Strategic Formulation Analysis For De Beers International Corporation

Strategic Formulation Analysis For De Beers International Corporation
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Strategic Formulation Analysis For De Beers International Corporation
INTRODUCTION
Background in Brief
De Beers has been a monopoly in the diamond industry until the late 1990s. During this time, the company faced a dilemma as to whether it could join the market of making and selling a synthetic diamond or not. The only competition that the De Beers faced was selling a synthetic diamond, sold at a lower price than natural diamond. Their new strategy was demand-driven and aimed at developing their brand.
DeBeers underwent significant changes following the Soviet fall in 1991. The company had been buying all the diamonds from the Soviet Union. When the union failed, De Beers could no longer enforce contracts, which led to the fall in diamond prices. By 2007, the company was producing and selling approximately 40% of the world's diamonds (McAdams, D., & Reavis, 2008).
The Organization Today
The history of De Beers has acted as a key factor in its strategic planning. Currently, the company no longer focuses on being a monopoly but aims to maximize profits. Therefore, it has laid down various strategies such as pricing their diamond depending on the market's prices. Such a strategy has prevented the company from buying a diamond at a price close to the market value. De Beers has also invested in the blockchain market, thus enabling it to track the diamond value chain.
De Beers is one of the world's largest companies in the Diamond Industry. However, it has lost a substantial size of the diamond's market share due to the competition. It faces a lot of competition from giant companies in the diamond industry, such as Harry Winston, Algore, and Aber Diamond. The reduction in market share has affected the company's profitability, as indicated by its declining revenues in the last five years.
The company has not been performing well since 2017. During this year, the company's total revenue fell by four percent. In 2019, De Beers reported a twenty-five percent decrease in sales from the previous year. In 2020, the total revenues decreased by fifty-four percent of the prior year. The poor performance attributes to Covid 19 on the economy (Grigoryeva, Evstafeva & Sentizova, 2020). 
Mission
De Beers mission statements stated on its website as the company's purpose: 
"In the De Beers family of companies, we have one purpose: 'We are driven to turn diamond dreams into lasting reality".
The mission statement indicates that the company focuses on fulfilling its shareholders' needs regarding diamonds' purchase. It plans to bring the dreams of the rich into a reality by offering them the diamond they would wish to buy with their riches. The mission statement indicates the company's commitment to being the leading diamond seller in the industry. 
Goals and Objectives  
De Beers' mission statement is an indication that the company focuses on giving its best to the stakeholders. Such would be possible by providing an intelligent life to those involved with the company. It is a reflection of how the end-user benefits from De Beers products. Therefore, the mission shows how committed the company is towards consumer satisfaction. 
Stakeholders 
De Beers stakeholders play an important role in the achievement of the company's goals and objectives. The company works to ensure they meet the attributes of each stakeholder group. (For more information regarding De Beers stakeholders, please see Table 1).
TABLE 1: Organizational Stakeholders
Stakeholder GroupGroup Demands / AttributesProduct Market
customers
local communitiesQuality products.
Fair prices.
Corporate social responsibility.
Job opportunities.Capital Market
shareholders
debt investorsProfits and fair compensations.Organizational
employees
GovernmentConducive work environments.
Adhering to government regulations
EXTERNAL ANALYSIS
General Environment
De Beers' general environment has a massive impact on its profitability. Each of the environmental factors determines the company's strategic planning for meeting organizational goals and objectives. Below is an analysis of the environmental factors which influence De Beers' performance.
Demographic Segment:
De Beers targets a wide range of demographic groups. Their primary focus is on the upper and middle-market segments such as singular events and impulse purchases. De Beers customers are the rich people willing to spend their money on buying a diamond. diamonds. The company also sells to urban women and men of the upper and premium classes. Most of these customers are of white, Arabic, and African origins.
Political/Legal Segment
New regulations set by the South African government have mostly affected De Beers operations. Among the regulations are increased export duty, laws governing diamond processing, and the changes in various trade arrangements. The Namibian government implemented a regulation that local miners should only sell some of their diamonds to local polishers. De Beers agreed with the Namibian government in 2007 to ensure that 50% of the diamond was sold locally.
Economic Segment
De Beer is facing a lot of competition from other large entities in the diamond industry in the current market. Such has threatened the company's profitability, as evidenced by the decline in total revenues in the last three years. Russian and Canadian competitors have helped regulate market prices, thus forcing De Beers to reduce its cost of product and diamond prices for it to make profits. 
Socio-cultural Segment  
De Beers' socio-cultural environment includes different trends, which range from sex, age, and preferences. The populations' reaction to social and environmental concerns has highly affected the De Beers market share. Diamond is an indication of prestige. Individuals who attach the diamond to such value have higher chances of purchasing it than those who do not value the commodity.
Some people do not prefer to buy natural diamonds because they associate them with war and crime. An example is the blood diamond concept, which originated in the killings of innocent people in Sierra Leon. The fact that child soldiers were involved in the war makes matters worse, discouraging many people from buying a diamond.
Technological Segment
In 2017, De Beers invested in blockchain technology, which has led to an increase in sales. The company uses the best diamond mining technology in the industry, which is advantageous in reducing competition (Voigt, Morrison, Hill, Delias & Mangera, 2019). Such technology has been in use for the last 35 years.
Global Segment
Competition from global companies characterizes this segment. The company has to focus on increasing its market share in the global communities to reduce its competition. Trade tariffs in the global environment also threaten De Beers' operations in international markets. 
Physical Environment Segment
The physical environment segment refers to the diamond mining process and the parties involved. The mining process can result in damage such as landslides and tremors. Such causes an environmental concern that mining companies ought to address. Synthetic diamond has less environmental concerns since they are made i...