BUS 499: Social Performance of Organizations

Nature, Structure, and Types of Products: De Beers Diamond Company

De Beers Diamond Company is an integrated cartel of firms that engage in the mining, selling, and manufacture of diamonds. The company is engaged in almost all active categories of industrial diamond mining that involves open-pit mining, underground excavation, intensive alluvial mining, coastal and deep-sea mining. The company’s diamond mining activities are conducted in South Africa, Canada, and Namibia. The firm engages in a monopolistic form of trading, whereby it utilizes its persuasive position to manipulate the activities of global diamond markets.

Diamond mining in Botswana is conducted through a 50-50 joint partnership between Debswana and the government of the Republic of Botswana. The same arrangement is reflected in Namibia and South Africa. The trading activity of rough diamonds is conducted through another of De Beers Diamond Company, Diamond Trading Company in conjunction with the joint partnerships in the aforementioned countries of operations. It is established that Diamond Trading Company embarks on sorting and valuing the diamonds. It also provides at least 40% of global rough diamonds by value. Significantly, the company enjoys an employee-base of about 20,000 people that are distributed within the countries of operations.

External Factors That Might Affect the Company’s Operations

Some of the key factors within the company’s external environment that can be detrimental to its operations include political and legislative framework factors and technological factors.

In regards to the political and legislative framework, De Beers Diamond Company faces a threat of unfriendly legal rules and policies that are formulated by the different government agencies responsible for the mining operations. It should be noted that the company’s major operations are in Africa, whereby political turmoil is imminent. Thus, the set of relational system that is created by the political agencies and the business might be affected in the event that the company fails to conform to the laws and regulations set by existing political parties. In the event of a rift between the political system and the organization, the company will likely face immense loses as a result of unprofitable operations. For instance, if an incumbent political regime in a country where the company conducts its operations changes taxes, labor, and environmental sustainability programs, the company might face the risk of losing more profits.

Another fundamental factor that might likely affect the external environment of De Beers Diamond Company rests with the ever-changing technologies. It is important to note that newer technological features allow companies to attain optimal production levels and also help in the generation of innovative products. In consequence, De Beers Diamond Company engages in intensive mining operations that require top-notch technological advancements. This means that the company should be able and willing to adopt new technologies as they are developed and introduced into the market. In the event that the company fails to adopt this critical component in its operations, it might result in poor performance, hence lower production rates and poor profits in the long-term operations.

Three Salient Stakeholders

First, the firm‘s owners are the immediate principal stakeholders. The owners’ fundamental role within the company’s operations rests with the provision of capital resources needed in conducting various mining activities across the key mining areas. Owners are also tasked with the responsibility of appointing an effective management team capable of ensuring the owner’s interest is fully met. Thus, they appoint competent officials and supervise their activities to make sure that they are executed in the best interest of the firm. Significantly, the sole interest of any owner of a given business rests with the ability of the appointed team to maximize the existing wealth. This means that the fundamental relation of owners within the company rests with ensuring that wealth maximization objectives are set and adhered to at all times.

Second, the governments within the area of operations are also salient stakeholders of De Beers Diamond Company. These governments include the government of the Republic of Namibia, Botswana, South Africa, the United Kingdom, and Canada. The relational system created between the two parties, the firm, and the government rests with the creation of a favorable legal and political framework that will guarantee future operations of the firm. Notably, these two parties are also involved in joint ventures in owning the mining operations; thus, they also influence the manner of activities within the firms. For instance, in Namibia, De Beers Diamond Company, together with the government of the Republic of Namibia, is involved in a 50-50% ownership deal under the Namdeb project. A similar arrangement is manifested in the Republic of Botswana under the Debswana project.

Third, the firm’s employee base, mostly miners, is another salient stakeholder. These two factions embark on a relational agreement, whereby the employees offer their services of mining diamonds for the company at a fee. They ensure that the operations of the company are productive enough to yield positive profit results. This means that the company expects them to perform at their optimal level while their efforts are compensated at an agreed period and price.

Influences of Primary Stakeholders to the Company’s Financial Performance

Primary stakeholders are considered relevant to the performance of any given business operation. They depict different interests in these operations, thereby creating a good structure relational system with a company. In the case of De Beers Diamond Company, these stakeholders are also relevant to the day-to-day operations of the firm in its endeavor to demonstrate higher financial performance.

