Strategic Plan for De Beers - Case Study Example

Strategic Plan for De Beers Name: Institution: Course Title: Instructor: Date: Contents Contents i List of Figures ii List of Tables ii 1.0 Current Situation/ Current Business Strategy 1 1.1 Brief History 1 1.2 Strategic Positioning 2 1.2.1 Mission and Goal 2 1.2.2 Current Financial Statistics for Diamond Industry and De Beers 2 1.2.3 Position of the Industry 2 1.2.4 How the Firm Differentiate from Competitors 2 1.2.5 Current Porter’s Generic Strategy 4 2.0 External Environment 5 2.1 General Environment 5 2.2 Task Environment 6 3.0 Competitive Position 6 4.0 Internal Environment/ Resources & Capabilities 7 5.0 Gap Analysis 7 6.0 Recommendation 7 References 8 Appendices 10 Appendix 1: Macro Environment Analysis (PESTEL) 10 Appendix 2: Industry Analysis/ Competitive Strategies (Porter’s Model) 12 Threats of new Entrants 12 Bargaining Power of Buyers 13 Threats of Substitute Products 13 Bargaining Power of Suppliers and Partners 13 Rivalry among Existing Competitors 14 Appendix 3: SWOT Analysis 14 Strengths/ Key Success factors 14 Weakness 15 Opportunities 15 Threats 16 Appendix 4: Strategic Positioning (Bowman’s Strategy Clock) 16 Appendix 5: Industry Life Graph 18 Appendix 6: Financial Performance 18 List of Figures Figure 1: Michael Porters Model of Competitive advantage 3 Figure 2: Porters Five Forces Model 12 Figure 3: Bowman’s Strategy Clock 16 Figure 4: Industry Life Graph 18 List of Tables Table 1: PESTEL Analysis 10 Table 2: De Beers Strengths 14 1.0 Current Situation/ Current Business Strategy 1.1 Brief History De Beers a diamond company was founded in South Africa in 1888. Currently, it is a group of companies with a global reach focusing exploration, mining and marketing of diamond. The principal role of its wholly owned subsidiaries and partners is on value addition on diamond (De Beers, 2012). Up to 1990s, the company used to control the global trade of diamond through their supply driven approach. By then, they produced 45% of global rough diamonds, but sold 80% of the global sales. During this period, they dictate trends in the market in terms of prices and whom to sell to (Cadieux, 2005). Nevertheless, this global dominance has changed as result of myriad of factors. The three scenarios that tilted the playing include the introduction of 3 new players who were outside its grasp in the 90s. The entry of the three curtailed its control on diamond supply. These three were Leviev which was operating in Russia, emergence of Argyle in 1996 in Australia and emergence of Canada. This drove them to panic, thus, stockpiling diamond yet the prices were going down (Berman & Goldman, 2003). The other happenings include being involved in blood diamond with Angola and Sierra Leone rebels which tarnished their public relations (Berman & Goldman, 2003) and the emergence of synthetic diamond which is comparatively cheaper and with less environmental and political complications (Reed & White , 2006). As process of recapturing its market dominance, the company has undergone massive restructuring. The first is by shifting their focus from supply driven approach to demand driven approach (Cadieux, 2005). The second is aggressive marketing and branding so as to distinguish their natural diamond from the synthetic one and lastly, engaging in Kimberley certification program so as to control purchase of blood diamond which tarnished their reputation (The Economist). Based on this brief excursion, the chief focus of this report is to develop a strategic direction to ensure long-term survival of De Beers within the competitive environment of diamond industry by using various analysis tools of strategic management such as Porters 5 Force, PESTEL and VRINE (SWOT) analysis. 1.2 Strategic Positioning This sub-section outlines the current mission and goals of the firm. Secondly, it assesses how the firm differentiates itself from the competitors through factors like value creation. Lastly, it interrogates the application of porter’s strategy in the company and if it is consistent with the mission & goals and how it fits within the larger environment context. In this regard, the section will rely of the appendix 1 that does environmental analysis and appendix 2 that does analysis for industry through porter’s model. 1.2.1 Mission and Goal The company mission is to turn diamond dreams into a lasting reality. To attain this, they have two objectives which are to utilize their economic power in creating value out of diamond and employ partnership. Additionally, they have 5 principal values. These are being passionate about the products & firm, unite their strength, ensure trust in all their operations, prove that they mind others (communities) and impact on the future positively through research & risk taking (De Beers, 2012). 1.2.2 Current Financial Statistics for Diamond Industry and De Beers Appendix 6 gives highlight of financial performance in the industry and financial performance in relation to De Beers. There has been increased performance by the company. However, from comparative perspective, the company has been losing its footing as result of various market dynamics. 1.2.3 Position of the Industry Based on appendix 5, the position of diamond industry is at maturity stage. This is because the power of buyers has increased and the capacity equals demand. At the same there is emerging threat of substitutes with the main concern being synthetic diamond. Moreover, mergers and acquisition are evident in this industry. 1.2.4 How the Firm Differentiate from Competitors A company is able to distinguish its products/ services in a competitive market by providing customers greater value, either by means of lowering prices or through providing greater benefits and services that will justify higher prices. According to Michael Porter, there are two basic types of competitive advantage, which include cost advantage and differentiation advantage (Strasser, 2011, p.17). Source: Brown, 2010 From the porter’s model in appendix 2, it is evident that the threats posed by new entrants, existing competitors and substitute products are high. This is because substitute products like artificial/ synthetic diamond are cheaper and comes in numerous colors as compared to the natural/ mined one. Moreover, new entrants especially those in synthetic diamond production such as Apollo and Adia are able to produce at a lower cost as compared to De Beers which rely on natural one. This implies that they are able to transfer this cost advantage to consumers which DeBeers is not able to ride on. Moreover, as seen, in the same appendix 2, most existing competitors such as Argyle Diamond produces low quality diamonds which are suitable for low cost jewelry? Thus, Cost advantage isn’t a plausible option for DeBeers. This implies differentiation is the key. Diamond suffers from heterogeneity. As result of not being homogenous, developing prices structures and differentiating it from industry competitors has been difficult (Dunn, 2006). This was complicated by the fact that the packaging by all players was the same. Moreover, since they used to enjoy monopoly over diamond supplies up to 90s, they didn’t see the need to brand (Cadieux, 2005). To differentiate its products, since 1999, the company has embarked on massive branding. The first approach to branding is to allow her partners to use her logo to verify that the diamond customers are purchasing is natural. Secondly, they brand their diamonds with the company logo (Cadieux, 2005). 1.2.5 Current Porter’s Generic Strategy Goymer (2004, p.209) notes that Porter’s five forces model is essential for business in understanding both the business current competitive position and the position the business is perceived to move to. Based on the analysis on appendix 2, the current Porter’s generic strategy applied by De Beers differs according to the threat it faces within the industry. From the analysis it was established that the threat by new entrants is low because initial capital investment and license fee is high and thus, there few players in terms of exploring and mining corporations. However, to still counteract this threat, the firm has developed closing rapport with countries with diamond deposits so as to lock possible entrants out. For instance, the firm has 50% share in Debtswana and Namdeb. For the bargaining power of buyers which is high as result of switching cost being low, the company is focused on differentiation and aggressive marketing. For instance, the firm usually proves to the customers that what they are buying is natural and thus has more value as compared to the artificial one. Equally, they exploit the fact that synthetic diamond is only one carat yet the natural one varies. Lastly, the company ensures that their diamond is marked with their logos so as to differentiate from other. In this regard the focus is on quality of the cut. This has allowed them to account for 45% of cut diamond sold in 2007. To counter threat of substitute products like synthetic diamond, the company has engaged in aggressive marketing so as to qualify that synthetic diamond can’t be compared with natural ones especially in terms of carats. Equally, they have lobbied for synthetic diamond to be labeled the same so as not confuse customers. Lastly, they have invested in machines that can help sellers prove to customers that what they dealing with is natural diamond. For bargaining power of suppliers, the company has tried to ensure that they are the buyers of last resort. This means that they are able to control global prices. Moreover, they have stakes in most producing countries. Thus, they are guaranteed of the supply. For threat of existing competitors, to lock them out of supply, the company has tried to enter into agreements with producing countries so that they acquire stakes in them. Moreover, they help them in value addition. Additionally, the company has vertical, backward and horizontal integration thus, it offers one stop solution. Lastly, the company has embarked on aggressive marketing and branding as means of differentiation. The current strategy matches with the company mission and goal by reducing their focus from being a supply driven organization to demand driven. This has helped them focus on differentiation where they seek to brand their products and not just to remit it to customers without creating a unique position among purchasers. Moreover, the shift has forced the company to build close working rapport and network with suppliers and not based on coercion and price control as a result of being the last buyer. 2.0 External Environment Every organization needs to thrive and grow in its business operations. This is realized through its ability to meet the demands and expectations of the customers by doing things better than its rivals (Thompson & Martin, 2010). A strategy has to be viewed from perspectives of opportunity, capability and competitiveness/ threats. These three, plus the company aspirations and values are what drives an organization to succeed and reach greater heights (Thompson & Martin, 2010). This segment relies on the PESTEL analysis and SWOT analysis with the specific focus of Opportunities and Threat elements of SWOT and all elements of PESTEL. All elements in PESTEL analysis and those in Porter’s qualify as threats in the SWOT analysis. 2.1 General Environment The findings that emerged in relation to the competitive environment is that it is highly competitive based on the fact that De Beer faces massive threat from high bargaining power from buyers since the switching cost is low, high threat from existing competitors who have done forward & back ward integration and substitute products especially synthetic gold which is comparatively cheaper. Moreover, there various PESTEL elements that is a threat to their dominance. For instance shift in politics made them loose their global dominance since governments were licensing other players; environmental factors like sustainability has impacted on their customer base since some customers now prefer environmentally friendly products yet mined diamond contributes to environmental degradation; technological advancements have given growth to synthetic diamond which is cheaper than the mined one and lastly, legal factors have forced the company to drop supply driven strategy. 2.2 Task Environment All the five forces in the porter’s are currently affecting the level of competitive intensity within the industry. In regards to which opportunities and threats which are important to the firm, existing competitors, emerging technologies forms the core of the same. For instance, the new technology such as synthetic diamond is likely to curtail the market share of the firm. Secondly, producing countries have reviewed their laws to accommodate many players. The opportunities that exist are based on the fact that De Beers have chance to differentiate through branding and equally to ride on their extensive network with suppliers and buyers. 3.0 Competitive Position Bowman’s strategy clock is used analyze an organization’s competitive position. In order to analyze De Beers’s business strategy and strategic position in the marketplace, consideration is given to the company’s Product, Price and the Perceived benefit and how it applies the same to differentiate itself from other competitors. According to Sengupta (2005, p.12), Bowman’s strategy clock is an extension of porters three strategic positions to eight strategic positions. The analysis below is based on appendix 4 that examines various positioning that a business can adopt. In initial years, the company used to have global monopoly up to 90s (Cadieux, 2005). During those periods, they fell in Monopoly pricing. For De Beers, since 1999, they currently lie in focused differentiation strategy since produce high value product and services at high prices. Consumers perceive these high valued products and services as having high values for their monies. For instance, one carat diamond cost about $ 100, 000 while the synthetic one goes for $ 4, 000 (O’Connell, 2007). To convince the customers, about the value of natural diamond so that they don’t feel that they are being overcharged, the company has engaged in aggressive branding and marketing. They currently brand their products with company logo and have advertisements outside the marriage theme so as to expand their customer base (Cadieux, 2005). 4.0 Internal Environment/ Resources & Capabilities This is based on the SWOT analysis in appendix 3with the principal focus being on the strengths. The firm has been able to ride on the strengths so as to gain market leadership. 5.0 Gap Analysis Over the years, the firm over focused on controlling supply instead of meeting the demand. This at a time didn’t work in their favor especially with the growth of the liberalized market. Secondly, the firm has not been proactive on the branding approach as a means of differentiating its products. Lastly, the firm has over focused on internal industry without giving much thought to other competing industry like gold and silver among others. 