Question 4 De Beers — Marketing Question
(TEXT: Marketing Management 12e, Kolter, Keller)
Part 1 (500 words)
Is the diamond industry structure unique in the opportunity it offers for collusion and price maintenance? Compare De Beers’ market leadership with that of the Organization of Petroleum Exporting Countries (OPEC). Are there other lessons that businesses can learn from De Beers?
De Beers is one of the marketing leaders in the diamond industry. Like Organization of Petroleum Exporting Countries (OPEC), De Beers has influence on controlling prices and leading the best practices. It is a strong member of the industry. Any new entrant or market followers would like to attain the similar or better market position which is enjoyed by De Beers. There are various factors which businesses can learn from De Beers. These are as follows:
Effectively handling marketing competition by adopting strategies at correct time as De Beers has done to deal with competition with new value chains.
Using branding and marketing as a tool for value addition.
Using brand simulation strategies by more selective sales practices in the place of controlling supply
Using customer relationship by adopting ‘supplier of choice’ program and selection of most effective and successful value chains.
Accepting external and internal environmental changes and incorporating changes in organization strategy and functions accordingly for instance getting marketing support from the sight holders in order to emphasize more on marketing.
Focus on retailing and marketing and establishing De Beers as a branded luxury item
Extending product lines from traditional engagement rings to others.
Effective marketing communication and promotional strategies. In the marketing communication targeting the users like women and associating diamond, their emotions and their identity to the product. Campaigns like “Celebrate Her”, “Will you Marry Me again”, “Women of the World Raise your Right Hand” and message like “A Diamond is Forever” is evergreen message which started in 1930s and still goes well with diamonds and De Beers’ brand.
Adopting new communication and retailing channels like Internet
Emphasizing on educating customers about diamonds and De Beers’ expertise and guarantees that can help in decision making process of customers.
Adopting corporate social responsibility projects in order to portray new brand image and acceptability among various stakeholders.
It also adopted new corporate policy for equal treatment to the people with HIV/AIDS infection and developed an image of sincerely concerned employer.
Adopting latest technology for imprinting unique logo on diamonds and other permanent markings and intensive advertising.
De Beers has list of Best Practice Principles which is adopted throughout the organization. These best practice principles cover various issues like defining natural diamonds, stressing on helping consumer making informed choices, commitment to ethical corporate practices like rejecting any of the practices like child labour, buying and trading from areas that support or encourage of conflict and human suffering, practices that can endanger or harm to health and wealth of individuals. De Beers is committed to highest industry ethics like proper working conditions, being responsible diamond industry member, ensure fair treatment to individuals, full compliance with international best practices and disclosure of the diamond distribution channel.
De Beers enjoys similar position enjoyed by Organization of Petroleum Exporting Countries (OPEC) in the international diamond market. This means it has influence over the pricing and standards of the industry. This makes it more responsible towards industry practices. Any business to operate in the similar industry or any other industry can look at these factors.
Part 2 (500 words)
Assume that you are the CEO of a relatively new Canadian-based, well-funded vertically integrated processor and marketer of Canadian-sourced diamonds. Using your knowledge of strategies for entering markets held by incumbent firms (Kotler, Chapter 11), briefly describe which single strategy you would choose to develop to compete against De Beers in export markets outside of Canada. You will need to justify your choice of strategy, and you can assume that your organization will remain independent and not be absorbed nor controlled by De Beers or any other global diamond competitor or trade association for the purpose of responding to this question.
This company is new and will have to face different types of competition outside the Canadian market. The marketing opportunities must be available in the international market for different diamond jewels. Diamond customers can be segmented in different categories like daily wear, occasion specific like wedding gifts, marriage gifts, festival gifts, and this customer can be categorized on the basis of their economic backgrounds, purchasing power and age groups. Company will be required to study different customer groups in different markets and target specific customer group according to corporate goals. This is a small company, the best strategy would be Niche Marketing for the global market. These niche segments can be decided or segmented on the basis of extensive research on various needs of consumers. It can also be a target to the extensive consumer groups and making a specific segment of the same as target consumers for instance a particular class for wedding ring gifts. It can identify the separate needs of some particular consumer groups as a niche segment. “A market nicher” serves small market segment not being served by larger firms. The key to nichemanship is specialization. Nichers develop offerings to fully meet a certain group of customers’ needs, commanding a premium price in the process.” The niche market should be highly profitable and should allow consumer to work profitably. The CEO can decide on the best consumer segment which is willing to pay the particular premium price. This strategy will help in identifying and attracting a particular group of segment. The niche pricing will help to attract particular customer group and gain attention of other prospects. The niche marketing strategies will also help the company in covering its risk of over production. The company may decide on Teen age jewel or more expensive customization services for the wedding ring or the adult requirements. This will allow company to differentiate itself and create a different brand image which can be capitalized later by catering customer needs of different segments. Company can focus on the marketing mix elements and develop its product, pricing, place and promotional strategies on the basis of its niche market’s specifications. De Beers has adopted competitive and ethical business practices. De Beers’ have set different objectives for different processes. It has established its brand name and brand image of a quality product provider as well as ethical and responsible corporate citizen. These factors have added to the sustainability of the company. De Beers’ has focused on continuous improvement within the organization by involving in maintaining performance and ethical standards. De Beers’ has extended its operations throughout its value chain. The vertical and horizontal integration allowed company to expand its business and maintain cost and satisfy stakeholders. This company can also involve in the similar activities. The company can follow different strategies adopted by De Beers’ in its business model.