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DE Beers Diamond Dilemma - Case Study Example

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Some of the factors in the macro-environment that affects the various decisions within an organization are political, economic, social, technological and environmental factors. All these factors are can be analyzed using Pestle framework (Gillespie, 2009)…
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DE Beers Diamond Dilemma
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DE Beers Diamond Dilemma

Political factors These factors emerge from the various policies, which are imposed by the government. De Beers as an incorporation had to deal with different political upheaval since it operated in different countries and had to sell its products to different countries as well (Gillespie, 2009). The political upheaval in Soviet Union in the year 1991 causes a lot of profit loss to De Beers Incorporation (Danielle, 2005). Before this upheaval, the Soviet Union and De Beer Incorporation had trading agreements and that dates back to the year 1950s. In this same year, deposits of Diamond were found in Siberia and from the trading agreement; Soviet Union had agreed to sell all their diamonds to this Incorporation. The integration of the Soviet system resulted into the collapse of the trading agreements that De Beer had with them and therefore, the enforcement of the various contracts were not possible. The political upheaval in Angola in the year 1990 also weakened the operations of De Beer Incorporation. The rebels were able to take control of major diamonds mines from the then President Dos Santos and this forced De Beer to purchase blood diamonds. Apart from Angola, other African countries, which were trading partners for De Beer, also suffered a lot of political upheaval. Countries like Sierra Leone, Democratic Republic of Congo, and Liberia were equally affected by the political upheaval and that led to reduced trading by De Beer. Trading in blood diamond later caused the company many revenues following their exposure in the year 1998. Economic factors Changes in the economy greatly affected the operations and organization of many business corporations (Gillespie, 2009). Due to hard economic times in diamond trade in the year 1999, De Beer was able to experience some shifts in its value chain (Danielle, 2005). A lot of integration in terms of forward and backward movement was experienced. Many investments in mines by the retail outlets were being experienced at that time and at the same time many mines were equally becoming retailers. This integration proved it tough for De Beer since the company returns were greatly reduced. In the same year, jeweler Tiffany and Company that has been sourcing most of diamonds from De Beer announced its withdrawal and it bought some mining concerns from Canada at a cost worth $ 104 million. These economic factors affected De Beer Company and the Company opted to safeguard its market dominance. The safeguarding practiced proved to be very expensive for this company since it was forced to buy diamonds from inflated prices. Some of the diamonds, which were purchased at inflated prices, were later sold at very low prices. The emergence of Australian Argyle Company into the diamond trade further weakened the market bases for De Beer since this company was able to produce low quality diamonds, which were later sold cheaply. The inflation in prices of diamonds from other countries where De Beer was sourcing them also made this company in the year 1990 to lose a lot of its market share (Danielle, 2005). The share price for this company was also able to reduce from 17 to 12 $ between the year, 1989 and the year 1998 and the fall in price presented a percentage drop of close to 30. Social factors These factors generally affect the demands of the various products produced by an organization. These factors circumrotate on the labor and the workforce within an organization (Gillespie, 2009). The processing of diamond in De Beer Company had several processing industries, which were helpful in the cutting and polishing of the processed diamonds. The Indians dominated the workforce in the organization and close to 1 million workers in the processing ... Read More
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