Study Of Diamond Industry & Impact of Technology in it.

Executive Summary:
The Indian diamond industry thrives in the atmosphere of secrecy and
informality that envelops the diamond trade and has for long been labelled as
an unorganized sector of the economy. However, it resembles a close-knit
community composed of thousands of small, medium and large sized CPD (cut
and polished diamonds) units and has grown to become one of the highest
foreign exchange earners for the country. The industry exports cut and
polished diamonds worth US $ 22 billion annually and enjoy a 93 % market
share of the global exports of cut and polished diamond pieces. An in-depth
study of the industry reveals that the so called unorganized sector is in fact
highly organized and has great potential to offer useful insights to the field of
management in terms of new forms of organizing, networking, business
processing and for doing international business. It includes insights about the
remarkable rise, growth and the unique working of the industry
The Indian diamond industry received significant attention in the media
recently because about a hundred thousand workers lost their jobs in Nov
2008 when panic followed due to the impact of recession. While we
acknowledge the sensitivity and gravity of the issues and the need of reforms
to address them, this paper is an attempt to draw useful insights for the field
of management with a balanced perspective on the industry. Due to the
manner in which the Indian diamond industry has organized itself and grown,
coupled with the kind of signals of recovery which have followed after the
severe recession, we believe that this success story of long waits to be
documented in the business management literature.

Diamond is an 'export-led' and 'value added' industry. The industry depends

entirely on imported raw material, namely, rough diamonds, generally referred
to in trade parlance as “roughs”. The diamond exporters have developed a
global outlook, as theirs is an export-oriented and import-dependent industry.
In order to excel, they have to overcome necessarily competition from
manufacturing and cutting centres in other countries. India is the biggest
diamond cutting and polishing centre in the world.

Our study revealed that a few enterprising Indians who went to Antwerp
agreed to bring to India the left-overs of diamond rough for polishing. These
were very small pieces of diamonds called as ‘grains of sand’ in diamond
terminology. The entrepreneurs from Gujarat in India, utilized this opportunity
to develop indigenous methods of cutting and polishing of diamonds in small
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factories (CPD units). The finished product, the processed diamond was then
exported to the globally centralized trading market which existed in Antwerp.
This was like outsourcing of low-valued diamond rough to an under developed
country in those times.

The prices of rough diamonds have increased sharply in the recent times
pushing down margins further. Companies have started to look at more
technological advance process to reduce manufacturing cost, predict future
trends & understand supplier buyer demand. Thus this project will help us to
understand how much technology has penetrated in the unorganized sector &
how much more can be done to improve it further.

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Study Of Diamond Industry & Impact of Technology in it.

1. Introduction

From time immemorial, India is very well known in the world as the birthplace
for diamonds. It has remained the home of diamonds for over two
millenniums. It is difficult to trace the origin of diamonds but history says, that
in the remote past, diamonds were mined only in India. Diamond production in
India can be traced back to almost 8th century B.C. India in fact, remained
undisputed leader till 18th century when Brazilian fields were discovered in
1725 followed by emergence of South Africa, Russia and Australia. World
famous diamonds such as the Koh-i-noor, The Orloff, The Great Mogul, The
Sancy Hope, Florentine, Nassak, Regent, Pitli and the Nizam etc. were produces
of India and many of these world famous diamonds were recovered from India
in 16th & 17th centuries. It is also said that, India was the sole producer and
supplier of diamonds to the world before the discovery of Brazilian fields till
the 17th century and the later emergence of South Africa, Russia and Australia,
as major producers. The success story of the Indian diamond industry is
unique. From humble beginnings, India rose to become the world leader in a
span of just two decades. No other export segment of the country has such a
significant share in the world market. It is rightly said, that India has indeed
'democratised' diamonds, which in the past were the exclusive preserve of
only the rich and famous.

This achievement of the Indian diamond industry was possible only due to the
fortuitous combination of the manufacturing skills of the Indian workforce and
the untiring and unflagging efforts of the Indian diamantaires, supported by
progressive Government policies. But how did the Indian diamantaires get the
diamonds? The answer to this query lies in the business acumen and core
competency of the early Indian diamantaires who migrated from small towns
of Gujarat (specifically Palanpur in Surat and other nearby areas) to Antwerpen
(in Belgium) which was then the diamond hub of the world, a market
dominated by the orthodox Jews of Israel who claimed expertise in the cutting
and processing of large diamonds (sized more than two carats, 1 carat =0.2
grams). The visionary Indian diamantaires started their trade with the cutting
and manufacturing of diamonds of very small sizes, which nobody was ready to
process (less than two carats, especially one carat and lesser) and gradually
made it their core competency, a niche field in which no other country had the
mastery in; and coupled with the lowest manufacturing and labour costs
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worldwide, India assumed greater market presence in the global diamond

industry.

The area of study of family owned businesses derives its importance from the
huge conglomerate of family run organizations which operate in the diamond
industry since many generations (not only in India, but all the diamond traders
globally are family run businesses); the analysis of which would help to
internalize the attributes that have helped them achieve the stupendous
growth. Family-owned businesses play a crucial role in the economy of most
countries. Much of the retail trade, the small-scale industry, and the service
sector is run by family businesses. Worldwide, family-managed businesses
employ half the world's workforce and generate well over half the world's
GDP. In the United States, 24 million family businesses employ 62 per cent of
the workforce and account for 64 per cent of the GDP. In India, it is estimated
that 95 per cent of the registered firms are family businesses. Some of the
basic traits of family run business enterprises:

• Spirit of entrepreneurship: Family businesses have done an excellent job

of keeping the spirit of enterprise alive especially through the 40 years
of quasi-socialism with their commitment, integrity and aggression. The
spirit survived onerous taxation and repeated government attempts to
undo supposed 'concentration' of economic power. Today, as India
competes in an increasingly globalised economy, family businesses are
playing a major role in turning the engines of growth.

• Trust lowers transaction costs: It is a well-documented fact that 'trust'

lowers transaction costs, corruption, and bureaucracy. Trust can be a
source of significant competitive advantage to a family business, the
entire diamond industry operates majorly on the basis of trust between
suppliers, contractors, buyers and competitors

• Small, nimble, and quick to react: Family businesses, both small and
large, tend to be quick to react to threats as well as opportunities. There
are fewer decision-making gates and constituencies to deal with. Very
often, the survival of the family depends on the survival of the business.
This results in sharp and decisive action in the face of threats that could
be potentially fatal for the business. · Information as a source of
advantage: Many family businesses are private enterprises. This is an
advantage since a private company can see the strengths and

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weaknesses of its public competitor and act accordingly while the

converse is not true. Further, private companies can have private
strategies to which analysts and the competition are not privy. And,
private family businesses have the freedom to pursue truly long-term
strategies that are not constrained by 'quarterly reporting'.

• Philanthropy: Lastly, Indian family businesses have played a significant

role in giving back to the community. To the average Indian, names of
large Indian business groups are synonymous with philanthropic efforts
in education, environment, health, culture, heritage conservation and
upliftment of people of their community. And it is not just the large
groups that have been active; numerous foundations engaged in
charitable work are supported by scores of small and medium family
enterprises. However, continued success for the family businesses is not
guaranteed; in order to prosper further, the family owned businesses
would clearly need to improve on many fronts.

