Industrial diamonds, which take up the remaining 70% of the industry (The Diamond Industry), do not have specifications like gems. Industrial diamonds are mostly used in cutting, grinding, drilling and polishing processes. With these stones hardness and heat conductivity are the qualities researched. Many gem diamonds that are too small to cut are sold into the industrial diamond trade. The industry operates mostly in the regions of Botswana, Russia, Canada, South Africa and Angola. These countries make up 83% of the diamond industry by value, and 65% by weight of annual diamond production.
The four major players in this industry consist of: Dabbers Dabbers S. A. , a Kimberley, South Africa based holding company, is historically and currently the main driver of the diamond industry. With its hand in many aspects of the global value chain, Dabbers has proven itself in the market, In the sass, Dabbers had 80% of the market share, in 2000 it had 65%, and in presently holds 50%. Much of this loss can be attributed to production surges in locales where De Beers does not have a stronghold, including Australia, Canada, and Russia.
Dabbers has the largest hare of exploration expenditure of all companies; The company has over 20 mines distributed among South Africa, Iambi, Botswana, and Tanzania, and engages in production Joint ventures with local governments and other companies, such as Louis Button. Dabbers also oversees both Dabbers Consolidated Mines, Ltd. (mining in South Africa) and The Diamond Trading Company, which markets rough diamonds for Dabbers and other companies. The ETC sorts, values and sells approximately 75% of the world’s rough diamonds by value.
There is a lot of fear about Dabbers monopolizing the diamond industry. There has been very little action taken against them the fear among competitors is that if Dabbers is removed or made less in the diamond Industry, prices and the value of the industry would decrease. Largos Another competitor is Largos, which is a Russian state-owned diamond company. Largos partakes in exploration, mining, manufacture, and sale of diamonds. This Company produces 100% of Russian’s rough diamonds and about 20% of the world’s rough diamonds, making it the second largest producer to Dabbers.
Largos mines mostly in Russia, but also mines in Angola at the Actor Kimberley, the 4th largest nine in the world and the biggest producer of diamonds in Angola. Largos supplies Debaser’s Diamond Trading Co. With rough diamonds, the company is working on marketing its own diamonds, in attempts to support a Russian diamond-cutting industry. ROI Tint The next competitor is ROI Tint, who is a major Australian player in diamond mining. Diamond Industry By Sharpener revenue. This Company also mines iron, copper, uranium, aluminum and gold.
The company is responsible for 9% of world production of diamonds. ROI Tint mines in Australia, which produces the highest mass of diamonds, but not the highest value. Its two major mines in Australia, Argyle Mine and Merlin Mine. ROI Tint also has an operation in Mural, Zombie. ROI Tint sells its rough diamonds in Antwerp and also sells polished pink diamonds from Argyle Mine to wholesalers, manufacturers, and retailers. BP Battalion BP Billion is an Australian diamond mining firm as well.
BP Billion the largest world resources company. This company is also involved in mining other products such as iron ore, coal, petroleum products, aluminum, base metals, manganese and stainless steel. BP Billion plays a fairly large role in the industry, producing 6% of he world diamond production. BP Billion sells both rough and polished diamonds to various manufacturers; selling about 10% of rough diamonds to Canadian manufacturers and sells polished diamonds, made via contract polishing arrangements through its and AURAS brands.
Another competitor is known as Baber. This company is a successful Canadian firm in the diamond global value chain. De Beers, South Africa based holding company, is historically and currently the main driver of the diamond industry (known as the monopolize, or possessing most control over the industry); Largos, which is Russian state-owned amend company; ROI Tint, Australian based, and BP Billion, which is another Australian diamond mining firm, and is the largest world resources company.
The value chain of the diamond industry includes exploration, mining, sorting, cutting and polishing, Jewelry manufacturing, and last but not least retail. The entire process, length of time, changes depending on the size of the stone. Usually the process occurs within 18 to 30 months; larger stones usually move faster through the value chain. Dabbers being the number one competitor is the company that is compared throughout this analysis.
Dabbers continues to succeed off of their company purpose which is “to be driven to turn diamond dreams into a lasting reality'(). Dabbers Believes that the world of diamonds is about making “dreams” come true. They have a vision of “unlocking the full economic value of our leadership position across the diamond pipeline” Dabbers plans on fulfilling this vision through “maximizing the potential of our global partnerships, the skills and commitment of our people and the magic and emotional value of our product”().
Within Dabbers, they are held responsible for five main values: be passionate about their product and heir company, pull together and unite their strengths, build trust within all their corporate relationships, s how they care through service contributions to communities and shape the future through their ability and willingness to take risks. De Beers also has three principles to help their purpose and vision manifest.
The first principle is to keep sustainable development through partnership, meaning that, longer term economic social and environmental effects of the decisions they make for Dabbers and the societies in which they operate, they dreams and development, this principle is Dabbers working to concentrate on the poverty and socio-economic deprivation or dispossession that affects many of the communities where the company operates. These issues especially in Africa may include education, and the HIVE/AIDS epidemic. The last principle says that Dabbers lives up to “Accountability and Living up to diamonds”.
