About diamond

About b each field mental homeA ball field is forever (De Beers sort, 2008) is likely to be champion of the high hat kn possess slogans the mining labor has ever had. Sixty years after(prenominal) the foundation of the De Beers Consolidated Mines in South Africa (CMSA) in 1888 (Epstein, 1982) this slogan represents a campaign aimed at merchandise the sale of De Beers diamonds. In the early twentieth century the British South Afri scum bag comp some(prenominal) monopolised giving them the influence over the studyity of the worlds diamond supply. To establish the monopoly, Ernest Oppenheimer, considered as prototype of the multinational melodyman German by birth, British by naturalization, Jewish by religion, and South Afri hobo by residence has perceived that the only modality to increase the honor of diamonds is to amaze them scarce (Epstein, 1982) in 1910. Ernest Oppenheimer has so cold laid the foundation for De Beers descent st rollgy of dictatorial supply that l asted for most one century facilitating the process of becoming an globular cartel in the late 1930 years. Within the following twenty years, De Beers monopolised the natural diamond industry on a global scale. The attach to monitored all pipe mines, was amply backed by the British, Belgian and French governments and was considered as the official channel for the diamond trade (Epstein, 1982) among all new(prenominal) governments. This distinction only lasted until the 1990s when world-class threats menaced the monopoly. De Beers has been put face to face with the loss of its position in the worlds diamond producing industry wherefore they had to cope with a dwindling reputation. To counter this damaging tr terminus which non only existed for the diamond industry alone likewise among customers the De Beers Group had to fight down back. Therefore, this business inform is going to examine the factors stinker any kinds that hit taken place in the structure of the comp anys take to be compass in recent years. It provide also explain the reasoning behind any points made. To support the reasoning divers(prenominal) business bodworks result be use.The Global Value scope war-ridden Advantage and Value ChainMichael E. porter, professor of Business Administration at the Harvard Business School, analyses the basis of war-ridden advantage in his book Competitive Advantage Creating and Sustaining Superior execution, that was create in 1998. He explained that it is the companys agonistic advantage that leads to value creation, hence to gain leverage among competitors in their particular grocery store segment (Porter, 1998). Porter points out two general distinctions of agonistic advantage either a company can offer benefits at a lower be than the rival which is called cost advantage or the company surpasses the benefits that argon delivered by the competitor which is a differentiation advantage. To create a agonistic advantage, disregardle ss of its nature, so to say by cost or differentiation the business fields resources and capabilities to at long last create superior value. To visualise this issue, one can take in regard the resource-based view in the following change model (QuickMBA, 2009). Contemplating Fig. 1 there is still one step scatty before competitive advantage is attained. It is take in by a avow of value creating activities which Porter identified as value chain. He boost found out that a company needed to outperform one or more of those activities that atomic number 18 above the overall value which ascertains the company creation ahead of its competitors (QuickMBA, 2009). To get a better understanding of what the value chain contains and expresses one should boast a look at the word form below that was neutered from (Porter, 1998). ContinuedThe value chain aims at creating the highest achievable value for the company and is the last step to gain a competitive advantage as seen in Fig.1. Th ere can be different reasons why a company whitethorn add or hitherto lose value. Th grossout the years of business, the sign may have to squeeze measures to make a change in the firms value chain (e.g. collect to external factors). One of these external factors can be the time in virtue of changing circumstances in the business environment, or a special market. The company needs to move with the times to stay competitive. A ostracize grammatical case that may cause a change in value can be the chaining of unfortunate events (e.g. collapsing market, amaze termination with major producers, new competition, and consumers strain teddy). This chain of unfortunate events would engender dire consequences that may conduce a company to consider changing or restructuring its value chain to haul itself out of the loophole. In the following section Porters supposition of competitive advantage and the value chain will be utilise on the particular case of De Beers. Afterwards, any fa ctors of the then(prenominal) decade it will be looked at in detail. These factors include any event that occasioned De Beers to react quickly to a negative trend of falling market dole out and worsening reputation and consequently how the company dealt with the situation to stop this thread.De Beers Competitive Advantage and Value ChainDe Beersoperates since its foundation in the late nineteenth century as already mentioned in the introduction. From patsy it followed a prospering strategy that helped controlling the vast majority of the worlds diamond supply and world market leader since the beginning of its operations. In Fig. 3 is shown briefly how De Beers created its competitive advantage over competitors and how the company managed to acquire a market al circumstances of some 85% (Irwin, 2001). The activities that created value and in what way the success grade of De Beers detaind will be explained subsequently. Before analysing the value chain it is useful to have a look at the De Beers Family of Companies (De Beers, Family of Companies, 2009) showing all virtuoso member that is at some extent involved in the companys operations. smell at Fig.4 one can see that the Anglo American Group, the Central Holdings Group and the Government of the Republic Botswana argon the shareholders of the De Beers socit anonyme (De Beers sa). The companys head office is set in Luxembourg managing and monitoring the entire business whereas commercial activities are executed from subsidiaries in different parts of the world (De Beers Group, 2008). The Family of Companies is integrated across the breadth of the global