• Higher standards of corporate governance: Family businesses need to

clearly distinguish between family interest and company interest. Good
corporate governance in family business should promote the long-term
good of the company and not necessarily of the majority or minority
stakeholders. It is essential for family businesses to acknowledge the
distinction between ownership and management and above all; the
perception of fairness should reign. There needs to be emphasis on
attributes such as ethics, values, orals and meritocracy.

• Long-term, performance-focussed strategies: Family usinesses tend to

build 'long-term strategies' that assume that today's business model and
assets that will not be valuable tomorrow. Long-term strategy means
emphasis on core competency, investing in technical capabilities,
employees, R&D, brand building, and acquisition of customer
knowledge, which are surely one of the most globally competitive
parameters.

• Modern management and technology: Family businesses should strive to

hire the best people, and be capable of recruiting and retaining outside
professional talent. In a competitive world this is a sine-qua-non. The
inability to professionalise management can lead to family businesses
being shut out of sectors that require complex management, scale and

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constant technological improvements. Family businesses will need to

constantly seek and embrace the latest technology and productivity
enhancing techniques such as improvements in Information Technology,
TQM, Six Sigma, et al. Clearly, for Indian family businesses, the path to
sustained excellence is one that requires willingness to change, learn
and excel. However, there is no doubt that Indian family businesses will
be able to make the transition and, thus, play a vital role in contributing
to India's development.

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Study Of Diamond Industry & Impact of Technology in it.

2. Industry Overview

a. The Global Spread

The diamond industry is truly global. The raw material which is the diamond
rough is not mined in India but in different pockets around the world as in
Africa, Russia, Australia and Canada. This is imported by different countries
where it is cut and polished. Fig 2 and 3 depict the global percentage share
by value, of regions and countries which produce rough diamonds and of
those which import this rough in 2009. The finished product has since long
been traded mostly in Antwerp, Belgium, and exported to different parts of
the world, the major consumer being the USA.

Fig 2

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Fig 3

b. The Incredible Growth

Gradually, over a span of four decades, there was an increase in the size of the
industry, and in the number of CPD units in India. The secrets of this business
were shared with and restricted to the members of a local community in
Gujarat. The community members were largely simple, religious and possessed
very little formal education. Personal discussion revealed that those who were
interested in going to school were attracted towards diamond business and
dropped out of studies. In spite of absence of management education, unique
management styles and organizational skills were developed. They tirelessly
worked on upgrading the skills of artisans as well as on the techniques of
diamond processing. As these Indian firms (CPD units) increased in size, they
moved up the value chain and set up their own trading offices in Antwerp.
After creating a niche in the diamond arena with small diamonds, some of
these units developed skills and technology for cutting and polishing larger
stones and fancy cuts. Improved technology and product quality helped ‘in-
sourcing’ of higher valued raw material, the larger sized diamond rough to
India. The firms eventually developed a worldwide marketing network of
global suppliers and clients on their own. The entire process, by the dawn of
the 21st century, led to a shift in the global production base of diamonds to a
country which by now had transformed into an emerging economy. On Aug 1,
2005, the Financial Express reported, “The Indian gems & jewellery (GJ)
industry is one of the most important segments of the Indian economy.”

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Study Of Diamond Industry & Impact of Technology in it.

“About 12 lakh people out of the total of 38 lakh population of Surat city
earned directly or indirectly from diamond industry in 2006”, said a local
industry report. The enterprising Indians were successful in leading the
remarkable growth of the CPD industry from 0.12 billion US$ in 1975-76 to 14
billion US$ in 2008-09.

Networking of CPD Units

Different categories of CPD units are equipped to cater to cutting and polishing
of different categories of diamond rough. Often, the large CPD units have
subsidiaries and outsource the smaller and lower quality rough to the smaller
CPD units. Discussions revealed that the imported diamond could pass through
different channels before being exported. It is possible for a large
manufacturer to directly import, process and export the diamond. The medium
sized CPD units may depend on the traders and brokers who are involved in
the intermediate buying and selling. There are several small units at the lower
end of the chain which participate in the Heera Bazaars to collect their share of
the diamond rough for polishing.

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Study Of Diamond Industry & Impact of Technology in it.

A Unique Transactions System

Trading across various levels between importers, exporters and

manufacturers is carried out through thousands of brokers on open streets
in markets called ‘Heera Bazaars’. Diamond packets worth millions of
dollars continue to exchange hands without formal receipts in such There
are Heera Bazaars located in different parts of the state of Gujarat which
cater to the nearby CPD units. The rough diamonds as well as the polished
ones are traded here. It appears impossible to track and account for the
exact number of such transactions or the number of people involved in
them, however, they seem to be well-connected to the industry network
and are engaged optimally to produce the overall output of the industry.

The transaction of diamonds is carried out through special mechanisms. The

transportation of diamond packets, both rough and polished, is largely done
through angadias. Angadias are people, members of Unja Patels , a local
community who have specialized in carrying diamonds safely within the
industry for a period of over four decades and have achieved
trustworthiness of the highest order. There are often no written contracts,
many transactions occur in cash, and stones worth millions of dollars are
transported with virtually no security. The angadias could also be carrying
these diamond packets in their pockets & travelling in economy class of
train. The whole industry they say works in trust.

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3. Growing Software Technologies in Diamond Industry

Research Methodology

Need and significance of the study:

The diamond industry occupies an important position in the Indian economy
and is one of the fastest growing industries in the country. Hence the research
conducted will help in

• To understand the factors leading to the success of this unique industry

• To understand the impact of different technologies used for cutting &
polishing of diamonds
• How much IT industry have contributed to this unorganised sector
• To understand how much capital the industry is ready to invest in IT.

Objectives of the study

• To understand the factors leading to the success of this unique industry

• To understand the strategies & structures used in this unorganised
sector.
• To understand the impact of different technologies used for cutting &
polishing of diamonds
• How much IT industry have contributed to this unorganised sector
• To understand how much capital the industry is ready to invest in IT.

Limitations of the study:

• The research is only conducted in Mumbai & Surat.

• The sample size is only 100 which do not give a comprehensive result

• Sector is highly dominated by unorganised market.

Sources of Data Collection

The study undertaken will be mainly based findings from that will be collected
from primary data i.e. through the structured questionnaire which has been
designed especially for this study. The study also contains secondary data i.e.
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data from authenticated websites and journals for the latest updates just to
gain an insight for the views of various experts.

The data collected is then coded in the tables to make the things presentable
and more effective. The results are shown by tables which will help me out in
easy and effective presentation and hence results are being obtained.

Data analysis & interpretation

Q1. From how many years you are into diamond trading business?

Interpretation:

This question was asked to get an rough idea average years the target
audience have worked in this industries. Our main aim was to fill these
questionnaires who are working in these industries for more than 6yrs. The
above clearly shows us that more than 90% of people have an experience of
more than 6yrs. Infact more the 70% are above 11years of experience which is
very good for the research we are conducting.

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Q2. Which of the following defines you?

Interpretation:

This question was asked to understand out of our target audience who has the
actual ability to by software technologies & implement it on a high scale. From
the above graph we can clearly state that around 80% of audience were
manufacturer, who actually have the ability to buy software & use it for their
day to day business.

Q3. Do you own website which can sell diamonds online?

a. Yes - 69 %
b. No - 31%

Interpretation:

When we asked this question our primary aim was to understand the
difference between people having a static website or a realtime website.
Around 80% of people said they are having a website, but when asked about
selling diamonds online at realtime only 69% of people said yes. Thus we can
conclude that people working in this industry have the knowledge of
technology but they are not using it on a full fledge basis.

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Q4. Do you feel that IT Software will help you increase your business?
a. Yes – 78%
b. No - 22%

Interpretation:

This question was asked to understand the mindset of people working in this
industry. This will help us to understand the acceptance level of the people in
applying technology. When 78% of people said yes it will help them to improve
their business we can conclude that people are ready for accepting technology
& they know it will help them to grow in their business.

Q5. Tick from the following list of companies you know which makes diamond
related software

Interpretation:

This question was asked just to know whether they are aware of IT companies
present in the market who specially makes customized software for diamond
industry. So when people responded it was properly divided among the
companies which actually make diamond software, of which lemon is the
oldest company present & most of the people recognize it. It was followed by
the most recent n innovative company Fauna technologies.
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Q6. Please tick the below modules applicable to you?

Interpretation:

The aim for above question was to understand where the actual need of
software requirement is is there which people working there can think
of. And the results were quiet clear, most of people felt to have a
diamond software which will help them in Inventory management, Sales
&marketing, Pricing & customer relationship management (CRM). If we
club the entire thing we can easily come to a conclusion that mostly they
require post manufacturing software.

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Q7. How much % of revenue you invest in IT- software every year?

Interpretation:

This question was the first when we asked them about their revenue. This
question was aim to understand the amount of money they are willing to
spend in software. This question was important as it will help us in research to
understand that whether people are ready to invest or not & if yes how much
they are willing to spend. Majority of the people came in the range of 2%-5%,
this shows us that most of them want to have diamond software but when it
comes to actual spending of money the percentage reduces dramatically.

Q8. Do you use any IT software for supporting your business?

a. Yes – 37%
b. No - 63%

Interpretation:

This question was asked to understand whether they are currently using small
software. The answer what we got 37% of people are using inhouse software
which is helping them for small day to day work. The figure which came was
really good as we can clearly sees that average numbers of people are actually
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using the software, so it’s not that no one is using it or very few people using it.
Thus we can conclude that market is really open to bring in good products
which will be easily acceptable by the industry.

Q9. How much % of revenue you invest in Hardware Technology every year?

Interpretation:

This question was aim to understand the amount of money they are willing to
spend in Hardware technology. This question was important as it will help us in
research to understand that whether people are ready to invest or not & if yes
how much they are willing to spend. Majority of the people came in the range
of 6%-9%, this shows us that most of them are actually currently using
hardware technology.

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Q10. Which of the following hardware technology you used?

Interpretation:

This question will help us to understand which technology is mostly used by

the industry. We can clearly see that smart eye & RFID is the hardware
technology used by most of the industry people. Barcoding is the old
technology & is outdate as the process is slow in that. Thus we can cleary state
that people working in this industry are well aware of the newly introduce
technology.

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Q11. Tick the number of IT person you have in your office?

Interpretation:

This question was asked to understand of how many average numbers of

people are working in one particular company. Maximum range came in
between 5-10ppl. This actually shows that people are having in house software
which they are using. This also signifies that people are not afraid to hire
software people & meet their requirement which is to reduce their day to day
activity & increase their efficiency.

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Q12. Which of the following certification you do?

Interpretation:

This question was asked to understand whether they are making certified
stones or they are fine with non certified stones also. The above answer clearly
states that most of the organization does the certification, this not only helps
them to sell their stones in India but also outside the India. With the help of
certification the efficiency of selling the stones online also increases.

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4. Online portals & their Impact

• Rapnet

The Rapaport Group is an international network of companies providing first

class, added value services that support the development of free, fair, efficient
and competitive diamond and jewelry markets. Established in 1976, the Group
has over ten thousand clients in 70 countries.

Group activities include publishing, electronic information services and trading

networks, diamond grading and certification, global trading and auction
services, consolidated international shipping, international sourcing, quality-
control and compliance services, financial, research and marketing services.

A primary and unifying focus of the Group are knowledge based information
services that create transparent and efficient markets. Examples are the
Rapaport Price List and Rapaport Magazine, the RapNet – Diamond Trading
Network, GIA LabDirect diamond grading and certifications services and the
Rapaport Fair Trade Jewelry initiative.

The publishing division is best known for its Rapaport Price List. Established in
1978, the Report is the industry's primary source for diamond price and market
information.

The Diamonds.Net internet portal supports our 24/7 Rapaport News Service as
well as RapNet, the world’s largest diamond trading network with daily
diamond listings of 525,000 diamonds valued at over $4.12 billion. While the
Group provides extensive trading services to our clients, we do not trade
diamonds for our own account.

The most important strengths of the Group include our dedicated team of over
100 highly skilled professionals, sophisticated information and data
management technology, global reach, independent perspective and total
commitment to providing our clients with consistent first class service.

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Information That Means Business

Information is the key to your success in the diamond business. You need the
best price, availability and market information to trade diamonds.
You need honest information from someone that is not afraid to tell it like it is.

Rapaport is your best source of information. Rapaport is the international

standard for diamond prices. Our 24/7 global news network, market reports,
in-depth articles and diamond trading data take you inside the market in real
time, online. Rapaport does not just tell you what is happening. We explain
why it is happening and how it will impact your business.

The Rapaport Diamond Report is the primary first-hand source of diamond

pricing information. Rapaport sets the standard for establishing inter-dealer
prices in the diamond market. Buy and sell better diamonds at better prices.
Buyers and sellers deal directly with each other without any middleman
commissions. RapNet connects all players in the diamond industry from
primary cutters to downstream retailers. RapNet is fully supported by the
Rapaport Group. Membership includes direct trading privileges, real-time
access to Rapaport prices, news and analysis, subscription to the Rapaport .

Benefits:
• Real-time 24/7 access to the global diamond markets.
• The best diamonds at the best prices from the best suppliers.
• Buyers and sellers deal direct. No commissions.
• Real time patented Best PriceGrid technology provides the best price
information in the world.
• Customized search engines that let you select exactly the type of diamonds
you wish to buy.
• Diamond Listing Service allows sellers to control who gets their data and
allows seller’s qualified buyers to efficiently download diamond listings to
their websites.
• Online real-time access to Rapaport prices, news and analysis.
• Weekly online access to Rapaport Price List updates.

RapNet is the global diamond market most suitable for professional diamond
dealers who are experts familiar with traditional terms and conditions of the

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international diamond markets. It is the ideal market for buyers and sellers
who wish to deal directly with each other. RapNet provides excellent
opportunities for buyers and sellers to get to know each other and build long
term direct relationships. Sellers post electronic listings of diamonds for sale
by uploading files to the RapNet database. Files with sell listings can be
uploaded at any time in a variety of ways. RapNet buyers search for diamonds
on the internet. The search engines allow buyers to easily specify what they
are looking for and obtain listings of diamonds that can be sorted by the best
prices. Buyers can also post specific buy requests which sellers can respond to
with offers of diamonds for sale.

Information is the key to your success in the diamond industry. Pricing,

availability and market information provides jewelers, dealers and
manufacturers with a critical edge in the complex and competitive diamond,
gem and jewelry marketplace. The Rapaport Diamond Report provides you
with all the information you need to buy and sell better. Rapaport is your key
to increased efficiency and higher profits. Rapaport tells you what is really
going on in the diamond industry and what you can do about it. We identify
the challenges and the opportunities.

The Rapaport Diamond Report is the primary source of diamond pricing and
market information for the diamond industry. It is the international standard
used to establish prices in all the major cutting centers and dealer markets.

