MINT follows BRICS, new geoeconomics phenomenon

BRICS is an acronym denoting Brazil, Russia, India, China and South Africa. Four more countries Egypt, Ethiopia, Iran & UAE joined it beginning 2014. Thirty-four more countries have expressed their interest in joining this group. But there is another bloc forming in the horizon.

Originally coined in 2001 as "BRIC" by Goldman Sachs economist Jim O'Neill to mean four countries Brazil, India, China & Russia this grouping was enlarged to include South Africa and one more alphabet added to make it “BRICS”. Ten years later, Jim O’Neill followed up with another acronym. This time it was MINT referring to Mexico, Indonesia, Nigeria & Turkey. These countries are often grouped together due to their large population, rapidly growing economy, and accelerating global importance. Here is meat on them.

Mexico

With a population of 128 million and having abundance of natural resources Mexico is ranked second largest economy in Latin America and fifteenth largest globally with an output of US$ 1466 billion in GDP. A diversified country in mining, agriculture, fishing, tourism she is the largest recipient of US$ remittance from America. Oil & minerals are key geoeconomics power sectors.

Indonesia

As the fourth populous country in the world boasting almost 280 million people Indonesian GDP of US$ 1.47 Trillion gives her 16^th position in global economy. Not only the country is rich in natural resources such as timber, agricultural products, petroleum, natural gas, and other minerals but export a wide range of products & commodities chief amongst these are crude petroleum and natural gas. She is a major source of rubber, coffee, cocoa, and palm oil. By the way Indonesia has the third largest rainforest and has the biggest source of cheap labour.

Nigeria

Almost 230 million people living within the country, Nigeria has an economy largely choreographed in the trading sector where buying & selling within shores and importing & exporting beyond shores as twin actors. Nigeria is the largest exporter of petroleum in the whole of Africa. GDP hovers around US$ 253 billion broadcasting an annual growth rate pf 3%. She also boasts of huge agricultural output and largest animal husbandry in the African continent. Globally its reputation hinges on her military prowess and also as the head of ECOWAS, an economic grouping of 15 countries in Western Africa.

Turkey

A middle ranked power in terms of military and economy, Turkey has a perennial problem of deficit forex. Her imports exceed exports to the tune of more than US$ 10 Billion and still growing. Population of 84 million compared with GDP of US$ 754 Billion resulting in per capita GDP of US$ 9040 is somewhat of a reasonable achievement during difficult times. Although 19^th in terms of global economy it straddles between East & West physically and figuratively.  Undoubtedly, a great military power, a position inherited from the Ottomans.

As per geoeconomics BRICS might find MINT as competitor or collaborator or in the worst case a spoiler!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

SWOT analysis of Alrosa Diamonds

Usually SWOT analysis focuses on the firm as against the market in which it operates. In the case of Alrosa Diamonds, I have made a bit of twist and made an incline towards geoeconomics. Here is my take:

In the diamond industry Alrosa ranks globally first in terms of output and second in terms of grossing.  In the backdrop of this scenario my painting of the canvass of Alrosa strength, weakness, opportunity and threat is as follows:

Strength

1. Being largest diamond producer Alrosa is entitled to sway competitive advantage towards itself if it can play the market dynamics judicially

2. Three major mines, namely Aikhal & Udachny which lie underground and Nyurba surface level open-pit mine provide bulk of the output located in Russian Republic of Yakutia leading to concentrated production zone

3. Major plus point is that Alrosa is a vertically integrated firm where exploration, excavation, mining proper, transportation, storage, sorting are done in a systematic manner resulting in high quality roughs. Further processing in terms of cutting & polishing and mounting on diamond jewellery completes the entire gamut

4. Plainly stated Alrosa is a state owned enterprise.

Weakness

1. Alrosa is not a household name as in the case of De Beers. Hence there is no established brand image to bank on

2. It has no diversified production base outside Russia. Neither has a commercial base within Russia for jewellery ready diamonds or finished diamond jewellery

3. For the diamond roughs Alrosa is dependent on the export market. In fact 90% of its output is exported

4. Safety & security is the major weakness where Alrosa has to protect mines on the one side and storage, sorting and processing all under one roof on the other.

Opportunity

1. There is growing demand for industrial diamonds where Alrosa has a built-in advantage

2. Cut & polished diamonds ready to be mounted on jewellery pieces worldwide is the forte of Alrosa

3. No taint of ‘blood diamonds’ that bedevil De Beers, Rio Tinto and many others in the diamond industry

4. Possessing huge storage of roughs as well as cut & polished diamonds means Alrosa can supply large quantum at short notice

Threat

As per geoeconomics, I call threat as vulnerability. Here is the vulnerability profile:

1. Lab developed or synthetic diamonds presents huge vulnerability as these are produced & marketed by sundry companies at very cheap prices

2. Market dynamics is unpredictable, so to speak. Volatility could be traced to price or quantum or both

3. Supply chain issue could arise anytime due to sanctions imposed by the West against Russia that impacts sale & transportation. This translates into a huge operational risk

4. Source of origin rule imposed by the West affects the entire product range of Alrosa, roughs, cut & polished diamonds and diamond jewellery.

    

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

Highlights of Alrosa Diamonds business model

Overall business vision of Alrosa diamonds can be summed up as strengthening her leadership position in the global diamond industry. In order to achieve this   a business model has been crafted. Here are the highlights:

Key partner remains the Russian State which supports the entire gamut if key resources & key activities. Most if not all technology processes are supplied by the government.

Key resources is the major strength the firm possesses. There are several mines in the Republic of Yakutia that Alrosa owns & operates. Aikhal & Udachny are underground mines and Nyurba is an open-pit mine along with   lesser known ones. Altogether these mines said to possess more than one billion carats of roughs at conservative estimate. Alrosa has patent rights over the mine technology along with more than sixty licenses in operating this technology.

Key activities include mining & processing diamond roughs where the outputs are three types:

1. High quality diamond roughs

2. Cut & polished diamonds ready to be used by jewellers

3. Diamond studded jewellery home made by the firm

Customer segments, therefore include diamantaires, jewellery manufacturers domestically and elsewhere globally, lastly the firm’s dedicated jewellery arm that uses splendid designs appropriate for fashionable suites and durable too. As regards to the main buyers for roughs India occupies the first place followed by countries including Belgium, UAE & Hong Kong.

Customer relationship is the building block that is vital in the entire business model. This is dictated by maintaining stable relationship with buyers within and without. Obviously, price of roughs being the critical factor buyers of high quality stuff are often consulted with before despatch. Adjustments of price or quantity or both are made taking into considerations of the global market trends.

Value proposition is yet another essential component. There are three prongs. One is mine to diamantaire where the best quality roughs are turned out using innovative mining technology as well as state of art processes and shipped out to  buyers most of them are located in Surat and Antwerp. Second prong relates to mine to jewellers where the output is cut & polished diamonds that are ready to be mounted in the pieces of jewellery. The last prong is the in-company demand for the diamond studded jewellery marketed within Russia and outside.

Needless to say, the cost structure & revenue stream are marvellously placed as the firm earns more than Ruble 332 Billion in turnover and Ruble 135 Billion in profit. An unbeatable ratio of 40% proving that Alrosa Diamonds business model helps the firm to achieve its business vision successful

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist