Table of Contents
Introduction
De Beers is involved in exploration, mining, retailing and trading of diamond. Currently, the firm is active in large scale alluvial, open-pit and deep sea and coastal mining. It has its operation in over twenty eight nations (De Beers, 2017a). De Beers provides range of services such as diamond marketing, promotion and community development. On the other hand, the company has a strong presence in the diamond market as both a monopsony and monopoly of diamonds. Approx 35% of rough diamond production of the world is sold by De Beers through its auction sales businesses and global sight holder sales (De Beers Group, 2017b). The key objective of the study is to determine the correlation between the structure of the company and external and internal factors. Therefore, analysis and critique would be presented in relation to the De Beers structure.
Mission of De Beers
The mission of De Beers is to become the leader in the jewelry retailing industry in order to release its own image from just the engagement event by expanding the range of products to other precious gemstones. Moreover, the company aims to turn diamond dreams of the consumers into lasting reality. Therefore, De Beers focuses on maximizing the potential of its universal partnerships, the skills, the commitment of its employees and emotional value of its products. It has been identified that in order to attain the mission, De Beers considers five values under its corporate system which are: be passionate, pull collectively, establish trust, show care and shape the future (De Beers Group, 2017c). It supports the organization in providing lasting satisfaction and benefit to its customers and stakeholders through quality and unique production of diamonds. The offering of high quality and good branding such as collaboration with celebrities allow the company to maintain its global market share which ultimately contributes in the growth and future expansion of De Beers. It can be further discussed that for achieving the mission, the company promotes diversity of its people and their skills and experiences for carrying out the business activities as a responsible corporate citizen. It contributes in strengthening the brand of the company globally, which helps in engaging more number of customers across the world. On the other hand, de Beers considerably cares for the community, nations and the environment. The firm thinks about the consequences of what they do so that their contribution to the world is real and lasting. Therefore, it can be illustrated that De Beers ‘mission not only focuses on becoming the top leader in the diamond industry and market, but also potential contributor in the growth and development of economy and community.
Concept of Uncertainty in the external environment
The concept of uncertainty, which has been in a focus in numbers of research, emphasize on the characteristics of the link between the organization and its surroundings. With the enduring increase in environmental complexity and dynamism, the environment in which the companies operate would become increasingly uncertain (Sanchez-Peinado & Pla-Barber, 2006). According to McMullen and Shepherd (2006), uncertainty means that decision makers may not have required information about factors of environment and would have limited time to predict external changes. It is studied that lack of understanding of uncertainty can increase the risk of failure for the organizational retorts and can make it tough to ascertain costs and probabilities, linked with decision alternatives (Slangen, & Van Tulder, 2009). The uncertainty in the external environment can be related to competition, customers, resources, technology and laws and regulations. One of the uncertainties that can impact the organization effectiveness is market performance. It can be imlied that if a firm does have a clear idea about the demand and supply system in the particular market, there is high tendency that a firm can fail in meeting the requirement of the customers and the market (Eisingerich, Bell & Tracey, 2010). It is evident that the likes and dislikes of the customers change rapidly. If the consumers are not satisfied with the products offered to them or do not meet their expectations, they can shift their preferences to other similar products which meet their perception. Customer uncertainty can add to indecision on purchasing the product of the company (Reimann, Lünemann & Chase, 2008). Therefore, De Beers may also find problem in realizing the actual demand and preference of the customers which can impact their sales and income. The uncertainty related to customers can be measured by ascertaining their behavior and expectations to specific product ranges. It would be important for the organization to anticipate the changes in the customer’s product needs so that their demand can be timely fulfilled.
The other uncertainty in the external environment can be the competition. De Beers can face significant competition in the global diamond market. The company may not have complete knowledge about the next move of the competitors which can negatively influence the business of the particular firm (Feil & Musshoff, 2013). Due to vagueness about rivals’ marketing activities, the companies like De Beers may take ineffective marketing decisions for its products. As a result of this, the firm may lose its sales, customers or market share to its competitors which can impact the overall business of the organization in the long run. It could be pointed out that the organization is required to know all the potential rivals, their organizational sizes, competitive advantage, offshore development, skills pool, etc (Li, Poppo & Zhou, 2008). It can help the firm to counter the uncertainty associated with the competition. On the other hand, the competition uncertainty can be measured by analyzing the current and future growth prospects of the rival firms nationally and internationally and their interactions with the customers.
The imposition of laws and regulations by the government can be an uncertain element for the company. An organization may be clueless when the government in power can alter the current rules of business. De Beers can also be uncertain about the changes in laws and regulations related to mining. This in turn, can increase the costs of the company which can affect its total earning and can also impact the total production of diamond. Furthermore, the government may impose additional taxes on high carbon emission anytime about which the firm may be indecisive (Julio & Yook, 2012).
Due to vagueness about the law imposition, the company may require to invest high capital in costly technology which would be difficult to cover the cost quickly. Therefore, uncertainty related to laws and rules can impact the business prospects and can limit the company to increase their operations in international boundaries. Such kind of uncertainty can be measured by maintaining a relationship with the government and abiding by the legal system. It can help in understanding when the possible changes can be made in the business rules and regulations (Porta, Lopez‐de‐Silanes & Shleifer, 2006). As a result, the company can prepare for a plan accordingly to deal with the situations.
Further, it can be discussed that if there is high uncertainty, the interconnections between the organization and the components of the environment can be unclear. Therefore, high level of uncertainty can make it difficult for the management of De Beers to take strategic decisions. According to York and Venkataraman (2010), organizations that face uncertainty, generally encourage collaboration and cross-functional communication in order to support the firm in adapting to changes in the environment. The uncertainty in the external environment by and large impacts the function of the firm in greater terms which may force them cut down their production or invests more than the requirement (Marcus, Aragon-Correa & Pinkse, 2011). For dealing with the uncertainty in the external environment, De Beers would require to ensure that its organizational structure is effectively designed. It is known that internal design of the company is directly influenced by the uncertainty and stability of the external environment. The company would require building an inter-organizational linkage effectively (Knoben, 2009). It would be imperative to place the right executives and staff at different departmental ladder. Having an effective positioning of people at top position would help in dealing with the uncertainty either related to market, economy or other. Moreover, executive and management teams at De Beers would require to be defined. Managers and executives would be responsible to ensure that each business unit attains the goals of organization. It may include one or many top executive in overseeing the overall company and managers to direct each business unit within the structure of the organization. On the other hand, De Beers would require having market research team or department in its organizational structure that would be responsible to measure the uncertainty, related to different factors which can have impact on the business.
For dealing with the high level of uncertainty, the organizational structure of De Beers is required to be designed by understanding the capability of company and its employees that are needed to be positioned at different authoritative levels. It would help the company to develop the strategies to counter each uncertainty respectively (Ellis & Ybema, 2010). Moreover, the overall chain of commands for the organization shall be designed. It can be effective in making the organization strong internally. This can help in dealing with different uncertainties that have been analyzed. De Beers can also focus on maintaining interdepartmental relationships as it can be effective in preparing plan which can help in countering issues related to market, competition or customers.
Corporate Strategy
Corporate strategy explains the overall direction and extent of an organization and the manner in which its range of business activities work collectively to attain the specific objectives. 7S framework model can be used for formulating strategies. It would be effective for De Beers in assessing and monitoring changes in the internal situation of the company. Considering the model, the firm would require to devise a strategy for building and maintaining competitive edge over the competition. For building the business strategy, the firm would need to have clearly defined competitors and price-quality points. It would be effective in supporting the functional strategy of the organization (Hanafizadeh & Ravasan, 2011).
De Beers can be able to focus on its marketing strategy to retain the market share and customer base globally. Moreover, the strong distributor relationships can be developed which can help the company to strengthen its place in the worldwide market among the competitors. The second element of the model is structure. It is important for De Beers to organize its structure in a way which can assist in carrying out the business operations effectively. De Beers would require to focus on its overall communication channel in order to maintain high coordination among different department so that integration of information can be fostered across the organization. Organization structure of De Beers supports in forming a healthy work culture at the workplace which helps the management to develop talent management strategy (The Official Board, 2016). It allows the company to focus on its human resources and provide required facilities which can help to perform tasks and coordinate with other employees. Furthermore, the firm is able to institute HR policies comprising of incentivizing which encourages the teamwork, which ultimately contributes in the growth of the organization.
The third element of the model is systems. Focusing on this aspect, the company is able to formulate day to day management systems. Procedural measure is placed along with regular feedback and reports are provided at the subordinate level to inform about results. Moreover, De Beers is able to design daily activities and procedures to conduct the activities of mining and production of diamond. Further, style is the fourth element which supports the organization in leading the team towards achieving the objectives. De Beers develops strategies to provide accelerated and meaningful learning opportunities to its staff so that they can contribute in the quality production and supply of products to the global customers (Anglo American, 2016). Moreover, the company focuses on making its employees both cooperative and competitive. This in turn, enables the company to devise plan to coordinate and align the activities of the workers towards organizational goals. The fifth element is the staff engaged in the 7S model which supports the company to understand the skills and capabilities of its employees. It allows De Beers to make strategy to engage its best personnel and retain them which can help in continuous growth of the company. It develops performance management systems so that employee turnover can be effectively countered.
The sixth element of the model is skill. Focusing on the set of skills and competencies of the workers, De Beers is able to design training and development programs. It would assist in obtaining the superior outcome from the staff for the operational purpose (De Beers, 2016). On the other hand, the shared value of the model is another element. De Beers is able to set innovative approaches for attaining the goals. The company can formulate core values which would help in uniting the employees for the future success of the organization.
We can do it today.
The core competencies of De Beers are promotion and productively controlling the widespread diamond sector with a product of both esteem and eminent quality. The company concentrates on promotional strategies such as advertising in order to create strong awareness of its products to the global customers. One of the firm’s main strategic concerning consumer bases has been to maintain a stronghold on consumers with extreme loyalty (Crowther et al. 2012). Therefore, the core competency of De Beers includes superior quality customer service. The other core competency of De Beers includes superior and unique design of diamond which touches the emotion of customers and strong marketing teams to strongly place the diamond products among the customers. On the other hand, the technical core of De Beers is linked with the application of skills and knowledge, required for performing specific jobs effectively within the organization (De Beers, 2005). The technical core provides support in meeting the core competencies of the company. The technical core includes interpersonal skills, professionalism, reliability and dependability of the workers which help in carrying out the planned business operations efficiently and superiorly, thereby contributing in successful performance.
Further, it can be discussed that it is imperative for De Beers to measure effectiveness of attaining objectives by exercising competing values model. The model includes four quadrants; hierarchy, market, clan and adhocracy. In context to this, the company should use hierarchy for giving the respective authorities and control to the departments and executives for ensuring the effective flow of work. Therefore, for measuring the effectiveness of achieving goals, the hierarchical leaders of the company would need to make sure that proper control and efficiency are maintained with capable processes. In relation to market, De Beers would require to assess the potential competitors, customer’s demand and preferences, etc. It would help in measuring whether the operational and production function of the company is effective in dealing with the market conditions (Vilkinas & Cartan, 2006). Therefore, De Beers would require assessing its market share, growth in profitability and customer base in order to attain the organizational objectives. On the other hand, there can be a situation where the management of the company can face new challenges and would make it to adopt adhocracy. Therefore, the firm may require to include leaders in an adhocracy which would help in taking calculated risks which can ensure significant gains. This would help in measuring the effectiveness of teams to deal with the rapidly changing business environment (Van Vuuren et al. 2007). In regards to clan, De Beers would need to provide flexibility in its rules and procedures and to its people by clearly communicating the shared goals, vision and outcomes. Moreover, the firm would require being loyal to its employees and shareholders for their superior and long-term engagement and collaboration.
Inter-organizational relationships
Resource Dependence: In relation to this, De Beers would require to minimize its dependence on other firms for the supply of important resources. The company would try to influence the business environment for making resources available. However, De Beers majorly depends on exploration and mining for obtaining diamonds (Anglo American, 2016). Therefore, the company is dependent on the natural resources for running its diamond business globally. Further, the company would need to maintain healthy supply chain relationships to produce and deliver high quality end products to the customers.
Collaborative network: De Beers maintains collaborative networks with different international organizations and media houses for promoting the diamond jewelry among the targeted audiences. It is evident that De Beers has collaboration with renowned photographer, Mary McCartney (Crowther, et al., 2012). It helps the company to highlight the craft and unique brilliance of women in making the diamond jewelry. This in turn, supports De Beers to strengthen its brand value among the targeted audiences globally.
Outsourcing: This is one of the inter-organizational relations where the work of designing of the products is outsourced to other small firms which are efficient in manufacturing that particular product. De Beers is expected to strengthen the communication process with the company such that the outsourcing can be carried out successfully (De Beers Group, 2017b). The managers of the company are expected to follow strategies so as to gather knowledge about the rival firms in the global market so as to avoid uncertainty. Furthermore, workplace diversity is to be encouraged so that the team members are able to make use of the innovative ideas, suggested by team members of various cultural backgrounds.
Association and alliance: De Beers can also form marketing alliances with other small companies such that it can advertise its products at a lower cost on the basis of shared campaigns such as direct mailings, co-hosting events and promoting each other through the social networking (De Beers, 2017a). This would help De Beers to identify the actual demand of the customers in the international market and develop strategies so as to meet the growing demands. Furthermore, the marketing strategies would be suitable in order to inform the customers about the new varieties of diamond that have been launched by the company, and to acquire greater market share as compared to its rivals (De Beers, 2005). Forming a strategic alliance would be beneficial for the company to expand its business in the global market.
Organizational structure of De Beers
De Beers has played a leading role in diamond mining, diamond exploration, diamond retail and trading in order to acquire greater market share (De Beers, 2017a). The study reveals that the company enjoyed both monopoly as well as monopsony in the diamond market, but there are several other companies developing in this field in the recent years. The organizational structure of De Beers can be compared with that of the matrix structure where both product and geography or product and function are focused at the same time (De Beers, 2017a). The matrix structure is suitable when both product innovation and technical expertise are required so as to meet the goals of the organization. The matrix structure is followed when the amount of change taking place within the organization is high. The structure helps in undertaking both communication and coordination with the rapid changes that take place. This type of structure enables De Beers to fulfil the rising demands of the customers. It allows the employees to develop management skills such that they are able to make complex decisions within the organization. However, the employees are expected to face the challenge of dual authority which is confusing. Furthermore, the employees are expected to possess excellent interpersonal skills and a great effort to maintain the power balance.
The managers in different departments of De Beers have taken initiatives to train the employees such that they gain the potentiality to deal with challenges in the international market (The Official Board, 2016). Separate workshops are organized in order to provide the employees with the opportunities to deal with live experiences and challenges (The Official Board, 2016). Moreover, the employees are to be clearly introduced with their job roles and the strategies that they need to undertake so as to deliver high quality performance.
De Beers have effectively used both vertical as well as horizontal linkages so as to stimulate its business across the globe (The Official Board, 2016). As part of the vertical linkage, the company has been using enhanced technology so as to determine the level of economic viability of the deposits. Furthermore, the company also supplies tools and equipment for cutting diamonds in the global market (The Official Board, 2016). As part of the horizontal linkages, the manufacturers associated with De Beers cut and polish diamonds and the industries are located in New York, China, India, Namibia and South Africa (The Official Board, 2016). De Beers has gained competitiveness through the presence of the diamond brand named Forevermark which sells diamonds that are rare and responsibly stored (The Official Board, 2016).
Alignment of organizational structure with the uncertainties
The structure of De Beers is considered as similar to the matrix structure where pressure exists in the development of product lines. Moreover, the employees need to possess technical knowledge such that they are able to use the advanced techniques. The structure usually involves a functional matrix and a product matrix where different tasks are performed by the employees within the organization (Daft, 2016).However, the decision makers within the organization would face difficultly in aligning themselves with the external changes that takes place.
Furthermore, the inefficiency of the employees may affect the company’s performance in case the company is not aware of the strategies followed by the rivals in the international market (Daft, 2016). The marketing managers of De Beers have followed the suitable marketing techniques so as to attract the customers towards the collection of diamonds produced by the company. Celebrity endorsements are used in order to help the customers’ gain the visual experience of wearing the diamond jewelries in different occasions (Daft, 2016).This strategy has raised the cost, incurred by the company to prepare the advertising campaigns; but it is expected to help the customers make their purchase decisions. This would bring stability in the marketing management of the company and enable it to gain competitive advantage.
It is evident from the study that the structure of De Beers is linked to some of the inter-organizational relationships such as there are separate departments within the organization, taking care of the availability of the resources. The company works in collaboration with many other firms so as to improve the production process. It has developed a 50-50 joint venture with the mining company Debswana. Furthermore, the investment of De Beers is held by a company named Anglo Amercan Plc which holds 85% of its share (De Beers, 2017a).
Moreover, the marketing campaigns are organized by the company successfully. “Occasion Purchase” is a campaign which is aimed at attracting the male target market. Moreover, “Celebrate her” was a campaign organized for the female customers such that they can make their purchase decisions (De Beers, 2017a).Therefore, the company has been successful in attracting both type of customers who prefer luxury brands. However, the rival companies of De Beers such as Rio Tinto and Alrosa of Russia have developed similar distribution networks so as to attract the customers across the globe (De Beers, 2017a). Hence, De Beers is recommended to bring in innovations in their marketing and distribution techniques such that the customer considers being in a profitable situation to purchase the diamond jewelries, manufactured by De Beers.
Conclusion
De Beers has gained reputation in the field of manufacturing rare diamonds that are preferred by the customers in high society. It aims at maintaining its reputation in the diamond industry by satisfying the customers with its unique varieties of diamonds. However, there are certain uncertainties that affect the performance of De Beers such as the decision makers within the company are not aware of the strategies adopted by the rivals. Change in the preference patterns of the customers can also be considered as another uncertainty impacts the business practices of De Beers. Moreover, there are certain inter-organizational relationships that can be adopted by the managers of De Beers so as to overcome the level of uncertainty. The organizational structure of De Beers is considered to be a matrix structure which involves operations and production techniques to be aligned to each other so as to produce high variety of diamonds. The structure is also linked to the inter-organizational relations that would help the company gain high reputation in the market.
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