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BG665
March 2005
Catalyst
Rough Diamonds courtesy of De Beers Group
Today
Today
Saturated marketplace
Problems with public relations
Rumors of De Beerss demise
Contract negotiations with key suppliers
Emerging suppliers from developed
countries
Today
Today
Analysis
Human
Resource
Management
Technology
Development
Plan
Procurement
De Beers
owns some
mines
Purchases
nearly all
mined
diamonds
Cartel
CSO
Controls
distribution via
lots and
provides $
value grading
service
Sets
infrequent
inventory
offering
dates
Stock piles
diamonds
Limited
offering
locations
Manages
supply to
distributors
Primary
Activities
Inbound
Logistics
Operations
Outbound
Logistics
Market
Maker
Builds
personal
value to
manage
financial
value
No
secondary
market
Up-sale is
only
consumer
option
Strong
advertising
Marketing &
Sales
After Sales
Service
Margin
Today
Support Activities
Context
Today
Value
Contributor
Mine
CSO
Diamond
Cutters
Dealers
Jewelry
Mfr
Retailers
Cost
markup
percent
from prior
value
contributor
Mine
15% Rough
[1]
20% Rough
[1]
10%
Polished
50%
Polished
100%
Polished
Percent
consumer
price
allocated to
value
contributor
24%
3.6%
2.8%
3.0%
16.7%
50%
[1] Rough diamonds loose approximately 52% of weight during cutting and polishing
Today
Today
De Beers Hangover
Context
Analysis
Plan
Today
Today
Soviet Union
Angola
South America
South Africa
Namibia
Rest of World
Botswana
Tanzania
Zaire
Rest of Africa
Today
Analysis
De Beers Customers
Context
Analysis
Plan
Today
Sightholders
80% cut their own stones before selling
20% mark-up on polished stones
20% sold to independent cutters
Dealers
10% mark-up
Jewelry Manufacturers
50% mark-up
Retailers
100% mark-up
Consumers
Industrial buyers
Supplier
Value
Customer
Firms Activities
Creation
Mines
CSO
Buyers
Cost
Value
Pay
Today
Appropriation
Firms Activities
Mine
CSO
Buy
Context
Analysis
Plan
Today
Context
Analysis
Plan
Today
3000
2500
Plan
2000
Today
1500
1000
500
0
CSO Sales
csu catalyst 2005 executive mba program lambert
Op Profit
Inventory
Figures from Ghemawat Case Study
Today
2000
1800
1600
1400
1200
1000
800
600
400
200
0
1978
1979
1980
Diamond Inventory
csu catalyst 2005 executive mba program lambert
1981
Investments
1982
Cash
Figures from Ghemawat Case Study
Today
Doing nothing
Other luxury items
Other gems
Imitation diamonds
Plan
De Beers Alternatives
Context
Analysis
Plan
Today
Pros
Increases speculation
Pros
Pros
Cost of interest
Pros
Pros
Maintain pricing
Analysis
Plan
Today
Analysis
Plan
Today
Today
De Beers Marketing
Context
Analysis
Plan
Today
De Beers Diversification
Context
Analysis
Plan
Today
Questions