First, one of the fundamental primary stakeholders of the firm is its employees. They are involved as factors of production for the firm and play a huge role in determining the financial performance of the company. The latter is greatly affected by the employees’ level of involvement in the company’s activities. The employees are expected to conduct mining activities to the best of their ability in order to attain optimal operational objectives. This means that in the event they are unwilling to commit to conducting mining activities, it will likely affect the future financial performance of the company. Following this line of reasoning, employers should ensure that their employees are fairly compensated and motivated for attaining optimal production capabilities.

Second, the company’s primary stakeholder rests with its management team. The management team is tasked with the responsibility of designing and implementing structural changes for purposes of ensuring higher financial performance of the company. They also supervise various mining activities within their sites to ensure that the owner’s objective of wealth maximization is attained above all costs. Notwithstanding, they possess the ability to affect the way operations of the firm are executed for that matter. They can affect the firm’s financial performance either negatively or positively depending on their immediate goals.

Third, the government also forms a section of the primary stakeholders that can affect the financial performance of the De Beers Diamond Company. Governments are tasked with the responsibility of ensuring that the legal environment is favorable for the growth and development of firms within the economy. For instance, in matters related to taxation, the governments can formulate and implement tax-friendly structures that promote the growth of companies by either allowing them not to pay taxes for a certain period of time or providing effective subsidies that will be likely to affect the financial performance in a positive manner. In the event that the taxation policies are deemed unfriendly, De Beers Diamond Company will not enjoy the immense profits needed for growth, since a larger section of the company’s earnings will be used to meet the tax obligations.

Fourth, the customers of the firm are also depicted as fundamental stakeholders in the operations of the firm. They are highly regarded as the backbone of any given firm, including De Beers Diamond Company. They are considered the sole source of revenues from the diamonds produced within any financial period. Thus, depending on the manner this group is treated, the financial performance of the firm will vary. If such enhancements as trade discounts and intensive marketing campaigns are introduced, the company will earn more loyal customers, who would purchase the company’s products for a long time. This step, in turn, will translate into a higher financial performance for a longer period. However, if the customers are misrepresented and misinformed about the diamonds, they will seek other alternatives from other companies. This outcome may result in poor financial performance.

Fifth, the surrounding communities within the areas of mining production are also perceived as key stakeholders that might determine the future financial performance of De Beers Diamond Company. The firm should ensure that a positive public image is maintained at all times. It should also engage in other forms of corporate social responsibility, like protection and reclamation of mining dams. These tactics will create a positive and cordial relationship with the communities and may boost the sales of diamonds. Notably, if a negative perception settles in, the company will likely suffer losses due to the poor public image. For instance, when it became known that some diamonds in the United States of America and other regions had been quarried using child slavery, some notable diamond mining companies suffered losses due to the negative perception created.

Controversial Corporate Social Responsibility

De Beers Diamond’s corporate social responsibility rests with re-investing of about $3 billion to Africa, especially in countries where the company conducts its mining activities: Namibia, South Africa, and Botswana. The money is used to fund education and health-based projects. Despite this positive move, it has been noticed that some of the mining openings have been left uncovered, hence causing tremendous risks to the communities living nearby. It is arguably right to postulate that the cash resource could have been used to reclaim this land first rather than leaving pits all over a vast land that should have been used for other purposes like agricultural activities.

Plan outline for Stakeholders

In identifying the right members for the group, I will take time to assess their level of education, experience in the subject matter, and above all, their recent engagement in ensuring a well-developed financial performance of the firm. I believe that individuals possessing these qualities will help to formulate and implement the benchmarking tools needed for convincing both the management and shareholders of the need to devise effective ways of enhancing positive profit results and survival into the future. In order to foster the element of collaboration, I will ensure that effective communication platforms like social media and other applications are used to receive and transmit feedback. I will also ensure that a separate department is developed to work towards a goal at hand.

Possible Challenges

First, there is a likelihood of facing issues related to the resistance to change of operations. Most of the managers will not agree with our devoted system of ensuring positive financial performance. However, in this case, the remedy will be to offer training and seminars in order to educate the managers on the necessity of change. Second, the resources needed to set the necessary materials in place are scarce. For this reason, I am going to ensure that the owners of the company are integrated so that they can provide the necessary financial support. Third, there is a likelihood of inadequate skilled personnel to execute specific complex tasks. In that case, the remedy will be to recruit skilled people in order to formulate and implement changes.