RapNet Prices & its Imapct

SHAPE

Price Lists are published for Round and Pear shaped diamonds. Prices are
published every midnight Thursday. The Pear ShapePrice List is often used for
other fancy shapes with varying discounts depending on the shape, size, and
quality. It is important to note that fancy prices are highly sensitive to the
shape and cut of the stone. Poorly cut stones often trade at huge discounts.
The Price List is based on well-shaped, fine-cut stones.

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SIZE

The Price Lists are organized by size, color and clarity. Each size has its own
matrix. Round prices are quoted for sizes from .01 carat to 10-carat sizes and
fancy shape prices are quoted for sizes from 1/5 carat to 5 carats.
Approximate price conversion scales are published for 6-carat to 9-carat sizes
in the monthly Report. Conversion scales are based on percentage increases
from 5-carat prices. Large stones often trade at premiums to the 5-carat list.

COLOR AND CLARITY

Each matrix has a vertical column of colors and a horizontal row of clarities.
The colors are based on Gemological Institute of America (GIA) standard
terminology from D through M. Clarity grades are also based on GIA standards.
We have, however, added an SI3 clarity grade that is not recognized by the
GIA. SI3 is a split SI2/I1 grade. It is included because sellers frequently sell this
grade of stone and trade it in the market. For sizes less than 1/4 carat, colors
and clarities are grouped together, as these stones are most often sold in
parcels.

PRICES

All price indications are quoted in hundreds of dollars per carat. For sizes under
1/3 carats, prices are quoted to the nearest $10. For example, a price of 6.4
should be read as $640 per carat. Sizes of 1/3 carat and larger are quoted to
the nearest $100 per carat. For example, a price of 95 should be read as
$9,500 per carat.Prices that has increased since the last price sheets are in
bold. Prices that have decreased are in italic bold.

INDEXES

For 1/3 carat and larger rounds, there are two Rapaport Diamond Indexes
under each matrix. The first index RDI, W (white) is the average price per carat
of all better-quality (D to H, IF to VS2) stones of that size. The second index
RDI,T (total) is the average price of all the stones (D to M, IF to I3) in the
matrix. The indexes are followed by an = sign and a number that reflects the
percentage change in the index since the previous Price List. All indexes are in
hundreds of dollars per carat.

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CUT

Cut has an important impact on price. A poorly cut, flat or deep diamond is
worth substantially less than a well-cut diamond. The price information in the
Rapaport Diamond Report relates to fine-cut stones as per Rapaport
Specifications. While medium-cut diamonds often trade at a slight discount to
fine-cut stones, poorly cut stones can trade at very high discounts. Prices for
fancy shape stones are highly dependent on the overall shape and the quality
of cut, with very large discounts for poorly shaped or cut fancies.

CUT SPECIFICATIONS

The Rapaport Price List is based on Rap-Specifications-2 stones without strong

or medium fluorescence. nonsymmetrical facet junctions, very wavy girdles,
large naturals, crown angle comments, pavilion percentages, and the
relationship between depth, table, crown, and pavilion are all factors that
affect cut. Fluorescence and graining may also impact market price. The effect
of cut on price is highly specific to particular stones and buyers. It is often
subjective and varies according to market conditions. The specifications sheet
is based on the opinion of Rapaport regarding current market conditions and is
subject to change without prior notice.

FLUORESCENCE

In some instances, high color diamonds are adversely affected by strong and
medium fluorescence, which give the stones a milky white appearance. In
recent years, buyers have discriminated against fluorescent stones even when
there is no milky white appearance. This may be because fluorescence makes
the stone’s face-up color look better and some labs have a tendency to
upgrade the color for these stones. For lower J to M color stones, fluorescence
may have a beneficial impact on color and may help the stone bring better
prices. In some markets, such as Singapore, the right type of fluorescent stones
can bring premium prices.

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GRADING REPORT AND CERTS

Our Price List reflects the value of stones that are accurately graded. Except for
SI3, the price list is based on Gemological Institute of America (GIA) grading
standards. Stones customarily
lab graded by the trade (0.50+, D to K, IF to VS2) are priced based on their
having GIA reports. Prices for smaller and lower-quality diamonds are based on
honest grading. Stones with non-GIA certificates may trade at discounts to
stones with GIA reports.

DTC Sightholder

DTC Sightholders are amongst the world's leading diamantaires, they

collectively handle approximately 75% of the World’s diamonds. Based mainly
in the traditional cutting centres of Antwerp, Tel Aviv, Mumbai, Johannesburg
and New York, as well as in Botswana, Namibia, Russia, China and Canada,
these Sightholders attend the DTC’s Sights, or sales weeks, which occur ten
times a year. Sightholders qualify for DTC supply by means of an objective
process including their ability to add value to the diamonds we sell, their
expertise in particular rough diamonds and their financial and ethical integrity

When you work with a DTC Sightholder you can expect much more than just
diamonds, they are all able to offer differentiated products and services,
exceptional manufacturing expertise all with the assurance of knowing that
they are fully compliant with our Best Practice Principles and all 100%
Kimberley Process compliant.Working with DTC Sightholders can provide you
with a wealth of expertise and resources unrivalled in the diamond industry.
DTC Sightholders can utilise all their experience, insights and resources to work
with you to help develop and deliver upon fresh ideas for consumers and bring
them to your chosen markets.

They may be able to offer:

• Well-established distribution capabilities

• The ability to draw on their own experience and the DTC's extensive
diamond and commercial knowledge to help you identify the most
promising environments for particular ideas
• Insight to market trends and economic developments
• Reliability of supply
• Ethical standing within the diamond industry
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Assured Integrity

It's essential that consumers are able to buy diamond jewellery with the total
confidence that their diamonds are authentic, as well as being free from the
taint of war or exploitation. Without that confidence, you could be putting
your business reputation at risk with some of your most important customers.

All DTC Sightholders must comply fully with the De Beers Diamond Best
Practice Principles. This means that a retailer or manufacturer can be assured
that when they work with a DTC Sightholder they are dealing with a supplier
that abides by the highest standards in the industry. These Best Practice
Principles demand that any treatments applied to diamonds must be fully
disclosed, and that synthetics are not traded as natural diamonds. They also
set business practice standards to ensure that diamonds supplied by those
committed to the Best Practice Principles are free of the taint of conflict,
human suffering or exploitation.

Planning for Growth

The DTC is in a unique position to bring greater consistency and predictability

to the supply chain, and the DTC's Intention to Offer Process (ITO) facilitates
confidence in this consistency and predictability. It provides an individual
indication to DTC Sightholders of the DTC's intended supply to them over a
twelve-month period. Although it does not operate as a guarantee, DTC
Sightholders are able to more effectively plan ahead when entering into supply
and marketing commitments with their customers.

All of which means that when a retailer works with a DTC Sightholder, they can
plan to create consumer demand with greater confidence in the reliability of
the supply of diamonds required to meet that demand.

Choosing and working with a DTC Sightholder

DTC Sightholders are amongst the world's leading diamantaires through their
outstanding commitment to excellence. DTC Sightholders are recognised
everywhere and immediately by the exclusive DTC Sightholder Signature. The
Signature is a mark of excellence backed by the DTC. It represents a
commitment to integrity, to consistent supply, and expertise. Only DTC
Sightholders (and their associate companies involved in diamond
manufacturing and distribution) may use this Signature.

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Finding the right DTC Sightholder

The DTC Sightholder Directory is designed to provide essential information on

DTC Sightholders and help a retailer or business partner find the right DTC
Sightholder for their needs. There is an online search facility enabling a search
by name, location and business type. For ease of use, you will see that the
directory is clearly divided by the location DTC Sightholders have facilities and
buy their diamonds. Also they are clearly grouped by Sightholder organisation.

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5. Cutting & Polishing Industries

1) The Diamond 4C’s:

a) Carat
b) Colour
c) Clarity
d) Cut

Every diamond is unique due to its journey from deep depths of the Earth's
volcanic pipes all the way to its manufacturing, ready to be set on a piece of
diamond jewellery. Yet all diamonds have qualities that all share which allows
us to define and evaluate them from one another, called the Diamond 4C's.

The First C: Carat - Also known as Carat Weight is the standard unit of weight
used for gems. Each carat (ct.) is equal to 0.200 grams (200 milligrams).
Diamonds are weighed to 1/1000 of a carat (0.001) and rounded to the nearest
100th or point. Gems weighing more than 1 carat are usually expressed in
carats and decimals. A 1.08 ct. stone would be described as "one point o eight
carats" or "one o eight". A diamond that weighs 0.74 ct. is said to weight
"seventy-four points" or a "seventy-four pointer."

The Second C: Color - A diamond color is measured from D (colorless) - Z (light

yellow tint) color grade. We recommend to stay above I color grade for an
exceptional diamond color. People think that diamonds as colorless but true
colorless diamonds are extremely rare, in fact diamonds used in jewelry are
nearly colorless with a small tint of yellow or brown.

The Third C: Clarity - Diamond clarity is a measure of a diamond's purity.

Imperfections called inclusions or pique are measured from the highest grade,
Internally Flawless (IF), Very Very Slightly Included (VVS1 or VVS2), Very Slightly
Included (VS1 or VS2), Slightly Included (SI1 - SI3), Included (I1 - I3), to the
lowest grade.

The Fourth C: Cut - This refers to the proportions and angles of a diamond's
cut. Based on tested scientific formulas that will give the best brilliance of the
round diamond. A very well cut diamond will reflect light internally from one

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facet to another, thus dispersing and reflecting light like several mirrors
through the top of the diamond. This will result in a brilliant display of fire
bringing a well cut diamond higher on the Diamond Quality Pyramid.

2. Certifications
Independent Gemological Laboratories

A diamond grading certificate is a report given by an independent and

professional gemological laboratory. The diamond is evaluated for its quality,
not its value. Every diamond is unique; to search diamonds that are identical is
impossible. The certificate will map out all the diamond’s recognizable and
individual characteristics. Each certificate will include the diamond’s color,
clarity, and carat weight and cut information (see the 4 C’s). The grading report
also includes a hand-drawn map of the diamond’s inclusions. Since no two
diamonds are exactly alike you can always check that the certificate matches
the diamond.

When it comes to certification and appraisal, you need absolute accuracy,

precision and reliability. That is why our stones are appraised by two of the
most respected laboratories in the trade.

GEMOLOGICAL INSTITUTE OF AMERICA (GIA)

An independent nonprofit organization, the Gemological Institute of America

(GIA) is renowned for its impartial service as the world’s foremost authority in
gemology. The Institute’s history of ground-breaking scientific research,
education, and gemological laboratory services reads as a virtual chronicle of
the industry’s own growth and sophistication.

From 1953, when Richard T. Liddicoat created and introduced the International
Diamond Grading System - to the position the Institute holds today as the most
respected grading and identification authority in the world - GIA has combined
the principles of research, education, and service to help gem and jewelry
professionals around the globe use science and product knowledge to sustain
the public’s trust.

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EUROPEAN GEMOLOGICAL LABORATORY (EGL) USA

EGL USA is one of the largest and oldest independent gemological institutions
focusing on gemstone certification and research. Originally part of an
international network founded in Europe in 1974, EGL USA opened its first U.S.
lab in the heart of New York’s international diamond and jewelry district in
1977. In 1986 EGL USA became independently owned. Today the EGL USA
Group has laboratories in New York City, Los Angeles, Vancouver, and Toronto.

EGL USA is not affiliated with any other EGL labs outside North America. Every
certificate issued by our lab states "A member of the EGL USA Group."
Certificate numbers are preceded by either "US" or "CA," to indicate country of
origin and to provide consumers the assurance that their certificate has been
issued by a member of the EGL USA Group. In 1999 EGL USA initiated a
Research Department to respond to the changing needs of the jewelry
industry. It is one of only a few labs worldwide doing advanced research in
gemology.

EGL USA versus EGL International or EGL Israel

EGL USA is not affiliated with other EGL labs (Example: EGL, EGL International,
EGL Israel, EGL Belgium, EGL Turkey, etc...) outside of North America. There are
other labs outside of North America which are using same name such as EGL
Israel or EGL International (or even some websites call them only EGL) are not
part of EGL USA.

Unfortunately EGL USA is in a legal dispute with EGL International or EGL Israel
which has been flooding the market with diamonds that have not been graded
as stringently. When purchasing an EGL graded stone, be sure to insist upon
EGL-USA only unless you and your jeweler are able to scrutinize the stone in
question very well and be assured it is as advertised. Any EGL that does not
have an EGLUSA logo can sometimes have a 2 or even 3 grades lower in the
color and clarity grades. EGL USA is far stricter compared to other EGL
locations. Each consultation of appraisal issued by the EGL USA lab states "A
member of the EGL USA Group" and certificate numbers are preceded by
either "CA" (Canada) or "US" (United States), to provide consumers the

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assurance that their certificate has been issued by a member of the EGL USA
Group.

3. Laser Inscribed Diamonds

Laser inscription is done by the use of a micro laser beam to etch a
microscopic inscription on the diamond’s girdle of a diamond of carat weight
greater than 0.25. Inscriptions were typically used to give a unique number for
identification purposes. But nowadays romantic messages, dates, names,
poetry and symbols such as "Always and Forever" and "John + Jane Forever"
are getting popular. These messages can only be read under the magnification
which you and your love one can keep to you or share to your friends and
family. DiamondonNet can do this service for you for a measly price. Typically,
up to 16 letters can be inscribed which will cost around $60 depending on the
number of words and the carat weight of the diamond. If you decide to add
this service, just instruct us when you checkout your diamond from our
shopping cart.

4. Smart-Eye
Introduction

Recent advances in machine vision research and computer technology have

now made it possible to measure head pose and eye state with great accuracy
in real time, using video cameras. The latest technique combines a high degree
of accuracy with the possibility of running a system with a virtually unlimited
field of view. Several areas in which this application can be used include
automotive safety research, operator performance evaluation, simulator
studies, psychophysical studies, etc.

Requirements

Realistic measurement scenarios offer a challenge to technical developers. In

order to meet this challenge, the following demands were identified as
decisive in the development of a new system:
• Immunity to difficult light conditions, including darkness and rapidly varying
sunlight.

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• Non-intrusiveness, allowing natural behavior. No strings attached, automatic

profile generation etc.
• Field of view large enough for free and unobstructed head movement.
• Small cameras and flexible camera placement, enabling installation in
constrained spaces such as instrument panels and cockpits.
• No moving parts, such as pan/tilt cameras or motorized iris/focus/zoom
lenses.
• Independent of any particular camera technology. Should be able to run on a
cheap VGA CMOS board camera, as well as high-resolution CCD industrial
cameras.
• Run on standard off-the-shelf hardware (computer, cameras, etc.)
• Modular software with a platform-independent and portable kernel. Use of
standard interfaces wherever possible.

TECHNOLOGY

IR-illumination

In order to cost-effectively maximize performance under extreme light

conditions, Smart Eye Pro 4.5 uses an innovative IR lighting approach, which
suppresses the effect of sunlight and shadows, and enables the system to work
in both daylight and in complete darkness without recalibration.

Multiple view geometry

The Smart Eye method is based on calibrated multiple view geometry. This
means that 3D positions can be triangulated directly by using both knowledge
of camera properties (focal distance, lens distortion) and relative camera
positions. The cameras can thus be placed in more or less arbitrary positions,
which is an absolute requirement for many applications. A 3D head model is
easily generated by using a simple step-by-step guide. The user marks some
landmark features in the face image. Once the system runs in tracking mode,
the 3D feature locations are determined from their previous locations and
motion prediction.

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Continuous tracking

For each set of video frames, the 6D (translation and rotation) head pose is
estimated with a simple and robust method, based on a 3D head model and
tracking of facial features. A major advantage of this new method is that
tracking can continue even with partial or full occlusions in one or more of the
cameras. The system even works with one single camera (monocular), which is
important in applications where hardware costs must be kept at a minimum.
3D distance is then estimated by using the intrinsic camera parameters and
typical dimensions of facial features.

Several trackers

While the face is being tracked, gaze direction, eyelid positions and iris opening
are determined by combining image-edge information with 3D models of the
eyes and eyelids. The accuracy is further refined by the use of corneal
reflection information, when available. If tracking should be lost, a fast face
detection procedure reacquires the head position, and normal tracking will
resume within a few frames.

Smart Eye Pro

Smart Eye Pro has been developed for users who require non-intrusive, high-
accuracy 3D measurements of head pose and eye gaze in real time, and under
realistic test conditions.

Features of Smart Eye Pro 4.5

• Real-time measurement (60 Hz sample rate, system lag typically <50 ms).
• Unrestricted head motion (translation and/or rotation) using up to six
cameras.
• Immunity to external light situation using active IR illumination.
• Flexible camera positioning provides adaptability to various measurement
scenarios.
• Fast camera calibration through a simple chessboard procedure.
• Semiautomatic profile generation
• Occlusions handled gracefully utilizing redundancy in multiple-view cameras.
• Instantaneous tracking recovery.
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• 6 DOF head tracking. Accuracy: Rotation 0.5 degrees, translation <1 mm.
• 2 DOF gaze tracking. Accuracy of gaze-vector: 1 degree.
• Compatible with contact lenses and glasses/sunglasses.
• Eyelid opening in 60 discrete steps, reported in mm.
• Pupil radius in mm.
• Consensus, left eye, right eye and quality values for all results.
• User customizable coordinate system.
• Tools for definition of gaze zones in a 2D or a 3D world.
• Live visual feedback including gaze and head motion in a 3D world model.
• Results in real time via network (UDP/TCP) or serial ports, also in
customizable text logs.
• CAN-bus interface for output data
• Customizable network client, including source code.
• Scene camera for overlay of gaze data on user view.
• Toolkit for synchronizing measurement data with external time sources.
• Remote control functionality for automation of experiments.
• Integration with 3rd party products, such as E-prime, Gaze Tracker & Net
Station.
• Statistical tools for post-processing of measurement data, on demand.
• Development toolkit for customers who want to tailor their own applications.
• Offline analysis of video recordings from Smart Eye cameras
• Scripts for importing logs into MatLab or SciLab

6. RFID

RFID is automated object identification and data capture using radio frequency
technology to communicate between objects and systems. The technology
consists of two main elements – a tag and a reader, that communicate through
radio transmission. The tag contains a small chip and an antenna and can be
placed on any object. Information stored on the tag (such as product type,
product item identification number, manufacturer, expiry date, etc) can be
transmitted to an RFID reader over a distance of a few metres. RFID and
barcodes are currently complementary technologies and will coexist for some
time to come. The advantages of RFID over barcodes (such as no line of sight
required, simultaneous identification of products, increased information
capacity, ability to operate in harsh environments, fast read speed, low labour
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costs, and ability to update/write information to the tag) will result in RFID
being more widely used and pervasive in the future.

The Diamond Supply Chain

The diamond supply chain is an impressive series of linked steps and markets
ending with the delivery of beautiful gems to the final consumer. Upon being
retrieved from a mine, rough diamonds are immediately manually assigned a
Kimberley Certificate Number to track movement of rough diamonds
throughout the world, which are distributed to manufacturers via the DTC and
other producers. Polished diamonds produced by the manufacturers are sent
to the GIA and other laboratories for grading. Ater grading the diamonds is
returned together with a grading certificate to the manufacturer, who then
distributes the goods through various retail channels to the final consumer. In
the Diamond industry, many of the current processes have been utilized for
decades and, although they have served the industry well to date, it is
expected that changes and pressures in the industry will mandate existing
processes being updated and modernized through the use of technology and
further automation

RFID In Diamond Industry

RFID has the potential to revolutionise the diamond supply chain. It is

anticipated that technology and automation will be employed at various and
numerous points in this supply chain. The adoption of this technology will
occur at different times for different stages and processes of the supply chain,
but ultimately all these technologies will converge, linking with and between
each other to revolutionize the diamond industry supply chain

DIAMOND MINE / DIAMOND PRODUCER

RFID tags applied to primary packaging used to track inventory. Sorting

automated and simultaneous confirmation of diamonds received full tracking
of inventory from primary packaging through sorting to secondary article
packaging. Inventory control of each article immediate inventory control by
customer. Viewing record of articles provided to respective customers
reconciliation of what has been taken and/or returned by customer following
selection

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MANUFACTURER/DEALER

Inventory management automated and instantaneous stock counts can occur

as and when required identification of all diamond parcels present record all
inventory numbers without the need for manual processes complete and up to
date inventory list can be generated as required Identification inventory
numbers can be read immediately once the diamonds are placed onto a
customized RFID reader Retrieval identification of specific parcels is achieved
by a handheld reader

DIAMOND GRADING LABORATORY

Automated certificate database full accountability and visibility throughout the

supply chain real time track and trace of goods avoidance of clerical errors, and
reducing time and cost. Improved billing increased efficiency of processes.
Provide non-manual solution for their clients obtaining and importing all the
valuable information from the GIA certificate at the click of a button image of
the GIA certificate that can be provided to customers allow full value of the
GIA certificate to be realized, thus increasing its utility and indispensability

MANUFACTURER

Inventory management automated and instantaneous stock counts can occur

as and when required identification of all diamond parcels present record all
inventory numbers without the need for manual processes complete and up to
date inventory list can be generated as required Identification inventory
numbers can be read immediately once the diamonds are placed onto a
customized RFID reader Retrieval identification of specific parcels is achieved
by a handheld reader.

POLISHED DEALER/RETAILER

Inventory control and management due to stock turn of 1.0 – 1.2, inventory
management is essential. Display optimization and real time store mapping
due to display driven sales generation due to absolute requirement to
maximise sales/£ invested and sales/metre allocated to products. Complete
stock protection due to high value goods subject to theft. Customer interaction
instantaneous product information to increase conversation rate.

