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

Assessing business strategy of Alrosa diamonds

As one of leaders in diamond industry, Alrosa has to remain focused not only on the production of roughs within but on how to keep updated on the geoeconomics surrounding the diamond industry without. This blog sums up my assessment of Alrosa business strategy amid geoeconomics.

First and foremost Alrosa wishes to remain the lead producer and seller of roughs. It is feasible in the sense Alrosa owns & operates Siberian Mine that possesses almost $4 billion carat in diamond roughs. This mine alone provides annual output of 40 million carat of roughs. Here comes the geoeconomics risk. Any natural disaster surrounding the mine or in case of war with America a nuclear blast would probably destroy the mine along with the roughs therein.

Value addition is not part of Alrosa business strategy. Alrosa is overly satisfied with the extraction business model that is operated to bring high quality roughs intended mainly for exports. Alrosa sells about 42 million carats of rough netting US$ 4.4 Billion whereas her nearest competitor beats her in the value addition perspective. To illustrate De Beers earns more than US$ 6.1 Billion with much less quantum of roughs.

Rio Tinto, third in the pecking order of diamonds earns more than US$ 4 Billion using the business concept of ‘mines to market’ meaning that roughs sitting in their mines are extracted, cut & polished and set in jewellery to be on the display cases of the Jewellers worldwide. Preoccupied with being roughs exporter, Alrosa tends to neglect the diamantine aspect in her business strategy.

Of late, Alrosa presented a standalone jewellery collection in 2021 under the rubric ‘ALROSA Diamond Exclusive program’. Once again this business strategy concentrates on large diamonds processed into jewellery-ready diamonds with a dedication on the investment side of possessing diamonds rather than on   the day to day use of diamond jewellery.

A key ingredient in the geoeconomics of diamond industry is to market small carat diamonds either set in jewellery pieces or as ready to use items in any jewellery order placed by buyers. This way Alrosa could easily qualify as a member of the ‘diamond cartel’. De Beers and Rio Tinto have done this feat with great degree of success. If Alrosa falls behind then these two dominant sellers can sign into a Faustian Deal to shut out Alrosa firstly as seller of cut & polished diamonds and thereafter diminish sale of Alrosa roughs?

No business strategy in this world can succeed unless it outlines methods to outbid geoeconomics. Sadly, Alrosa has still not come around

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist