indian diamond industry

7/27/2019 Indian Diamond Industry

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Positioning is the act of designing thecompanys offering and image to occupya distinctive place in the mind of thetarget market.Positioning forms the basis of all the other elements of the marketing mix.Branded diamond players credit a lot of

importance to positioning (whether theywant it to be exclusive or common or differentiated) and hence base all their budgets and strategies on it.


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The current nascent scenario of the brandeddiamond jewellery segment in India wouldnt permit many of the branded diamondplayers to move ahead with a very optimisticstrategy, in simpler words; all the players arefollowing a wait and watch strategy, whichwould give them ample time for the currentnascent status of the industry to grow andthegrowth would help them leverage their statusalso; but at the same time, also important is

to continuously maintain the relationship withthe brand so as not to lose the essence.


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Besides the designing of the diamond jewellery,also important is the estimation of demand ofpositioning the jewellery at the outlets (i.e. which

type of jewellery and quantity to be positioned atwhich outlets and in what price range) the mostpopular method is the constant feedback from thesales team which gives not only a clear picture of

what is the latest trend, but also an idea aboutcompetitors sales. Some of the currently followedmethods of demand estimation includeconducting of a formal market research(usually byan independent organization with a view to avoidbias) and use of Management Information System(MIS) software which technically prioritize areasgeographically, based on purchasing power parityand decide what goods to be exhibited in the

respective counters.


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Branded diamond players follow three basicmethods of pricing their jewelleryExclusive pricing: Price the jewelleryexclusively without any inhibitions regardingcompetitors prices, aiming to be perceivedexclusively by consumers.Competitor-based pricing: Pricing the

jewellery based on competitors prices andadjusting prices (either higher or lower) inaccordance with then competitor Consumer-based pricing: Taking views fromthe consumers regarding the prices theywould be ready to pay for the jewellerythey aspire.


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Besides self-pricing, another important aspect for thebranded diamond jewellers is the impact of pricechanges by competitors, some branded playersreact immediately and also follow the same trend;others react by introducing attractive offers (freegifts, vouchers etc.), some others do not react all,mainly because of the willingness to be exclusivelyperceived and not reactive to competitors pricechanges; all this again indicates the positioning of the

brand, which is one of the most importantparameters of branding a product, especially inbranded diamond jewellery.Some other methods of differentiated pricing involvehaving tie-ups with popular banks and provide easyinstalment schemes to the consumers, mainly tocompete with the offering of credit periods by local jewellers (an alternative to paying upfront, allowingthe consumer to pay a remainder of the amount at alater date).


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The External Environment : The analysis of the externalenvironment is related to the opportunities and threatsthat the industry should be prepared for.

The opportunities the Indian diamond industry couldutilise include the growing domestic demand for diamond jewellery and tapping potential newer markets in Europe and Latin America.The threats facing the Indian Diamond Industry includethe entry of countries such as China, Sri Lanka andThailand in the small-sized diamond segment, the over dependence on single-channel suppliers such as theDiamond Trading Company (DTC, the marketing arm ofthe De Beers Group) and most importantly, theemergence of newer substitutes such as syntheticdiamonds (cubic zircon, HPHT etc.) which are muchcheaper than the real diamonds.


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Entry barriers are economic and technological forces that

prevent outside firms from competing in an industry. Thesebarriers protect existing competitors from outsidersattracted to join the industry, some of whom might behighly diversified and powerful. If entry barriers are low,threats from potential entrants are viable because

outsiders can easily come into the industry and increasecompetition within it. This reduces the total profits industryparticipants can share. If entry barriers are high, outsiderscannot easily join the industry. This protects the industryand its profits.

Entry barriers depend on technological and commercialrelationships within the industry. The most important barriersto entry are cost advantages, product differentiation,access to distribution channels, and miscellaneous barrierssuch as patents and monopolistic control over raw

materials.


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Competition and profitability within an industry also dependon the intensity of rivalry among existing competitors.Competitive rivalry consists of dynamic moves andcountermoves by competitors to attract buyers and capturea larger share of demand. Every time one firm makes a

strategic move it can expect its competitors to retaliate. Thisretaliation may take the form of changes in product designs,promotional strategies, packaging, advertising, and prices.Price reduction is a commonly used competitive strategy.However, price wars reduce total industry profits by reducing

industry revenues. Thus, fierce rivalry within an industry can bedetrimental to its profitability. Rivalry among competitorsdepends on several factors. They include the number ofcompetitors and their relative power and size distribution,industry growth rate, fixed and storage costs, switching costs,size of capacity augmentation, diversity of competitors,stakes of individual competitors, and exit barriers.