diamond value chain. This covers exploration of deposits, sorting and valueing rough diamonds as well as cutting and polishing diamonds. We will have a closer look at these iodine instances in a little while. De Beers sa shareholders owned and controlled JV and independently subsidiaries and divisions managed subsidiaries Since we now got to kn ow of which coat of branchs the Family of Companies consists we can examine De Beers value chain presenting s neat changes from Porter De Beers adapted to its business. Since De Beers focused more and more on creating demand rather than controlling supply, they realised that a bad reputation of a consuming trustworthy they wanted (and needed) to sell has impacts on demand. De Beers response to face this problem was winning a key spot in the implementation of the Kimberley Process which is an international certification scheme that is aimed at controlling the rough diamond trade. It requires a governmental certification of any shipments of rough diamonds proving that diamonds are drop by the wayside from rake so to say not sold to pro bulky a conflict. De Beers efforts were being rewarded in January 2001 when Kofi Annan, the UN Secretary General praised the company saying that they set an example with its response to criticism of the diamond trade in Africa and its efforts t o ensure that traders and consumers of diamonds will no longer unwittingly help to finance warlords (Irwin, 2001). To recapture the past good reputation of De Beers they presented two more novelties.Forevermark De Beers needed to establish a brand name outset gear in Europe later in the US. Therefore the company formed a strategic alliance with Mot Hennessy Louis Vuitton (LVMH) a French luxury goods group (Irwin, 2001). In the expect of creating globally a differentiation between De Beers Forevermark diamonds and stones one can bargain for via internet the company put a lot of money into market strategies and campaigns to publicise the new brand and create an association with the utterly sumptuous high class. A feature that lived done the entire time frame of this partnership is that De Beers jewellery eer has been and will be sold only in special De Beers stores. Downloadable tales In 2001 De Beers published on their website the very first time an annual report reveali ng details about the deeds and profits of the company. It is said that it is the most comprehensive view that has ever been published (Irwin, 2001). The intention of this published report was the run address to shareholders of which a spectacular part resided in the US. Two years later, in 2003, De Beers independent arm the DTC use the provider of Choice strategy another project in their strategy shift. It is a sales programme aimed at selecting clients (sightholders) for De Beers. There are special sightholder selection criteria and considerations that provide a framework enabling the DTC to make an objective valuation of applicants. This method contributes to an allocation considered as fair and economic (De Beers Group, 2008). The next big change in the company was the change of the Managing Director. Gary Ralfe time-tested his best to help De Beers not to go down fighting deep down this highly competitive environment over years. He wanted to transubstantiate the once successful business steeped in history into a neo competitive market player that at one point can regain a position they once held. Since Gary Ralfe retired in 2006 he could not finish his projects whereas his successor Gareth centime now was charged with them. And it was this director change that breathed new life into the company. Gareth Penny, who beforehand was the director of sales and marketing of the DTC, his new role as MD was now to face all the issues that Gary Ralfe tried to antagonise. Penny first started to put new efforts on De Beers role in the Kimberley Process, always emphasising that De Beers only trades and sells conflict-free diamonds. To remove any doubts clients might have about the diamonds origin of De Beers jewellery the company introduced in 2006 the De Beers Passport. This passport accompanies every diamond purchase and certifies that the sold jewellery is certainly telephone line free. It is the first and only company offering much(prenominal) a cert ification to clients (De Beers Jewellers, 2009). The encourage main achievement of Pennys business reshaping plan is a higher density on the colligation ventures with African governments. Between De Beers and the Government of Botswana a colligation venture has been agreed in 1969, 40 years ago (De Beers Group, 2009). Since 1992 this joint venture is called Debswana (cp. Fig.13). A very important step was taken in May 2006 when the Government of Botswana and De Beers signed three very meaningful agreements. Those comprised a regeneration of mining licenses for 25 years, a prolongation of the selling contract for five years and the establishment of the DTC Botswana. It was in the same year that De Beers bettered their diamond turnout record producing in total 34.3 million carats (De Beers Group, 2008). provided the kinship was even more intensified in 2008 when De Beers moved its diamond-sorting preparation to Botswana. This facility is the worlds largest and most sophistica ted sorting institution avouching for the precious stones to stay in the country for a little longer (OConnell, 2009). De Beers or better Gareth Penny does create a lot of good for the country since Botswana counted for a long time to the worlds poorest countries in terms of living condition and development rate. meanwhile Botswana displays economic growth rates that are highest on a global scale (Morapedi, 2009). De Beers cooperation with the government thereby all impertinent direct enthronization they put in the country forwarded growth at bottom four decades. present Debswana is the countrys largest non-government employer, since they are giving 25% of the residents a place to work (Morapedi, 2009). investment in diamond production, De Beers aid contributes to export grosss of 76%. The diamonds create closely half of the government revenues and they account for a third of Botswanas GDP (Morapedi, 2009). apart(predicate) from any foreign direct investment in Africa and con flict free diamond issues an important point to mention last is that Penny always has been very keen on stimulating technology development. Supporting those processes financially the general idea behind was the aim to keep down production and sorting costs.Impacts of 10 years