Analysis, Pages 11 (2589 words)
De Beers is presently being faced with some new challenges that are doing it necessary for us to see a alteration in the manner we do concern. With recent convulsion in Western Africa. where illicit diamonds are get downing to come from war torn small towns. and other beginnings of diamonds being found in Russia and Australia. it is clear that we need to get down to travel into the U. S. market. However. lawfully. De Beers is in misdemeanor of the U.
S. antimonopoly Torahs and is hence being prohibited from selling straight in the U.
S. market. Throughout the undermentioned memo I will place the jobs we at De Beers are presently confronting. I will so do a set of recommendations for action to assist us travel into the U. S. market by suggesting a relaxation of U. S. antimonopoly Torahs with limitations on illicit diamonds. and eventually I will reason with some execution stairss for the solutions that have been recommended.
A PEST analysis has been performed on the current state of affairs facing De Beers. In the undermentioned subdivision. I will concentrate on the most of import jobs identified in the PEST analysis for which we must happen solutions and besides on the most of import positive forces that we must leverage to our advantage in order to keep or derive market portion. Please see Exhibit 1 for inside informations on the PEST analysis and extra information on other issues we are confronting and forces that might assist or impede our market portion in the U. S.
The most of import of the jobs we are faced with are due to Political issues in the United States and elsewhere. Due to war in western Africa. diamonds are get downing to flux from the war lacerate Fieldss of Sierra Leone and Angola. and in Russia. mines are being controlled locally as opposed to in coaction with De Beers. These challenges entirely present a menace to the power that De Beers presently holds over the diamond industry. Due to these challenges. we initiated a stigmatization run trying to trade name De Beers diamonds to the consumers. This run was centered in the U. S. . where “legally. the full De Beers group – its officers. its operations. its selling construction – was in misdemeanor of the U. S. antimonopoly law” ( Burns. 2000 ) . This prohibited De Beers from straight selling in the United States. Additionally. a political issue that we need to leverage to our advantage is the U. S. foreign policy towards assisting to reconstruct Africa. These political issues will be farther addressed in the recommendations subdivision.
Economically. there is an expected rush in diamond gross revenues expected to happen in the U. S. this twelvemonth. This emphasizes the fact that we need to be uninhibited in our selling and gross revenues attempts in the U. S. if we are to go on to be a successful company. Another economic issue that we are confronting is that the historical monetary value of diamonds is leveling off and may even be diminishing as new beginnings of diamonds are being found. This lessening in monetary values could be lay waste toing to De Beers and the diamond industry as a whole and needs to be avoided at all costs. The other big economic issue we are confronting is our method of stabilising the diamond monetary values. The carrying we presently utilize to command the supply of diamonds and. more specifically. command the monetary value of diamonds. is eating off at our net incomes. ensuing in a low stock monetary value. Our stockholders. of whom 21 % are from the U. S. . are get downing to voice dissent about our low portion monetary values.
Technically. we have been utilizing our individual channel distribution system to work our manner around the antimonopoly Torahs in the United States and to maintain an weaponries length from the U. S. legal system. By selling to diamond merchandisers through the Central Selling Organization in London. and commanding the supply of diamonds offered to these merchandisers. we control what stones come ining the market at what monetary value. This individual distribution channel has been at the nucleus of our ability to modulate the diamond market and without this agency of distribution. De Beers and the full diamond industry would greatly endure. By winning relaxed antimonopoly Torahs in the U. S. . we would be able to go on to leverage the power of the individual channel distribution system.
Socially. the perceptual experience of diamonds is that of a beautiful and rare rock that is a symbol of love affair and of greed and has been treasured as such for centuries. In the 19th century. the supply of diamonds increased. turning the rocks from something merely the elite could buy. to a trade good that could be purchased by the mass market. Even with this addition in supply. the perceptual experience of diamonds remained that of a rare and valued trade good. Therefore. even though the supply of diamonds increased. the perceptual experience that they were rare was non tarnished. go forthing the monetary value of this trade good high. This is a cardinal point that we need to leverage: consumers expect and want the monetary value of diamonds to stay the expected monetary value of a unique and high valued trade good.