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Substitute products erode the sales and revenuesof the industry. They may even eliminate demandfor an industrys product altogether.Industries with products that can be easily

replaced by products from other industries arealways under revenue and profit pressures (e.g. Ballpens eroding the market of fountain pens, andsynthetic diamonds like Cubic Zircon as against thereal diamonds). Besides product substitution,another form of substitution (substitution of newraw materials, components, and subassemblies)can create pressure on industry profitability andcompetition by directly affecting the cost ofmanufacture.


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Buyer power refers to the ability of purchasers toget favourable terms of trade with sellers. Powerfulbuyers can get attractive price discounts, better credit terms, better product quality, and moreproduct support services from industry suppliers.Because these concessions are costly, they havethe effect of reducing industry profits. Buyersattempt to get the best value for their money, andby so doing they put downward pressure onindustry profitability.The power of buyers depends on several factors:buyer concentration, degree of productdifferentiation, buyer switching costs, access tobackward integration, impact of the product onthe buyers product quality, and the amount ofinformation available to the buyer.


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Suppliers of raw materials (the DTC in the case of theIndian diamond industry) influence industryprofitability and competition by affecting the cost ofsupply. If suppliers are powerful, they can obtain highprices for the raw materials they provide. They mayalso negotiate favourable terms of trade. They candecide product features, packaging, paymentschedule, credit terms, transportation, delivery costsand schedules.The bargaining power of suppliers depends on thesame variables that shape the bargaining power of

buyers. These include concentration of suppliers,importance of industry to suppliers, threat of forwardintegration, access to other sources of supply, andthe nature of labour supply.


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Despite increase in rough diamondprices over the last year and also issuessuch as transfer pricing, excise duty onbranded jewellery and the newlyintroduced value added tax, thediamond industry has performed verywell, especially in the jewellery sector

which is the future of the industry.


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Some other basic facts about the Indian DiamondIndustry:Exports of Cut and Polished diamonds form 14% of thetotal Indias foreign exports (US$ 11.2 bn out of US$ 78 bn),total gem & jewellery exports US$ 15.7 bnWorlds largest diamond cutting and processing centre: Estimated workforce 800,000 skilled craftsmen60% global market share by volume and 80% by volume94% of global workers in diamond are Indians11 out of every 12 diamonds polished pass through Indianhands50 banks provide US$ 3 bn creditManufacturing and sales offices worldwideDiversified into jewellery manufacturing since 1990(Diamond Jewellery market inclusive of exports: Rs. 13,000

crores approx.)Conglomerate of family businesses, thus committed andenterprising


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With the exponential growth the industryhas achieved over the past years, thefuture is also equally bright for the Indiandiamond industry. The global presence

and recognition for Indian diamantairesover the years has been amazing,coupled with the positive vibes theIndian economy (GDP growth, increasein awareness levels) is expecting fromthe future; India is surely tending tobecome the global headquarters for diamond and jewellery.


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Infrastructure development: 19 more specialeconomic zones (SEZ) approved (one SEZ speciallyfor Surat in Gujarat), this would greatly facilitateexport

Setting up of the Bharat Diamond Bourse (BDB) tocentrally locate diamond trading operations andwould greatly benefit the Indian industryDiversifying into jewellery using state-of-the artmanufacturing facilities in export/economic zones,special economic zones to provide one-windowclearanceGreat growth curve for the branded diamond

jewellery segment, coupled with the growing levels ofconsumer awareness; the branded segment is sure togrow. Indias jewellery market is the worlds fastest growingmarketValue-addition capability and investment in

technology would give Indian diamantaires the realedge


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Emergence of China as a manufacturing alternativeGreater use of Information technology, the currentuse if very limited compared to the other industriesNeed to move from production/ manufacturingorientation to marketing led businessEmphasis on operational and ethical standards tobuild world class organizations; more investment in

employees required, greater abiding to the DTCsBest Practice Principals (BPP)Co-ordination amongst all stakeholders producer,

manufactures and retailers to protect and increasediamond industry reach

Forward integration into brand building (B2Csegment) very much required for all leadingdiamantairesReduction in credit period, Indian diamantaires offer the largest credit period in the world to their buyers


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Growing demands of the single-channel supplier (the DTC), increasing rough pricesSaturation of the US & European retail industries,newer markets need to be tappedProductivity levels in diamond processing need tobe increased as newer players like Sri Lanka andThailand are also entering in the small caratsegmentInvestment into greater use of technology, better

jewellery designs and into research anddevelopment (of gaining expertise in cutting

bigger diamonds as well)The India diamond industry if able to overcome theabove challenges would surely be a force toreckon with.


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http://timesofindia.indiatimes.com/news/business/india-business/Surat-diamond-

industry-http://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdf www.moneycontrol.com www.wikipedia.comwww.gjepcindia.org
http://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdfhttp://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdfhttp://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdfhttp://www.moneycontrol.com/http://www.moneycontrol.com/http://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdfhttp://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdfhttp://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdfhttp://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdf


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