reshaping measures Although all the measures of reshaping the company sound very promising, one would expect a growth in profits and reputation. But these apparently obvious consequences of all the efforts cannot be proven since the strategy shift also affects the companys value chain in a somewhat negative way.One can see the financial situation of De Beers over the past five years. Since 2005 the profits are decreasing continuously whereas the decrease rate of the total costs is minimal, so to say not evident. This phenomenon is going to be proven in the following.decreasing market share The macro-environmental factors that came up end-to-end the 1990 years are the cause for the negative development of De Be ers market share. Summarised, the single reasons werediscovery of rich deposits in Canadaemergence of new competitiontaste shift among customerseconomic decline in consuming regions andthe stigma of blood diamonds.customers turn into competitors The DTC sells the rough diamonds to a range of companies. As far as one is in this selling process these companies are customers of De Beers. But since the companies continue manufacturing the stones, selling them to alternative retailers the diamonds are at one point offered on the market as well as De Beers jewellery. In this sense, De Beers is competing with its customers.commitment to corporal social responsibility De Beers not only concentrates on foreign direct investment in African countries, it also cares for its employees and their families. Among all the activities and measures that are undertaken by De Beers three of them will be highlighted.The employment rate of Historically single out South Africans in management roles in the De Beers Consolidated Mines (see Fig.3) was at 45.5% in 2008, the year before at 39% (De Beers, Family of Companies, 2009).The De Beers constant workforce consists of 21.8% women. just about one fifth of management positions are filled by females. (De Beers, Family of Companies, 2009).De Beers implemented a disease management programme. Their investment supported additional medical word offers outside the insurance scheme to all employees and their relatives. Since the exposure of De Beers employees to in particular HIV and Aids is dangerous in terms of the workers and workers families health but also in terms of business continuity. The programme focuses on prevention, treatment and care and support (De Beers, Family of Companies, 2009). Despite all the positives points of De Beers CSR activities the company has to be measured with the amount of money it is investing since costs tend to escalate sort of easily In Fig. 14. one could already notice that costs are still too high in proportion to the total revenue of the firm. Even though the profits of De Beers are following a down(prenominal) trend the company is diligently improving to stay highly innovative and portray a serious competitor on the market. The shift to a new business model of creating demand De Beers has made it to a new competitive player taking continuously measures to add up to its competitive advantage, e.g. steady development and generation of technologies as well as foreign direct investment. The latter means a huge support of a developing country that certainly needs external aid to cleanse the economic situation inside the country.ConclusionThroughout this business report it was demonstrated that the firm De Beers always has been a very successful company. From scratch of its operations, De Beers followed well-wrought business concepts. Since the company is British-South African by origin methods to internationalise business operations had been very favourable in terms of crea ting success. The main aspects, make the business growing were 1st investing directly in African countries such as Botswana and Namibia, 2nd exporting directly to Britain and many other countries and 3rd establishing important joint ventures with e.g. African governments. Although De Beers took great risks operating how it finally did it got a maximum reward possible what is likely to be its brain-teaser of a successful business. Through the ages De Beers created itself high reputation among customers, further the firm had a competitive advantage benefitting from operating very early on this particular market. The company enjoyed a protrusion of know-how and knowledge about the market manifesting it by locating itself intelligently. All these points favoured De Beers monopoly which they held over decades. Accidentally the luck has turned. In the late 1980 years and throughout the 1990s an unfortunate series of events should end De Beers success story. With increasing frequency int ernational media casted a poor light on De Beers blaming the company to finance civil wars in African countries such as Sierra Leone or Angola. But De Beers had somehow to get through this period full of obstacles since it had a long track record to defend. moreover the firm possessed still a good position on the market. To overcome those problems De Beers responded proactively in initiating a multifaceted strategy shift that was realised progressively throughout a decade from 1999 until today. De Beers had to learn a lot about its business environment since they did not operate as a monopoly any longer. But De Beers has a fair chance having learned from its mistakes within those past ten years. The company is likely to grow out of this contend and might improve operations and achieve higher profits in the future. But since they have to bear additionally caused costs e.g. by the Supplier of Choice strategy and still compete with their customers who possibly could establish own br ands which would diminish De Beers power in sales the company exposes itself to a fight that keeps probably extending over several years. Reference list/BibliographyAnglo American plc. (2009). baseball fields. capital of the United Kingdom Anglo American plc.Banse, F., Jung, A. (2005). Der Stoff aus dem Kriege sind. medico internationl e.V. Frankfurt s.n.De Beers. (2005, September 29). A financial overview about De Beers. Presentation to Anglo American Analysts and Investment Banks , 99. London.De Beers Group. (2009, June 23). Botswana and De Beers celebrate a 40-year partnership. From De Beers Website Press Releases. Online obtainable athttp//www.debeersgroup.com/en/Media-centre/Press-releases/2009/Botswana-and-De-Beers-celebrate-a-40-year-partnership/ Accessed 11 November 2009De Beers Group. (2008). 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