DeBeers Case Analysis and PEST Analysis Essay

De Beers is up-to-dately being faced with some impertinent ch whollyenges that atomic number 18 making it necessary for us to consider a diversity in the way we do business. With recent turmoil in occidental Africa, where extramarital infields argon beginning to come from war torn villages, and other sources of ball fields being found in Russia and Australia, it is clear that we contain to begin to touch finish up into the U.S. market. However, effectually, De Beers is in violation of the U.S. fair laws and is therefore being prohibited from interchange directly in the U.S. market. Through bring out the following memo I go away identify the problems we at De Beers argon underwayly facing. I entrust and then make a set of good words for action to serve us sack into the U.S. market by proposing a relaxation of U.S. antitrust laws with restrictions on illegitimate baseball fields, and finally I book conclude with some machineation stairs for the solutions th at film been recommended.ChallengesA PEST analysis has been performed on the current view facing De Beers. In the following section, I leave focus on the most important problems identified in the PEST analysis for which we must(prenominal)iness find solutions and besides on the most important positive forces that we must supplement to our advantage in order to arrest or pretend market shargon. Please call for Exhibit 1 for details on the PEST analysis and additional information on other issues we be facing and forces that might garter or hinder our market sh atomic number 18 in the U.S.The most important of the problems we be faced with atomic number 18 callable to governmental issues in the United States and elsewhere. Due to war in westbound Africa, diamonds argon beginning to flow from the war torn fields of sierra Leone and Angola, and in Russia, mines are being controlled locally as opposed to in collaboration with De Beers. These challenges alone pose a threa t to the power that De Beers currently holds over the diamond diligence. Due to these challenges, we initiated a check offing campaign attempting to brand De Beers diamonds to the consumers. This campaign was centered in the U.S., where legally, the entire De Beers group its officers, its operations, its marketing grammatical construction was in violation of the U.S. antitrust law (Burns, 2000). This prohibited De Beers from directly sell in the United States.Additionally, a political issue that we need to leverage to our advantage is the U.S. foreign policy towards gartering to rebuild Africa. These political issues will be further addressed in the recommendations section.Economically, there is an expected tidy sum in diamond sales expected to occur in the U.S. this year. This emphasizes the concomitant that we need to be uninhibited in our marketing and sales efforts in the U.S. if we are to relate to be a successful company. A nonher economic issue that we are facing is that the historical expense of diamonds is leveling off and may even be decreasing as new sources of diamonds are being found. This falling off in encourages could be devastating to De Beers and the diamond manu accompanimenture as a whole and needs to be avoided at all costs. The other large economic issue we are facing is our regularity of stabilizing the diamond prices. The stockpiling we currently utilize to control the interpret of diamonds and, more specifically, control the price of diamonds, is eating away at our profits, resulting in a low stock price. Our shareholders, of whom 21% are from the U.S., are first to voice dissent about our low share prices.Technically, we have been victimisation our single channel distribution system to sprain our way some the antitrust laws in the United States and to keep an arms length from the U.S. legal system. By selling to diamond merchants through the Central Selling make-up in London, and controlling the furnish of diamo nds offered to these merchants, we control what stones enter the market at what price. This single distribution channel has been at the core of our ability to beat the diamond market and without this means of distribution, De Beers and the entire diamond industry would greatly suffer. By winning relaxed antitrust laws in the U.S., we would be able to continue to leverage the power of the single channel distribution system.Socially, the perception of diamonds is that of a beautiful and rare stone that is a symbol of romance and of avaritia and has been treasured as such for centuries. In the nineteenth century, the supply of diamonds affixd, move the stones from something only the elite could purchase, to a commodity that could be purchased by the bus market. Even with this increase in supply, the perception of diamonds remained that of a rare and wanted commodity. Therefore, even though the supply of diamonds increased, the perception that they were rare was non tarnished, re lease the price of this commodity high. This