This principle helps Dabbers live there vision across all the family companies through “The Principles Assurance Program” which transforms these Principles into practice and presents an outline for measuring continuous improvement in performance over time. In keeping with the Dabbers standards as their 2010 operation highlights featured he success their generic strategy for business growth. It is stated that from 2009 to 2010 there was a strong recovery in the diamond market with a 27% price increase for rough diamonds. “Operation and Financial Review 2010”) Dabbers was leading in this industry recovery. In 2009 they made moves to reinvent the company without jeopardizing the values of Dabbers in all there family operations/ companies. Their focus in 2010 is to capitalize efficiently on this growth in the industry. In the report Dabbers has outlined five strategic levers “designed to drive growth and maximize he value and life of diamonds across the Family of Companies”. (Operation and Financial Review 2010. ) First the company plans to sustainable maximize the price received for our rough diamonds.
Since the price has increased 27% in 2010 the Diamond Trading Company (ETC) $5. 08 billion for the full year 2010 versus the $3. 24 billion for 2009. Their next lever is to “find, optimize and invest in mines that generate superior returns. ” This represents the aim to safeguard future supply by finding new mines, and maximizing the value and life of the mines already obtained. Dabbers is also looking to free up capital for investing by selling late-life mines to operators who specialize in extending the life of mines Dabbers is not optimized to manage.
The third lever states that the company wants to “invest in value-creating downstream opportunities. ” This translates into expand its proprietary diamond brand, Forevermore, throughout Asia, as well as continue to consider US market opportunities for the brand during 2011(Operation and Financial Review 2010). The next step taken would be to “Embed cost and capital efficiencies” which is Just a better focus on managing the company’s cash and costs. The last lever is “Protect diamond equity’.
This lever is Just about supporting initiatives like the Kimberly Process which was created by The United Nations and other groups are working to block the entry of conflict diamonds into the worldwide diamond trade requiring each nation to certify that all rough diamond exports are produced through legitimate mining and sales activity known as the Kimberly Process (“Operation and Financial Review 2010”). This growth strategy will definitely lead to the capitalization Dabbers is looking for while holding on to their values. Porters Five Forces
The competitive environment factors of this industry shows that the industry itself is strong and Dabbers holding the majority of the industry is exceptionally strong. The potential entry of new competitors is not likely. Even though raw diamonds are plentiful, it is hard for a new competitor to enter into the industry. The industry is very tight and is ultimately known as a secure industry as far as competition is vertically integrated chain, which are companies in the same industry acting as a unified system. This set up makes it hard for an outsider to penetrate the industry.
Rivalry among competing firm is almost nonexistent Dabbers in fact has a contract with Largos. The companies competing in the diamond industry are extremely strong and are said to be monopolistic. This results in very little rivalry among competing firms. Because of the vertically integrated chain there is more collaboration than there is rivalry. The threat of substitutes depends on the price and performance of the competing product. Also the threat depends on customers’ willingness to consider these substitutes. According to the diamond marketers there are no substitutes for diamonds.
Diamonds are a symbol of love and status, and anything else that can be made and top the quality of a diamond will succeed but highly unlikely that something would come about with great demand. There is a threat for Synthetic diamonds but researchers say this threat is entirely manageable. Bargaining Power of Suppliers is great. Dabbers, have almost total bargaining power. They are able to control the supply and flow of diamonds and therefore manipulate their prices. Dabbers monopolizing 75% of the industry and being the main supplier leaves no room for additional bargaining power. Bargaining Power of Consumers is little to none.
There is a strong association linked to the product, diamonds, for uses such as engagement rings, seventy-fifth wedding anniversaries, and gifts of status. The only way consumer bargaining power would increase is if the customers as a whole educated themselves before making buying decisions concerning the company’s ethics and social responsibilities. SOOT Analysis Strengths Dabbers has owns over 40% of the rough diamond industry as well as over 50% of the US diamond market share. With this Dabbers is able to influence prices when selling o manufacturers. Dabbers also produces a quality product that competes with the rest of the market.
Weaknesses Dabbers has a reputation for association with conflict/blood diamonds. The conflict diamond is a diamond that has been sold under the conditions of a civil war, or warlords of a country. Genocide and many deaths are attached to these conflict diamonds. There have been laws put in place to prevent this happening such as, “the Kimberly Process”. Dabbers is working hard to overcome these accusations, through their lever to “protect diamond equity’. Also in Dabbers Operating Highlights in 2010 hey talked about the high production cost and efforts to reduce them.
Opportunities Dabbers has many opportunities for growth. One big opportunity that isn’t shared in the 2010 report is brand awareness. If Dabbers made their making the brand more appealing to consumers they could increase profits. In doing this they should not necessarily lower their standards as a brand but expand into a new markets or demographic. Threats With Dabbers, there are little threats the first would be the association with conflict diamonds. If the association becomes any more superior it could lead to loss in entrants, employees as well as customers.
The next threat is the threat of the synthetic diamond. There is little threat in this but if the synthetic diamond market increases it could pose a serious harm to Dabbers unless they were to choose to connected. The only thing holding the industry is the ethics and battle behind the conflict diamond. This issue has harmed the industry but they have overcome those obstacles. The industry and Dabbers have proven themselves strong. Dabbers controlling most of this industry has managed a tight rein since the beginning with no near failure in sight.