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5. Structure, Size and Growth of the Indian Diamond Industry

The structure of the Indian Diamond Industry:

The Indian diamond industry, similar to its origin, is based more in the villages,
towns and cities of Gujarat, where most of the processing facilities are
installed; the corporate operations of marketing and finance for all the
diamond traders takes place from Mumbai, where all the major traders have
their registered offices. Majority of the diamantaires procure the rough
diamonds from the Diamond Trading Company (DTC, the marketing arm of the
De Beers Group, which mines its diamonds in South Africa), which holds the
maximum share of rough diamonds in the world. The DTC sells its rough
diamonds through two channels: in the primary market to preferred clients
called Sightholders, the world’s leading diamantaires, carefully chosen for their
diamond and marketing expertise; and also form a part of the DTC’s Supplier of
Choice program; the remainder of the rough diamonds are sold by the DTC in
the secondary market worldwide. The other companies, besides DTC,
supplying rough diamonds (but to a lesser extent) include Rio Tinto diamonds,
Argyle, BHP Biliton and since recently, Lev Leviev Diamonds. All the rough
diamonds supplied by each of the companies mentioned follow the Kimberley
Process Certification as a proof of its purity, identity and place of origin.

Marketing in Diamond Industry

The secret to De Beers' success is a marketing campaign that has permeated

our culture --convincing every woman that she should receive a diamond ring
from her fiancé and convincing each groom-to-be to pay "two-months salary"
for that ring to show how much his love is worth. Prior to the 1930s, diamond
rings were rarely given as engagement rings. Opals, rubies, sapphires and
turquoise were deemed much more exotic gems to give as tokens of one's
love, according to the book "Twenty Ads that Shook the World" by James B.
Twitchell. Twitchell goes on to describe how De Beers changed the world
diamond market. This idea of connecting diamonds to romance was captured
in a brilliant ad campaign begun in the 1940s, causing demand for diamonds to
increase. Surely you've heard the De Beers advertisement that "A Diamond is
Forever." This ad campaign, which was created by the N.W. Ayer advertising
agency in 1947, transformed the diamond market. In 2000, Advertising Age
magazine named the ad campaign the slogan of the 20th century. De Beers
infiltrated Japan with the same ad campaign in the 1960s, and the Japanese
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public bought into the idea as much as the Americans did. Later ads by De
Beers told consumers to hold onto their family's diamond jewelry and to
cherish it as heirlooms -- and it worked. This eliminated the aftermarket for
diamonds, which further enabled De Beers to control the market. Without
people selling their diamonds back to jewelers or to other people, the demand
for new diamonds increased.

There are fewer than 200 people or companies authorized to buy rough
diamonds from De Beers. These people are called sightholders, and they
purchase the diamonds through the Central Selling Organization (CSO), a
subsidiary of De Beers that markets about 70 percent to 80 percent of the
world's diamonds. De Beers sells a parcel of rough diamonds to a sightholder,
who in turn sends the diamonds to cutting facilities and then to distributors.
Some rough diamonds are sold outside the CSO. These diamonds come from
small producers in Australia, Russia and some African countries. The cost of
these diamonds is still largely influenced by the prices set by the CSO.
Diamonds are the most coveted of all precious gems, as is witnessed by the
extremely high demand for them. While this has not always been the case,
diamonds are nonetheless exquisite gems that go through a long, tedious
refining process from the time they are pulled from the ground to when you
see them in the jewelry store. And, while some of the mystique of diamonds
may be gone -- they're just carbon, after all, the diamond will likely continue to
be a highly coveted jewel, because, well, "A Diamond is Forever." But, as the
saying goes, beauty often comes at a price. And, sometimes, that price goes
beyond the financial realm. In the next section, we'll examine some of the
biggest controversies in the diamond industry.

a) SWOT Analysis of the Indian Diamond Industry:

SWOT analysis is the overall evaluation of an industry’s Internal Environment

(strengths and weaknesses), and External Environment (opportunities and
threats) to understand the present status of the company and use it as an aid
in strategic planning.

The Internal Environment: The internal environment analysis comprises of the

evaluation of a company’s strengths and weaknesses, with a view to analyse its
current status and the areas where it can correct or strengthen itself.

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The strong areas of the Indian Diamond Industry include the large workforce of
skilled craftsmen (about 800,000), lowest manufacturing and labour costs, a
well-distributed marketing network and supportive governmental policies

Weaknesses of the Indian Diamond Industry include areas where it can correct
itself, such as low levels of productivity as compared to places like China, huge
stocking of inventory and thus handling costs and high working capital to be
maintained.

The External Environment: The analysis of the external environment is related

to the opportunities and threats that the industry should be prepared for.

The opportunities the Indian diamond industry could utlise 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 include the entry of countries
such as China, Sri Lanka and Thailand in the small-sized diamond segment, the
over dependence on single-channel suppliers such as the Diamond Trading
Company (DTC, the marketing arm of the De Beers Group) and most
importantly, the emergence of newer substitutes such as synthetic diamonds
(cubic zircon, HPHT etc.) which are much cheaper than the real diamonds.

Structural Analysis:

The essence of formulating a competitive strategy is relating an industry to its

Environment. Although the relevant environment is very broad, encompassing
social as well as economic forces. The industry structure has a strong influence
in determining the competitive rules of the game as well as the strategies
potentially available to the firm. The goal of competitive strategy for an
industry is to find a position in the industry where it can best defend itself
against these competitive forces or can influence them in its favour. There are,
as defined by Michael Porter; Competitive Strategy-1980, five competitive
forces (threat of entry, threat of substitution, bargaining power among buyers,
of suppliers and the rivalry among current competitors) determine the
intensity of industry competition and profitability, and the strongest force or
forces governing and become crucial from the point of view of strategy
formulation. (a detailed template indicating all the competitive forces and their
weights has also been used to analyse the various barriers of entry.

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1. Threat of Entry:

Entry barriers are economic and technological forces that prevent outside
firms from competing in an industry. These barriers protect existing
competitors from outsiders attracted to join the industry, some of whom
might be highly diversified and powerful. If entry barriers are low, threats
from potential entrants are viable because outsiders can easily come into
the industry and increase competition within it. This reduces the total
profits industry participants can share. If entry barriers are high, outsiders
cannot easily join the industry. This protects the industry and its profits.
Entry barriers depend on technological and commercial relationships
within the industry. The most important barriers to entry are cost
advantages, product differentiation, access to distribution channels, and
miscellaneous barriers such as patents and monopolistic control over raw
materials.

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2. Intensity of rivalry among existing competitors:

Competition and profitability within an industry also depend on the

intensity of rivalry among existing competitors. Competitive rivalry
consists of dynamic moves and countermoves by competitors to attract
buyers and capture a larger share of demand. Every time one firm makes a
strategic move it can expect its competitors to retaliate. This retaliation
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 be
detrimental to its profitability. Rivalry among competitors depends on
several factors. They include the number of competitors 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.

3. Pressure from substitute products:

Substitute products erode the sales and revenues of the industry. They
may even eliminate demand for an industry’s product altogether.
Industries with products that can be easily replaced by products from
other industries are always under revenue and profit pressures (e.g. Ball
pens eroding the market of fountain pens, and synthetic diamonds like
Cubic Zircon as against the real diamonds). Besides product substitution,
another form of substitution (substitution of new raw materials,
components, and subassemblies) can create pressure on industry
profitability and competition by directly affecting the cost of manufacture.