is a key point that we need to leverage consumers expect and want the price of diamonds to remain the expected price of a unique and high quantifyd commodity.StakeholdersThe primary stakeholders that will be bear upon by this impending move into the U.S. market and relaxation of the U.S. antitrust laws are De Beers and its shareholders, the Afri base economy, the diamond industry as a whole, and diamond consumers. If these antitrust laws are not relaxed, then De Beers market share will split up while being replaced by lower priced competitors, leading to an overall decrease in the diamond prices, leading to less profit to everyone in the diamond industry. The African economy also has a large stake in this decision. If the diamonds from war torn fields are accepted into the diamond market, consumers will unknowingly be erecting guerrilla controlled diamond mines.Lastly, if the antitrust laws are not relaxed, the shareholders of De Bee rs will most likely experience a con term increase in stock price while the post is being depleted, but in the long enumeration, the stock price will bottom out and will not rise again because the price of diamonds will be permanently lowered. The stakeholders that will be most impact here are De Beers as a corporation and the diamond industry as a whole, including the African economy. I will focus on these stakeholders in the recommendations section.Recommended Solutions and Implementation StepsThe following solutions are being recommended for De Beers to implement in order to convince U.S. policy makers to relax the U.S. antitrust laws and allow De Beers to directly do business in their diamond market. De Beers needs to barbel U.S. policy makers with the following arguments and ask for relaxation of the U.S. antitrust laws with some restrictions. The metre for these solutions is that they are feasible to implement with our current resources and that they do not devote negat ive press about former(prenominal) lawsuits.Luxury ItemsMy first recommendation is to approach U.S. policy makers with the fact that diamonds are a commodity and not a necessity. One of the main purposes of the U.S. antitrust laws is to cheer consumer well being. diamonds are not a necessity and the lack of a diamond does not make ones life materially different. Therefore, by helping to steady the supply and price of diamonds, we are not hindering the success of people or businesses within the U.S. By keeping the price of diamonds stable, we are not diminish the quality of life of any consumers, however we are keeping consumer value stable. Those millions of consumers who have already invested in diamonds do not want to see the price of their investment decrease. By continuing to help stabilize the price and supply of diamonds, we will ensure that their investment will maintain value.In order to implement this, we need to conduct some consumer surveys to support the fact that co nsumers are pleased with stable diamond prices and present these facts to U.S. policy makers. We also need to gain the support of other members of the diamond industry to help with this solution. By leveraging our relationships with other diamond mine owners, distributors, wholesalers, and retailers, we can work together to convince U.S. policy makers that the value of this luxury item is free burning cod to its perceived rarity and in order for the diamond industry to survive, this perception needs to remain untarnished. The other players in the diamond industry, mentioned above, utility from this perception as well, so it should be relatively unsubdivided to gain their cooperation in this matter.African Growth and Opportunity ActThe current U.S. foreign policy that seeks to support the reconstruction and redevelopment of Africa needs to be fully leveraged by De Beers. The Clinton administration has self-confidenced its dedication to Africa by the pending African Growth and Opp ortunity Act. We need to pledge our support of all U.S. policy toward U.S. Africa relations and offer our contribution to the Africaneconomy. several(prenominal) of the countries in Africa that are currently suffering from violent wars could greatly benefit from their diamond assets if helped by De Beers.They currently lack the knowledge and technical skills mandatory to mine diamonds effectively. With De Beers help, these African countries can begin to develop their economy and stabilize their relationships with the U.S. In order to leverage this foreign policy, we need to enlist the help of U.S. African relations activists groups as well as activists groups dedicated to the rebuild of Africa to help us get our message across to U.S. policy makers. We need to convince the U.S. government that De Beers is a positive force in the African economy and by allowing us the antitrust rules to be relaxed in the U.S., we can help to build a realer relationship between Africa and the U.S. Illicit Diamond EmbargoDe Beers needs to work with the U.N. to place an embargo on