Example Of Strategic Analysis Of The Future Of The Diamond Industry Case Study
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Introduction: This essay will deal with the global diamond market along with the prospects and performance over the past decade. It will also discuss the current trend and direction of the industry which will identify and help us understand the cost of doing business, as well as the various nuances prevalent in the different market sectors. An in depth analysis of the current competitive landscape and the strategic direction of the global diamond market will be explored and will critically identify and discuss the opportunities of refining and taking a new approach to promote the diamond trade across international markets.
Strategic Environment: Surrounded by glamour and prestige the diamond industry has been in a state of limbo over the past couple of years. A huge concern for the industry is the trend seen in terms of closures among retail outlets, recorded data shows over two thousand retail establishments closed over the past couple of years. This evidence is further enforced by data showing that customers would rather spend their wealth on purchasing luxury items like wines, trips etc. than on diamonds. The advertising slogans such as ‘diamonds are a girl’s best friend’ or ‘diamonds are forever’ are timeless but seem to have lesser appeal for the current generation. Taking this into consideration the diamond trade has focused on analyzing new opportunities across the world to push the supply of diamonds.
The US was originally the biggest market but it turns out the global market place is where the growth lies for the diamond market. A great example of this is that China has been experiencing exponential growth at 7% year over year vs. the US at 3%. This is very interesting as the same growth is not seen in a related country like Hong Kong; logic would dictate that companies are able to market people across globally by using cultural cues. Research is showing however that apart from culture the current government along with the political economic environment influences the format in which companies function in terms of trade and exchange. Similar bodies which influence the environment in China have allowed for low barriers of entry, channel exclusivity availability of information etc. to support the diamond trade. This allows global players to absorb the opportunity present in a country like China and establish their brand. (Li and Zhou, 2009). The elaboration of the environment in China is important to understanding how the global diamond marker should evolve going forward.
Industry Analysis: The industry as a whole has to have a new approach in terms of who their future buyers are going to be, what their sales will be dependent on in the next two decades. Ideally the company will have a clear set of ideas in terms of the global market place and understand the cross cultural demographics which will play to their success. This will provide the foundation for the strategic thinking of the Global diamond industry to shift. A good example of changes in thought process, new avenues of sale apart from retail outlets the web is serving as a huge growing option for most manufacturers to reach a newer genre of customers, younger tech savvy and can grasp the information available on the web. This is apparent as online sales have doubled over the past 7 years, which means companies are doing a better job in reaching the customer who is more accepting of the quality of information and the final product which is shipped to them. To provide a greater level of dependability various institutions, we will take the example of GIA (The Gemological institute of America’s lab) have linked with a number of retailers to provide grading for diamonds bought over the internet, these reports include face up images of the stones taken during grading which allows the users to enlarge certain features, apart from this the metrics of the diamonds are stored permanently in GIA’s database. Not only do buyers feel that that they are insured against fraud but also provides them for documentation when they want to resell the diamond in the future. (R, 2012) Decades ago this would not be the case of buying high quality diamonds of a catalogue but with the advantages made in mobile technology and the accessibility of the internet, users are happy to not leave their homes and make purchases based of trusted information over the internet.
In terms of production the industry has been experiencing positive demand which has always been ahead of demand. The business case points out a good example of 700 metric tons being excavated to yield 100 million carats in diamonds which allows us to calculate the value of a mines lifecycle at $ 24.867 billion. This all points to the piling costs of capital involved which have grown from $12 a carat in the 1990’s to almost $25 per carat in today’s market. Finding new sites to excavate and provide the strong demand is of major importance, the industry has spent over $7 Billion since 2000.
There is a lot of planning which goes into the long term outlook of the global diamond market, this can be seen in the case of De Beers SA, in February 2013, the company has planned to invest $2.4 billion into a Venetia Mine in Limpopo Province, as seen above the company estimates that they will achieve 96 million carats taken from approximately 130 million metric tons mined. On a side note this will provide an influx of money invested into the local economy in this case approximately 3000 skilled and semi-skilled workers will be hired to excavate the mine. (De Beers SA industry Profile, 2013) Taking all this into account the global diamond suppliers are planning for the potential growing demand of their products but also have to find new target markets to sustain their long term growth as well as pay for their investments into new mining opportunities. In terms of production it is apparent in order to bring the cost down for the industry companies must focus on more exploration but that can only be done on a long term mapping basis which is why the focus has to be on long term sustainable demand from potential diamond buyers.
As stated earlier the Chinese are one of the major markets to attract, apart from setting up retail practices in the country data shows that affluence among the Chinese population is growing exponentially. Data suggests that in 2014 China’s citizens are expected to spend $154 Billion on 93 million trips, this shows a huge increase from 2002 and is expected to double by 2016. Apart from this there is data showing that more and more Chinese brides are receiving diamond engagement rings. Simply put, the Chinese are becoming more affluent with higher levels of disposable income and also their mindsets of accepting western ideology on luxury has also changed in favor of products like diamonds. Diamond suppliers are going to look for opportunities to promote sales in any way possible, apart from taking diamonds to the Chinese; they will look to bring the Chinese to their own doorstep.
