Tesla Strategy - Current

DeBeers Diamonds: External Analysis [1 page]

General Environment (several most prominent areas of interest for this company)

Demographics: Greater availability. Men and women of all ages are now being targeted in the market as potential buyers of diamonds for jewelry other than engagement rings. Levels of discretionary income have also been increasing as a result of dual-career couples; particularly in the U.S. Financing options make diamond purchases more available to lower income families.

Socio-cultural: Demand continues. Diamonds are highly valued and considered symbols of romance, love, power, and commitment. Besides being used for jewelry and industrial purposes, diamonds can be used as an investment.

Global: Agreements and increased growth. The diamond industry is able to keep prices of diamonds high through formal and informal agreements and relationships. International trade of diamonds is steadily growing. Recent merging of international diamond companies fuels growth.

Technology: Synthetic diamonds. Advances in technology have led to the production of artificial diamonds in labs. Equipment has also been created that can determine the authenticity as well as the clarity of the diamond. The Internet has allowed information about the production and classifications of diamonds to be shared, supporting consumers’ knowledge when purchasing.

Market Structure (several most prominent areas from Porter’s 5 forces for this company)

Suppliers: Medium threat. Countries providing land for diamond mining can somewhat control profit margins of diamond companies because of extraction charges and land expenses. Governments may choose whether to allow diamond mining in their countries. Potential to threaten industry’s controlled supply of diamonds.

Buyers: Low power and high switching costs. Due to the controlled supply and high demand for diamonds, prices are set high for those attempting to buy diamonds from companies such as De Beers. Switching costs may be high as a result of limited diamond holders, many potential buyers, and potential risks of switching.

Substitutes: Low threat. Sales of synthetic diamonds being produced in labs, other gems being mined and sold that may be cheaper, may lead to decreased demand for diamonds. However, real diamonds are still considered rare and valuable and hold significant meaning.

Potential New Entrants: Moderate barriers to entry. New diamond reserves have been found in numerous countries. Companies have the potential to enter the market with relatively small costs, which would include equipment and labor. Many retailers have entered the market over the past decade and will continue to do so.