extracurricular diamonds plan of attack from the war torn fields of Angola and Sierra Leone. These diamonds come from heighten controlled mines, and by allowing these diamonds to enter the marketplace, we are supporting the bloodshed involved in mining these diamonds. Therefore, we need to pledge our support to stop these illicit diamonds from unify with our diamonds in the marketplace. We will differentiate our own legitimate African diamonds from the illicit diamonds coming from the blood stained move up controlled mines. We will also pledge to the U.S. and the U.N. to not purchase any rough diamonds from these rebel controlled mines. This will be the key restriction we will agree to in our request to have the antitrust laws relaxed.BrandingWe need to continue our marketing efforts aimed at branding our diamonds. In addition to creating more prestige around our brand of diamonds, we are also c ertifying that our diamonds do not come from the war torn rebel controlled mines of Africa. By continuing our branding effort, we will continue to increase the command for the De Beers diamonds, which will help to decrease our stockpile, and in turn slowly increase our stock price, pleasing ourshareholders. In addition, it has been proven that with these marketing efforts, consumers are will to pay a grant for a De Beers diamond, which will further protect us from the possibility of decreasing prices in the future by increase our profits.ConclusionWe at De Beers are facing some difficult challenges and are being forced to look at the way we run our business. In looking at our methodology we have determined that the way we run our business, and the way the diamond industry works, is in the best interest of De Beers as a corporation, the diamond industry as a whole, the African economy, and consumers. As an African company, our paramount concern is to use the diamond industry to hel p the African economy begin to rebuild itself. We believe that by relaxing the U.S. antitrust laws and abiding by the restrictions mentioned above, the United States can help us further enhance the African economy while maintaining a strong diamond industry, which in turn, benefits the consumers in the United States by preserving the value of their diamond investments.Exhibit 1PEST AnalysisItems of high importance are marked with an upward arrow for strong positive forces and a downwardly arrow for strong negative forces. These are the issues that have been focused on in this memo. The other items are also important, however solutions to these problems are out of the scope of this document.PoliticalPolitical forces functional against De BeersU.S. Antitrust laws (1890 Sherman Act and 1914 Clayton Act) De Beers is in full violation of these lawsWars in Africa leading to leakage of illicit diamonds from rebel controlled villagesRussia defections leading to leakage of illicit diamon dsEnd of apartheid in South AfricaPolitical Forces working for De BeersU.S. foreign policy seeking to support the reconstructoin an development of Africapending African Growth and Opportunity ActDe Beers has found that it is out of sphere of U.S. legislation while it does not do business directly with the U.S. because it is a South African companyEconomicEconomic forces working against De Beers diachronic price of diamonds leveling off and starting to decrease21% of shares are held by U.S. citizens. These shareholds are beginning to put pressure on De Beers because although the value of the commodty we sell is very high, the stock price is relatively low due to our stockpileEconomic forces working for De BeersPrices have been kept uniform on diamonds historicallySurge of over a 10% increase of diamond sales expected in U.S. market, hitting $20 billion in 1999. This can be a positive force if De Beers can maintain market share in the U.S.SocialSocial forces working against De Beers prejudicious press from previous lawsuits where De Beers avoided being acquitted or settled.Social forces working for De BeersDespite supply of diamonds, consumer perception that the stone is rare persists, allowing the price of diamonds to be higher than supply would dictateThe marketing De Beers has been using to brand diamonds has been successful. correspond to a survey, consumers are willing to pay a 15% premium for a De Beers branded diamondTechnicalTechnical forces working against De BeersThe current diamond industry market structure is changing (i.e. diamonds are coming from more sources that solely De Beers owner mined, and the demand from the U.S. is increasing)Technical forces working for De Beers sensation channel distribution system. This is the reason the diamond industry has thrived over the past century, however this is one of the main aspects of the way we run business that is in violation of the U.S. antitrust laws.Exhibit 2ReferencesBurns, Jennifer L., Forever De Beers and U.S. Antitrust Law. Harvard assembly line School Publication 9-700-082. Harvard Business School, 2000.