family of companies• Diamond Mining• Diamond Trading• Industrial Diamond manufacturing

• Leader in Diamond Market with 40% Share

Introduction• Founded by Cecil Rhodes in 1888• Johannesburg, SA• Largest company & World Leader• Active in every category of industrial diamond mining• US $6.8 billion (2009)• Approx. 20,000 employees

Monopoly

•Monopolistic practices throughout 20th century• International diamond market

manipulation• Single channel monopoly• “Central Selling Organization” - DTC• Stockpiled diamonds• Supply controlled business model

End of Monopoly

• Need for change of business model identified• Supply controlled model no longer viable• Changing consumer behavior & market

dynamics• Shift towards other luxury goods• “Blood Diamonds” taint• Legal & stricter govt regulations

Change of Strategy• Strategic review – Bain & Co.• Transition from supply controlled business

model to demand driven• “Supplier of Choice” program• Focus on stimulating or driving demand• De Beers’ Best Practice Principles• Business responsibilities• Social responsibilities• Environmental responsibilities

THE ORGANIZATION

Competitors, Markets

Industry

The Macro-Environment(PESTEL)

Layers of Business Environment

Business Level Strategies

SBU strategies

Bases of competition-Price-Differentiation-Hybrid-Focus

Achieving competitive advantage

-Sustainability-Hyper-competition-Collaboration-Game Theory

Detailed choices-Direction-Methods

Sustaining competitive advantage

Sustaining competitive advantage

Price based strategies-Win a price war- Focus on customer segment

Differentiation-Creating difficulties of

imitation-Imperfect mobility

Lock-In-Achieve size/market dominance-first mover advantage-rigorous enforcement

Business Level Strategies• First Level in the value chain• Commodity like market• Focused cost leadership strategy• Concentration on• Process efficiency• Total Quality Management• Security Measures

• Focus on Cost Leadership• Directly selling to its subsidiaries

• Fortifies barriers of entry for competitors

Business Level Strategies• The Diamond Trading Company• Differentiation Strategy• Branding ‘FOREVERMARK’• Cut/Polished by special “DIAMANTAIRE’• Sold directly to pre selected ‘SIGHT HOLDERS’• Pull Demand from end consumers

Long Term Sustainability? Diamond based on perceived utility Low cost competitors Fashion Trends

Corporate Strategies

• Low pressure for local responsiveness•Abundant Raw material availability•High Cost pressures• Increase in competition• Lack of better mining techniques

Corporate Strategies• Vertical Integration• Mining• Acquisition of new mines and established mines

that are a threat• Distribution• DTC• Sight Holders

• Marketing• Branding diamonds• Campaigns to convince customers that they are

essential• Forward integration – 500 stores by 2010