4. Bargaining power of buyers:

Buyer power refers to the ability of purchasers to get favorable terms of

trade with sellers. Powerful buyers can get attractive price discounts,
better credit terms, better product quality, and more product support
services from industry suppliers. Because these concessions are costly,
they have the effect of reducing industry profits. Buyers attempt to get the
best value for their money, and by so doing they put downward pressure
on industry profitability. The power of buyers depends on several factors:
buyer concentration, degree of product differentiation, buyer switching

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costs, access to backward integration, impact of the product on the

buyer’s product quality, and the amount of information available to the
buyer.

5. Bargaining power of suppliers:

Suppliers of raw materials (the DTC in the case of the Indian diamond
industry) influence industry profitability and competition by affecting the
cost of supply. If suppliers are powerful, they can obtain high prices for the
raw materials they provide. They may also negotiate favourable terms of
trade. They can decide product features, packaging, payment schedule,
credit terms, transportation, delivery costs and schedules. The bargaining
power of suppliers depends on the same variables that shape the
bargaining power of buyers. These include concentration of suppliers,
importance of industry to suppliers, threat of forward integration, access
to other sources of supply, and the nature of labour supply.

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6. Impact of Global Turmoil

The Recession of 2008

The year 2008 witnessed a global economic recession impacting all export
oriented business across the world. Indian exports during 2008-09 were valued
at US $ 115 billion which was 33.3 per cent lower than the level of US $ 172
billion during 2007-08.[7] The Indian diamond industry was not an exception
given the dependence on the global economy for exports and USA being the
largest consumer of polished diamonds. “Exports of Gems and Jewellery that
made up over 12 % of the total in 2007-08 entered into sharp decline after
August 2008 in the face of a collapse in global demand for polished diamonds
and jewellery.” In November 2008, an estimated one million workers returned
after a customary 3 week Diwali vacation just to find that owners of the
diamond processing units wouldn’t open gates for them. Thousands of such
units in Gujarat, India, which cut and polished diamonds mainly for export, had
been shut down. The decades old, and now US $ 14.2 billion Indian diamond
industry witnessed the severest recession in its history. Our study reveals that
the broad reasons for the industry to fall prey to the global recession were:

1) the long credit terms availed and given to suppliers and buyers in the supply
chain
2) investments in stock and oil bonds fuelled by the upsurge in economy
before the recession
3) Downturn in the global economy in particular the US leading to slump in
demand and
4) The devaluation of US dollar. This led to sudden drop in diamond prices and
reduction in liquidity while the uncertainty associated with the global
recession sent a panic amongst all, thus forcing most unit owners to shut
down their factories.

The Economic Survey presented in the Indian Parliament on July 3, 2009 said,
“Around 6 lakh people lost their jobs from October 2008 following the impact
of recession and most of them are from Surat’s diamond and jewellery
industry. About 500,000 people lost their jobs in the October- December 2008
period, while over 100,000 were shed in January this year”. The most affected
sectors were gems and jewellery, transport and automobiles where
employment had declined by 8.58 per cent, 4.03 per cent and 2.42 per cent,
respectively during the period (October to December 2008). Informal

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Study Of Diamond Industry & Impact of Technology in it.

discussions during the study suggest that many diamond workers who were
immigrants from Saurashtra, Bihar and Uttar Pradesh, and whose families were
totally dependent on their jobs in Surat, were left stranded during the crisis,
some tried to commit suicide, others who struggled for a few months, either
switched to jobs in other business or withdrew their children from local
schools and packed their bags for their native places. “Diamond had become as
good as stone” remembers a middle-aged artisan.

The Signs of Revival

The turnover of the CPD unit of our case had grown at an astonishing 47% in
first half of 2008-09. In Nov 2009, when most of other CPD units were shut
down, this unit allowed all of its over 1500 employees to resume work as
usual. Subsequently, the turnover came down from $ 335 million in 2008-09 to
$ 287 million in 2009-10. Six months later, the industry somewhat recovered
from its lows with around a quarter million jobs added after January and signs
of global recovery. Although it is now difficult for several units whose workers
wouldn’t return to them, some other units not only retained their staff, but
also invested more in rough diamonds during these times as in the unit
described above. Although there has been a global downturn in recent years,
the Indian exports of polished diamonds in 2009-10 crossed USD 15 billion.
During the severe recession, the Indian diamond industry was noted as being

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Study Of Diamond Industry & Impact of Technology in it.

one of the most affected out of all export oriented industries in the country.
However, as shown in Fig 7, it appears to be already on the path of revival.
India's cumulative value of exports for the period April-March, 2009-10 was US
$ 169 billion as against US $ 163 billion registering a growth of 3.4 per cent in
dollar terms over the same period last year. The Indian diamond industry has
been quick to follow the trend. By June 2009, the industry is already showing
signs of revival led by large sized firms.

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Study Of Diamond Industry & Impact of Technology in it.

7. Conclusions & Interpretations

The study of the Indian diamond industry & impact of technology in it provide
useful insights to the field of management. The unorganized sector, so called
due to the absence of traditional corporate structures, strategies and statistics,
remains under-researched and empirically undocumented. That these
unorganized, globally-dispersed companies appear to gel or ‘fit’ into a more
‘organized’ framework later in the value creation chain challenges our current
thinking on organizing and managing for competitive advantage. Neither
theorists nor empiricists have studied these unorganized organizational forms,
nor charted any so-called best practices despite this dominant global market
share. Hence, this is a first such attempt to study these new organizational
forms, as represented by the CPD industry in India. While many in the
corporate business and the world economy in general continue to struggle
with the aftermath of the recession, the so- called unorganized sector has
shown laudable resilience to bounce back. This only strengthens our
assumption that time has come to bring in lessons for management from the
unorganized sector to our business schools.

A possible outcome of this study is that industries and companies with close
knit community culture are likely to make use of their people management
skills to survive the difficult times. The so-called organized and corporate
structures hence need to revisit their organizational culture and in particular
the assumptions, values and beliefs held about their own people. It is evident
that unique leadership styles, management skills and culture exist within the
unorganized sector as in the Indian diamond industry and its contribution to
the growth of economy as well as to the study of organizations cannot be
ignored.

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8. Implications of Future research

This preliminary study on the multifaceted diamond industry opens a plethora

of new directions for future research. We believe this study will have
significant implications for theory as it explores new forms of organizing as
displayed by the CPD units of the Indian diamond industry. There exists a large
scope to learn from their innovative operations and value systems. Study of
the unique people management practices is likely to add to the body of
literature on human resource management.

This study also seeks to uncover the secret of such massive ‘entrepreneurial’
success framed within an ‘unorganized’ network of people involved in these
different organizational forms. We believe we have been able to only scratch
the surface of the unique but invaluable culture that exists in this largely
successful Indian diamond industry. It is therefore suggested that empirical
research be conducted in this industry to unearth the unexplored dimensions
of their culture. Clearly there will be implications for practice for small and
large firms alike.

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References

• www.gjepcindia.org

• http://mmsd.mms.nrcan.gc.ca/kimberleystats/public_tables/AnnualSummary

• http://www.financialexpress.com/news/gems-&-jewellery-the-jewel-in-the-export-crown

• http://www.forcesofindia.com/resources/presentations/Gems&Jewellery-200607.pdf

• http://www.commodityonline.com/news/Diamond--jewellery-sector-lost-most-jobs

• www.icra.in/files/pdf/MoneyAndFinance/MacroOverview.pdf

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

• http://www.pacweb.org/Documents/diamonds_KP/7Dec2002.pdf

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