6.0 Recommendation The company should improve on branding exercise as means of differentiation. There is need for enhanced market as means of overcoming competitors. The firm should have deliberate shift in terms of market focus in rapidly growing economies like India and China. To streamline its internal operations, the firm should outsource certain services where labor is cheap such as polishing in India as compared to Namibia and Botswana it is expensive. With the decreasing supply, the firm should not neglect in toto the supply driven strategy. They should strive to create a balance. The company should avoid over reliance in traditional supply sources which are mostly in Africa especially as result of the instability in certain regions which raise PR and CSR issues. However, if this not possible they should invest considerably in improvement of governance. To counter the threat of synthetic diamond and technological change, the firm can equally venture into the same. References Alimin, I.I. et al. 2009. Management, Strategic Management Theories and the Linkage with Organizational Competitive Advantage from the Resource based View. European Journal of Social Sciences, 11(2): 402-418. Aris, B. (11 September, 2001). A Diamond in the Rough. The Moscow Times. Barker, S. (6 April, 2001). Diamonds in the Rough. Available at: http://www.jpost.com/Travel/Around-Israel/Diamonds-in-the-rough-315164. Berman, P. and Goldman, L. (15 September, 2003).Cracked DeBeers. Available at: http://www.forbes.com/forbes/2003/0915/108.html. Brown, C. (2010). King Cotton. New York: University Press of Mississippi Burrow, L.J. 2008. Marketing. London: Simon and Schuster. Cadieux, D. (2005). DeBeers and the Global Diamond Industry. Ivey Case Study No. 9B05M040. De Beers (2012). About us: De Beers Group of Companies. Available at: http://www.debeersgroup.com/en/About-Us/The-Group-of-Companies/. Dunn, J. (4 October, 2006). Glittering Prizes. The Australian. Friedman, V. (10 May, 2006). The New Rocks on the Block. Financial Times. Gilchrist, S., & Zakrajšek, E. (2012). The Impact of the Federal Reserve’s Large-Scale Asset Purchase Programs on Default Risk. Goff, G. K. (4 February, 2007). Cultivated Carats. Available at: http://www.washingtontimes.com/news/2007/feb/3/20070203-101749-5166r/?page=all. Ireland, R. D. & Hitt, M. A. (2005). Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. Academy of Management Executive, 19 (4): 63-77. Jones, R.G. & Hill, L.C. 2007. Strategic Management. New York: Cengeage Learning. Pangarkarn, N. 2011. High Performance Companies. New York: John Wiley & Sons. Rapp, B. & Nilson, F. 2005. Understanding Competitive Advantage. New York: Harvard Business Press. Reed, J. and White, D. (14 July, 2006). Beneficiation: A chance to spread southern African wealth. Financial Times. Sadler, P. (2003). Strategic Management. London: Kogan Page Publishers. Sengupta, S. 2005. Brand Positioning: Strategies for Competitive Advantage. London: Cengeage Learning. Stein, N (19, February, 2001). The DeBeers Story: A New Cut On An Old Monopoly. Available at: http://money.cnn.com/magazines/fortune/fortune_archive/2001/02/19/296863/. The Economist (17 July, 2004). The Cartel Isn’t Forever. Available at: http://www.economist.com/node/2921462. Thomson, A., Strickland A. J. and Gamble, J. (2007). Crafting & Executing Strategy. NY: McGraw-Hill/Irwin. Wenzel, E. (14 February, 2007). Synthetic Diamonds Are Still a Rough Cut. Available at: http://news.cnet.com/Synthetic-diamonds-still-a-rough-cut/2100-11395_3-6159542.html. Appendices Appendix 1: Macro Environment Analysis (PESTEL) There are numerous environmental factors that influence the operations of a firm within a given economy and thus, their success and how they roll out their strategies. These issues at a time transcend the political boundaries. The table below outlines environmental factors that have influence De Beers and the issues that have arose out of it. Table 1: PESTEL Analysis Factor Issues Political The political happenings have helped the company in two fold manner, at time it has worked in their favor and at a time it has worked against them. There are numerous political happening in various political boundaries that have worked to reduce De Beer’s global dominance. These include: Their control on supply in USSR stopped with the disintegration of the union. This was marked with emergence of other companies like Lev Leviev who engaged in diamond cutting in the country of production (The Economist, 2004; Berman and Goldman, 2003). Being accused of being financiers of rebels that destabilized governments and maimed people in Angola and Sierra Leone (Berman and Goldman, 2003). Canada ensuring that most companies operating in their country are outside the control of De Beers supply network. There are numerous political happening in various political boundaries that have worked to enhance De Beer’s global dominance. These include: Signing