Opportunity: The business case takes up the Country of Botswana which over 50 years has increased its per capita income from $70 to $15,675, through decades of good governance and their heavy growth in diamond exploration When researched it is apparent that Debswana and Botswana government are interested in sustain its long term competitiveness. The reality is the economy is heavily dependent on the diamond industry so the government is looking for diversification of their industries. (Van Wyk, 2010) Strong attempts have been observed in the country with the promotion of aggregation, cutting and polishing to their current setup. Apart from this the business case eludes to Botswana wanting to capitalize on the country’s resources. In this case establishing Botswana as a tourist destination to attract wealthy tourists, similar to Chinese travelers listed above. As discussed earlier policy changes on the decision making government level would prove more effective than changing the values of people within the country. The key here is to make the entire outlook of the country welcoming to a traveler.(Kayank, Marundu , 2006) The idea here is to attract tourists who can afford the Botswana experience and are willing to splurge on luxury items like quality Botswana diamonds while on vacation.
Marketing Botswana: While considering a plan on how to market Botswana to the World, we have to dive into the minds of the tourist and understand what would stand out to them. Globally a product- oriented approach to tourism has always been the foundation of many popular locations. The flip side of this equation is that while Botswana will be marketed globally as a tourist destination it will also provide opportunities for tourists to purchase diamonds during their visit. The key to success is Availability, accessibility, locations and sustainability. Brand Botswana should be portrayed around the world for its variety of destinations, a safe and fulfilled place with a scenic beauty which is only heard of in story tales. The detailed strategy in play here is Botswana attracting tourists to their locations and giving them an opportunity to buy a luxury item while on vacation.
In this case it is apparent that Botswana is a country with a lot of natural beauty and plenty of wildlife. The tourism department should try their best to capitalize on Okavango Delta and Chobe River Plains in the North to the Kalahari Desert in the South. While formulating a strategy, it should be clear that it is not about just running a marketing campaign but a fill and concise effort to build up the country from within, example road development and upgrading of infrastructure, overhaul of the transport infrastructure, improve on cleanliness, anything to make tourists feel a sense of comfort as well as safety. Since we have established that by focusing on the country’s natural and beauty and wildlife is imperative to this plan the tourism department should put its efforts towards effectively planning and zoning wildlife parks to achieve a sustainable flow of visitors.
Botswana has never focused on the hospitality sector until recently most cities and towns are restricted to guest houses and small hotels. Hotel and resort brands have to be given opportunities to setup their establishments; they should be encouraged by provided space at reasonable rates, tax holidays as well as opportunities to expand. This should be a blend of global hospitality requirements and what suits the particular destination, for example a resort which has a nature theme located next to or in a game reserve. Offering tax holidays to the resorts will also help keep the cost of stay lower to travelers allowing them more money to spend in the local market.
Apart from promoting the natural beauty and developing the infrastructure of the country, positioning is very important. A good example on how Botswana can position itself is that of Dubai, looking back apart from the wealth of oil in the Middle East, Dubai was mostly sand and dunes. But with long term planning it has now attracted investment from all over the Globe with currently soaring property prices. Most people in Asia are aware that the quality of Gold in Dubai is the purest and has gained a reputation for its duty free practice for the same. What this tells us that Visitors can have a twofold focus when visiting Dubai, One to visit all the miracles of construction and attractions with the biggest shopping malls etc. and second the availability of quality gold at a low price. Similarly Botswana as suggested above needs to focus on establishing a trade practice which eradicated duties and taxes on Diamonds as well as make them accessible to visitors , i.e. airports, shopping malls in main towns etc. This can be done by focusing on the ease of purchase through malls, duty free shops, establishing a diamond market in each major tourist destination etc. It provides and environment to make purchasing decisions in a welcoming environment. Another good example Switzerland which is famous for its Slopes and picturesque landscapes, is also famous for quality Swiss watches and Swiss chocolates, all available extensively in airports, malls and Main Street across the country
Conclusion: As per the analysis above the opportunity cost of not exploring the natural beauty of Botswana far outranks any new exploration which can be done to feed the diamond trade. Not only does this open up an avenue for the current and planned diamond exploration but helps raise the GDP of the country by providing employment opportunities to its citizens, help boosts the country’s reserve by attracting investment from foreign entities and develop the country’s infrastructure. When investments from abroad increase the world ranking of Botswana also increases by increasing the value of its currency. The undertaking of promoting tourism although long term can reap unprecedented rewards both from a tourist spending standpoint as well as increasing diamond demand. This shows the overall importance of Botswana diversifying its market place as a tourist destination, as in the long term it has to stop being so dependent on the diamond trade along. Botswana should become synonymous with Wildlife and natural beauty but as a tag line “a great place to buy diamonds at a reasonable price.”
Li,S,karande,K, & Zhou,D 2009, ‘ The Effect of the governance environment on marketing channel behaviors: The Diamond industries in the U.S., China, and Hong Kong’, Journal Of Business Ethics, 88,. Pp. 453-471
R.,B 2012, ‘GIA introduces online- only Reports’ Jck, 142,4,p.38, Ebcoshost, Viewed 6 January 2015.
‘De Beers SA industry Profile’ 2013, De Beers SA SWOT Analysis, pp. 1-7, EBCOhost, Viewed 6 January 2015.
Van Wyk, J 2010, ‘DOUBLE DIAMONDS, REAL DIAMONDS: BOTSWANA’S NATIONAL COMPETITIVENESS’ Academy of Marketing Studies Journal, 14, 2, pp. 55-76. EBCOhost, Viewed 6 January 2015.
KAYANK, E, & MARANDU, E 2006,’ Tourism market potential Analysis in Botswana: A Delphi Study’, journal of Travel Research, 45,2,pp. 227-237. . EBCOhost, Viewed 6 January 2015.
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