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Precious metals and gemstones have been an integral part of the Indian civilization since
its recorded history. Gems and Jewellery has been consumed by Indians for ages for
both its aesthetic as well as investment value. India has the distinction of being the first
country to introduce diamonds to the world. The country was also the first to mine, cut
& polish and trade in diamonds. In fact, the gems and jewellery industry formed the
single largest component of merchandise exports in country.

Though India plays a dominant role in the G&J industry in terms of processing and
consumption, mining of gold and diamond is amongst the lowest in the world. India
imports gold and rough diamonds along with other precious metals. Gold is purchased
from countries like Switzerland, South Africa, Australia and UAE, and rough diamonds
are sourced from Belgium, UK, Israel and UAE. Diamond distribution was dominated by
a few major diamond-mining companies worldwide. Diamond Trading Corporation
(DTC), the marketing arm of De Beers was the largest diamond distributor and
accounted for approximately 50% of worldwide distribution of rough diamonds, and
India sourced approximately 23% of its diamond requirements from DTC directly,
accounting for approximately 28% of DTC sales in 2004.

The crucial role of the gems and jewellery industry in the Indian economy is evident
from the contribution the industry made in terms of exports from India. And the
government is also taking several initiatives to boost this industry up. This gives India a
national advantage in diamond processing and jewellery manufacturing. Initiative and
regulations like duty free imports of rough diamonds, reduction of import tariff on cut
and polished diamonds and gemstones from 15% to 5%, 100% FDI inclusion in gems and
jewellery industry are complimenting the industry to thrive. Under the Industrial policy
and FEMA, FDI up to 100% was permitted in the gems and jewellery industry. The
industry is characterized by a significantly large labour-intensive operations, high
working capital & raw material intensiveness and due to ample supply of cheap
workforce and manufacturing costs is low in India and thus it gives a competitive
advantage over other countries͛ jewellery manufacturing companies.

The demand for gold and diamond jewellery is driven by festivals, weddings and gifts,
the increasing affluence of the middle class population and the increase in per capita
spent on luxury items. The key drivers for growth in the industry are increasing
disposable income, conscious marketing efforts, rising young population with the urge
to spend on jewellery since it͛s regarded a fashion accessory. Thus business is
dependent on the continued establishment and promotion of the various brands.
Competition is based on primarily on the quality, design, availability, and pricing of
products.
New players can enter the industry, tough there are some entry barriers like substantial
working capital to purchase rough diamonds and hold polishing inventory, the difficulty
in obtaining access to upscale channels of distribution. And there are threats of
suppliers since small number of diamond mining firms controlled a majority of the
world͛s rough diamond supply, any decision made by such firms to restrict the supply of
rough diamonds could adversely affect operations. The availability and prices of gold,
diamonds could be influenced by cartels, political instability in exporting countries, and
inflation. Even Buyers, though having low bargaining power, still can affect sales hugely
if they turn to other modes of investments or if their tastes and preferences are not
taken care of. So there are hurdles which can drive away the new entrant from the
market.

The primary competitors were the top 3-5 jewellers at the premium end of the jewellery
market, in major cities. Most of them are old players and has been in existence for
several decades and had advantage of local knowledge and loyal base of customers and
hence there is a intense competition in the market. Brands like Tanishq are creating a
newer base of competition and are coming with new high the technologies. Even there
is a completion from international market also.

GITANJALI GEMS
Established in 1966, by Mehul Choksi, the Gitanjali group was the one of the earliest
diamond houses in India. Gitanjali Gems was an integrated diamond and jewellery
manufacturing company and one of the largest manufacturers and retailers of diamonds
and jewellery in India. By 1967, it was accorded a Sight by the DTC Ltd. London, making
it one of the first Sightholders in India.
Initially they were in exporting and manufacturing of cut and polished diamonds to
various international markets and gradually they started leveraging on their sightholders
status and they commenced production of diamonds studded and other jewellery ar the
SEZ at Andheri, Mumbai. It captured the entire value chain from sourcing to roughs to
cutting and polishing them at five locations in India. It also manufactured gold and
diamond jewellery, which was marketed as branded jewellery. Being a sightholder they
are assured of steady source of rough diamonds, this enables them to focus on other
elements like sales and distribution, marketing, etc.

Gitanjali did not have any long term contracts with customers, but the top 10 customers
accounted for 42% of the sale. This is because excellent marketing and campaigning.
Gitanjali products are aimed at aimed at various jewellery categories, different
customers and price segments. Their brands enjoyed significant brand equity in their
respective market segments developed through aggressive advertising and marketing
campaigns, which gave the company a competitive advantage over competitors.

In order to tightened the grip in the market Gitanjali Gems had strategic alliance and
had acquired number of companies. It helped them to expand their operations in
smaller cities and towns in India. It gave them the opportunity to diversify
geographically and hence penetrating the market deeply. It also helped in being
associated with other established names and gain publicity on various media. And it
curbed the competition because instead of having rivalry, companies came together and
integrated their resources, capabilities etc. Alliances with the foreign companies helped
them to make the most of their existing marketing and distribution networks. Alliances
helps other companies to leverage gain because of each other. Their strengths can
complement each other, when integrated, and hence it aids value to all of their
operations. And higher the value addition, higher will be the margins in retail business.
So ultimately the whole value chain will get stronger and give higher returns to all the
parties involved.

And when it comes to Gitanjali the whole thing gets complimented by the sales and
distribution network in the form of exclusive distributors, direct sales to large
departmental stores and end customers. And thus helps them to excel in entire value
chain from cutting to retailing. Gitanjali can also tap various opportunities like:
y? Leveraging on IT. i.e Online platforms can be a mean of retailing through
websites.
y? They can expand their operation in countries like Europe, Latin America etc and
can make most of their acquisitions and alliances made by them.
y? Diversification in lifestyle products as they have good hold on their existing value
chain of marketing network.

They also need to take care of the threats which can hamper their growth. Technology is
something which is playing a significant role in this industry and its keeps on changing so
they need to have a track on this.
Gitanjali Gems is poised to become a leading integrated diamond and jewelry
manufacturing and retailing company. For this they need to keep a eye in the following:
y? Keep up the new technologies to get competitive advantage
y? Expand product line to cater the needs of customers
y? Taking care of training and development of employees
y? Diversify geographically. Hunt new markets (domestic as well as international)
y? Taking care of customer preference as they keep on changing
y? Delivering the value to the customers
y? To offer p
 
  by effective online brand promotion and online
merchandising

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