joint deals with Botswana and Namibia government in 2006 and 07 respectively. This has helped in value creation in those countries and created new job opportunities (Reed and White, 2006). Economic As countries recover from the global financial crisis of 2007-09, there is hope that people will have huge disposal incomes to spend on luxuries/ objects of desire like diamond (Gilchrist and Zakrajsek, 2012, p.2). This is good news to De Beers as its sales will increase. There has been a shift as result of market dynamics from supply control to demand driven operations which calls for value addition (Stein, 2001). Social The company has been a victim of blood diamond in Sierra Leone and Angola (Berman and Goldman, 2003). This has tarnished their reputation among customers who are ethically responsible thus, reducing its customer base. Equally their social legitimacy has been reduced since the areas they mine in are more impoverished as compared to the value of mined diamond. The company has responded with numerous CSR program to enhance their image and social legitimacy. These include building of schools and being a signatory of Kimberly certification system. Technological The emergence of synthetic diamond which is chemically similar to mined diamond and has little impact as compared to natural diamond on environment and elicits least social & political reactions (Wenzel, 2007). This has greatly eaten into their market share since they are cheap, identical to the natural one and come in numerous colors. The only reprieve is that it can’t be more than one carat. Environmental Diamond mining has been one of the sources of environmental degradation through creation of derelicts, destruction of natural habitat and emission of carbon from diesel powered equipments thus contributing to global warming (Wnzel, 2007; Berker, 2001). Legal There are legal pronouncements that have impacted on the company. The company operations being banned in US for violating Anti Trust Act. For their re-entry in US market, they had to pay $250 million (McAdams and Reavis, 2008, p.10). Diamond producing countries like Namibia amended their diamond law so as to allow local polisher engaged in value addition locally. This compels miners to sell portion of their diamond to local polishers. The same trend has been experienced in Angola, South Africa, Botswana and so on causing shift in value chain (The Economist, 2004). Source: Author, 2013 Appendix 2: Industry Analysis/ Competitive Strategies (Porter’s Model) Figure 2: Porters Five Forces Model Source, Shrader & Heselbein, 2008 Threats of new Entrants The entry barrier to diamond industry is relatively high and thus, the threat is low. The rationale behind this argument is based on the fact that initial licence/ concession fee for mining is usually high, the money required to buy capital equipments are equally high. Moreover, De Beer has been able to lock in various suppliers, build networks with countries with diamond resources such as Australia, Canada, Angola, South Africa and Botswana among others and has extensive experience making it difficult for new entrants. For instance, by 2007, they still controlled 45% of mined diamond and 45% of diamond sold (Cadieux, 2005). Additionaly, by early 2007, DeBeers had 22 stores spanning the United States (3), Europe (4), the Middle East (1), and Asia (14). However, to an extent, the threat is moving towards the higher scale as a result of the fact that companies which are manufacturing artificial diamond are increasing because the industry structure has changed since 1990. Bargaining Power of Buyers The bargaining power of buyers is high if compared between those processing mined diamonds and those processing synthetic diamond. The justification for this is based on the fact that switching cost is low. For example, one carat diamond cost about $ 100, 000 while the synthetic one goes for $ 4, 000 (O’Connell, 2007). The same applies to those processing mined diamond alone since their market niche are different. The buyers that used to purchase diamond from De Beers are investing in mines through backward integration. For instance in 1999, tiffany a high end diamond dealer stopped purchasing from De Beers and bought stakes in Canadian Mining Concern. Additionally, Aber which is a Canadian based diamond firm acquired Harry Winston thus, allowing them to have presence in US, Switzerland and Japan (Cadieux, 2005). Threats of Substitute Products The threats of substitute products are high. In this regard, synthetic/ artificial diamond comes in forefront. This is based on prices, environmental friendliness and level of conflict. In terms of price, one carat diamond cost about $ 100, 000 while the synthetic one goes for $ 4, 000. Moreover, the synthetic one comes in variety of colors as compared to the natural one (O’Connell, 2007). For example in 2006, 400, 000 carats of synthetic diamond were produced in USA. This led to 20% increase of prices. At the same time synthetic diamond worth $50 million pounds