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