The primary stakeholders that will be affected by this at hand move into the U. S. market and relaxation of the U. S. antimonopoly Torahs are De Beers and its stockholders. the African economic system. the diamond industry as a whole. and diamond consumers. If these antimonopoly Torahs are non relaxed. so De Beers market portion will crumple while being replaced by lower priced rivals. taking to an overall lessening in the diamond monetary values. taking to less net income to everyone in the diamond industry. The African economic system besides has a big interest in this determination. If the diamonds from war torn Fieldss are accepted into the diamond market. consumers will unwittingly be back uping Rebel controlled diamond mines.
Last. if the antimonopoly Torahs are non relaxed. the stockholders of De Beers will most likely experience a short term addition in stock monetary value while the reserve is being depleted. but in the long tally. the stock monetary value will bottom out and will non lift once more because the monetary value of diamonds will be for good lowered. The stakeholders that will be most impacted here are De Beers as a corporation and the diamond industry as a whole. including the African economic system. I will concentrate on these stakeholders in the recommendations subdivision.
Recommended Solutions and Implementation Steps
The undermentioned solutions are being recommended for De Beers to implement in order to convert U. S. policy shapers to loosen up the U. S. antimonopoly Torahs and let De Beers to straight make concern in their diamond market. De Beers needs to near U. S. policy shapers with the undermentioned statements and inquire for relaxation of the U. S. antimonopoly Torahs with some limitations. The standard for these solutions is that they are executable to implement with our current resources and that they do non bring forth negative imperativeness about past cases.
My first recommendation is to near U. S. policy shapers with the fact that diamonds are a trade good and non a necessity. One of the chief intents of the U. S. antimonopoly Torahs is to protect consumer good being. Diamonds are non a necessity and the deficiency of a diamond does non do 1s life materially different. Therefore. by assisting to stabilise the supply and monetary value of diamonds. we are non impeding the success of people or concerns within the U. S. By maintaining the monetary value of diamonds stable. we are non decreasing the quality of life of any consumers. nevertheless we are maintaining consumer value stable. Those 1000000s of consumers who have already invested in diamonds do non desire to see the monetary value of their investing lessening. By go oning to assist stabilise the monetary value and supply of diamonds. we will guarantee that their investing will keep value.
In order to implement this. we need to carry on some consumer studies to back up the fact that consumers are pleased with stable diamond monetary values and present these facts to U. S. policy shapers. We besides need to derive the support of other members of the diamond industry to assist with this solution. By leveraging our relationships with other diamond mine proprietors. distributers. jobbers. and retail merchants. we can work together to convert U. S. policy shapers that the value of this luxury point is sustained due to it’s sensed rareness and in order for the diamond industry to last. this perceptual experience needs to stay stainless. The other participants in the diamond industry. mentioned above. benefit from this perceptual experience every bit good. so it should be comparatively simple to derive their cooperation in this affair.
African Growth and Opportunity Act
The current U. S. foreign policy that seeks to back up the Reconstruction and renovation of Africa needs to be to the full leveraged by De Beers. The Clinton disposal has pledged it’s dedication to Africa by the pending African Growth and Opportunity Act. We need to plight our support of all U. S. policy toward U. S. – Africa dealingss and offer our part to the African economic system. Some of the states in Africa that are presently enduring from violent wars could greatly profit from their diamond assets if helped by De Beers.
They presently lack the cognition and proficient accomplishments needed to mine diamonds efficaciously. With De Beers’ aid. these African states can get down to develop their economic system and stabilise their relationships with the U. S. In order to leverage this foreign policy. we need to enlist the aid of U. S. – African dealingss activists groups every bit good as militants groups dedicated to the rebuilding of Africa to assist us acquire our message across to U. S. policy shapers. We need to convert the U. S. authorities that De Beers is a positive force in the African economic system and by leting us the antimonopoly regulations to be relaxed in the U. S. . we can assist to construct a stronger relationship between Africa and the U. S.