were sold and it is estimated to hit $ 2 billion in the year 2015 (Goff, 2007). Bargaining Power of Suppliers and Partners The bargaining power of buyers is medium. De Beers has developed an extensive network with suppliers/ supplying countries, thereby locking them in. thus they are out of reach of other suppliers. In this regard they have partnership program and supplier assessments to collaborate and maintain good rapport with suppliers. For instance, the firm has agreement with leading diamond producing countries like Australia, Canada, Angola, South Africa and Botswana among others (Cadieux, 2005). Moreover, the firm has 50% stakes in firms like Debstwana and Namdeb. To an extent it can be argued that some suppliers/ countries depend on De Beers as their main purchasers. A case example is that of Zaire and the slump in the prices as result of the firm’s ability to control supply (Spar, 2006). Equally, the firm has stakes in companies that sell direct to the suppliers in Europe and America and this means that they are likely to purchase from De Beers (Reed and White, 2006). However, the threat of the suppliers can be said to be medium because, the company in their strategy are shifting away from being buyer of last resort or from supply control to demand driven approach. In this regard they have opted out of the concept of stock piling diamond with the major focus being on differentiation (Stein, 2001). Moreover, countries that supply diamond such as Angola and Botswana are changing their mining / diamond law that requires that a fraction of the mined diamond is refined locally. This means that if De Beers can’t absorb this they will look for other options (The Economist, 2004). Equally, other supplying countries like Russia, Australia and Canada had opened their market to other dealers as far as 1990s (The Economist, 2004; Berman and Goldman, 2003). Rivalry among Existing Competitors De Beers faces a two pronged competition, those dealing with mined diamond and those dealing with synthetic/ artificial diamond. Moreover, most firms are doing forward or backward integration thus, allowing them to have stakes in mines of stakes in companies that sell refined diamond. The rivalry in the industry from the existing competitors is high. There are various justifications to point towards this. For instance, in earlier years, De Bears used to account for 45% of global rough diamonds, but sold 80% of the global sales. However, from 1990s, this trend has shifted and by 2007 they account for 40% of rough diamond and 45% of those sold (Economic Intelligence Unit, 2007). Moreover, companies like Alrosa have ventured in to retail (Aris, 2001). Apart from these synthetic diamond dealers like Adia Diamonds (Michigan/Ontario), Gemesis (Sarasota, Florida), Apollo (Boston, Massachusetts), Chatham Created Gems (San Francisco, California), and an outfit called Life Gem (Chicago, Illinois) have eaten into the market shares of Natural diamond and to extent that of De Beers. Appendix 3: SWOT Analysis SWOT analysis of an organization involves evaluating both internal and external factors which have either beneficial or detrimental impact on the ability of an organization to effectively compete in the market place. Organizations strengths are internal resources and capabilities and regarded as an organization’s core competencies. It is these strengths that enable Sony Corporation to create and maintain competitive advantage against competitors in the market place. Weaknesses on the other hand are those factors internal to an organization that jeopardize business performance and competitiveness in the market place (Ireland & Hitt, 2005, p.68). Strengths/ Key Success factors Table 2: De Beers Strengths Factor Issue Extensive research and development De Beers has invested heavily in research and development activities in order to have the best products on the market. The company has innovation as its driving strategy enabling it to make unique products (De Beers, 2013). Extensive experience and financial might The company has treaded in gold since 1888 and has huge financial might that enable them to venture into new markets, acquire other companies and lock out competitors. Creativity and Innovation De Beers employs some of the highly talented and knowledgeable personnel in the industry. These people have brought in a lot of creativity and innovation when it comes to the products offered by the company. Differentiation and Advertising The company has embarked on branding and it engages in personalized advertising to market its products and reach its target market. Over years, there have been various advertising campaigns by the company (Cadieux, 2005). Brand Loyalty The company has engaged in production of high quality and unique products. These help in maintaining customer loyalty. De Beers has been made a household name world over. There is brand and customer satisfaction that comes with using De Beers products. To people, it is prestigious to use unique De Beers products Distribution channels, and integration The company has extensive network with suppliers and business to business buyers. Thus, they currently account for 40% of rough diamond. They have agreement with countries like Namibia and Botswana where they have 50%. Capturing new markets The company has extended its reach beyond the traditional markets of developed nations to India and China. For instance, diamond of over 2 carats worth $15, 000 has been a booming business (Dunn, 2006). Source: Author, 2013 Weakness The evident weaknesses in the company are three. The first is their supply driven strategy. The company aims at controlling they supply of diamond at the global level without focusing on quality and differentiation. This has made them to be blocked in certain periods in lucrative markets like US for breaching anti-monopoly trends (Stein, 2001). While they are attempting at shifting their operations towards demand based approach, they have not successfully shed the old tag. The second concern is that they have not actively engaged in massive branding exercise so as to differentiate their products (Friedman, 2006). Lastly, to those who are concerned with business ethics and CSR usually paint the company in bad picture owing to its operations in war torn areas with the accusation that the money from mining is used to finance rebel activities (Berman and Goldman, 2003). Opportunities There are numerous opportunities such possibility of expanding to other markets as result of emerging economies with people who can buy luxury goods like South Africa, China, India, and Brazil and so on. Secondly, they have opportunity to brand so as to differentiate their products. With their knowledge and financial might, they can venture in the production of synthetic diamond among others. Threats The threat that De Beers faces is highly connected with analysis in appendix 2. Thus, for threat appendix two is utilized. In a brief overview, they include emergence of synthetic diamond, change in legal frameworks governing diamond mining which allows other competitors, loss of market share and bad public relation among others. Source: Author, 2013 Appendix 4: Strategic Positioning (Bowman’s Strategy Clock) Source: Pangarkarn, 2011. The fist position is the Low Price Low Value part. Many business organizations do not operate or rather compete in this strategic position. Many business organizations that operate within this strategic position are those which lack differentiation value for their products and services. According to Burrow (2008, p.34), this strategic position enable business organizations which operate in a cost effective manner with high volume of products to operate effectively. The second is the low price position. This strategic position mainly consists of low cost market leaders. According to Jones and Hill (2007, p.100), the key challenge for business organization operating in this strategic position is how to balance the cost of production with the perceived income. The third is referred to as hybrid, the moderate price or moderate differentiation strategy position. In this strategic position, business organization producer low quality products and services and offer them at low cost. However, these products and services are usually of higher value as compared to those produced by their competitors and offered at relatively higher prices. The fourth strategic position is the differentiation strategy position. Business organizations employ this strategy when they need to offer highly differentiated products and services. This strategy enables businesses to acquire the trust of the customers while promising high value products at very competitive and unbeatable lower prices, which other industry players find difficult to compete (Rapp, & Nilson, 2005, p.653). Fifth is the focused differentiation strategy position. In this strategic position, business organizations produce high value product and services at high prices. Consumers perceive these high valued products and services as having high values for their monies. In this regard, Burrow (2008, p.34) reiterates that consumers will buy the high valued due to the perception created from the high price. In the risky high margins, businesses raise the prices of their products and services without adding any value to them. If consumers accept these price increases they will enjoy the benefits resulting from such high prices. On the other hand, this strategy could be risky in that it could jeopardize the public image and name of the company. Monopoly pricing together with loss of market share strategic positions represents classic monopoly pricing trends in the marketplace. This strategy is usually employed by business organizations, which are the only providers of specific products and services and have no competitors (Alimin et al, 2009, p.231). Appendix 5: Industry Life Graph Figure 4: Industry Life Graph Source , Guide to business planning, 2013 Appendix 6: Financial Performance Source: De Beers, 2012, p.23 Read More