Illicit Diamond Embargo
De Beers needs to work with the U. N. to put an trade stoppage on illicit diamonds coming from the war lacerate Fieldss of Angola and Sierra Leone. These diamonds come from Rebel controlled mines. and by leting these diamonds to come in the market place. we are back uping the bloodshed involved in mining these diamonds. Therefore. we need to plight our support to halt these illicit diamonds from unifying with our diamonds in the market place. We will distinguish our ain legitimate African diamonds from the illicit diamonds coming from the blood stained Rebel controlled mines. We will besides plight to the U. S. and the U. N. to non buy any unsmooth diamonds from these Rebel controlled mines. This will be the cardinal limitation we will hold to in our petition to hold the antimonopoly Torahs relaxed.
We need to go on our selling attempts aimed at branding our diamonds. In add-on to making more prestigiousness around our trade name of diamonds. we are besides attesting that our diamonds do non come from the war lacerate Rebel controlled mines of Africa. By go oning our branding attempt. we will go on to increase the demand for the De Beers diamonds. which will assist to diminish our reserve. and in bend easy increase our stock monetary value. delighting our
stockholders. In add-on. it has been proven that with these marketing attempts. consumers are willing to pay a premium for a De Beers diamond. which will further protect us from the possibility of diminishing monetary values in the hereafter by increasing our net incomes.
We at De Beers are confronting some hard challenges and are being forced to look at the manner we run our concern. In looking at our methodological analysis we have determined that the manner we run our concern. and the manner the diamond industry works. is in the best involvement of De Beers as a corporation. the diamond industry as a whole. the African economic system. and consumers. As an African company. our paramount concern is to utilize the diamond industry to assist the African economic system Begin to reconstruct itself. We believe that by loosen uping the U. S. antimonopoly Torahs and abiding by the limitations mentioned above. the United States can assist us farther heighten the African economic system while keeping a strong diamond industry. which in bend. benefits the consumers in the United States by continuing the value of their diamond investings.
Items of high importance are marked with an upward pointer for strong positive forces and a downward pointer for strong negative forces. These are the issues that have been focused on in this memo. The other points are besides of import. nevertheless solutions to these jobs are out of the range of this papers.
Political forces working against De Beers
U. S. Antitrust Torahs ( 1890 Sherman Act and 1914 Clayton Act ) – De Beers is in full misdemeanor of these Torahs
Wars in Africa taking to leakage of illicit diamonds from Rebel controlled small towns
Russia desertions taking to leakage of illicit diamonds
End of apartheid in South Africa
Political Forces working for De Beers
U. S. foreign policy seeking to back up the reconstructoin an development of Africa
Pending African Growth and Opportunity Act
De Beers has found that it is out of range of U. S. statute law while it does non make concern straight with the U. S. because it is a South African company
Economic forces working against De Beers
Historical monetary value of diamonds leveling away and get downing to diminish
21 % of portions are held by U. S. citizens. These shareholds are get downing to set force per unit area on De Beers because although the value of the commodty we sell is really high. the stock monetary value is comparatively low due to our reserve
Economic forces working for De Beers
Monetary values have been kept unvarying on diamonds historically
Rush of over a 10 % addition of diamond gross revenues expected in U. S. market. hitting $ 20 billion in 1999. This can be a positive force if De Beers can keep market portion in the U. S.
Social forces working against De Beers
Negative imperativeness from old cases where De Beers avoided being acquitted or settled.
Social forces working for De Beers
Despite supply of diamonds. consumer perceptual experience that the rock is rare persists. leting the monetary value of diamonds to be higher than supply would order
The selling De Beers has been utilizing to trade name diamonds has been successful. Harmonizing to a study. consumers are willing to pay a 15 % premium for a De Beers branded diamond
Technical forces working against De Beers
The current diamond industry market construction is altering ( i. e. diamonds are coming from more beginnings that entirely De Beers proprietor mined. and the demand from the U. S. is increasing )
Technical forces working for De Beers
Single channel distribution system. This is the ground the diamond industry has thrived over the past century. nevertheless this is one of the chief facets of the manner we run concern that is in misdemeanor of the U. S. antimonopoly Torahs.
Burns. Jennifer L. . Forever: De Beers and U. S. Antitrust Law. Harvard Business School Publication: 9-700-082. Harvard Business School. 2000.