Case Study on Geetanjali Gems Final

8/8/2019 Case Study on Geetanjali Gems Final

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Submitted To: Submitted By:

Aarti Dhanrajani Amit Chaturvedi

Lecturer, BPIT Sushant Kaushik

Prayag Anand

Vinay Kundra

Sumit Kumar

Pooja bagri


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India is a leading player in the global gems and jewellery market

The gems and jewellery industry occupies an important position in the Indian

economy. It is a leading foreign exchange earner, as well as one of the fastest

growing industries in the country

The two major segments of the sector in India are gold jewellery and diamonds.

Gold jewellery forms around 80 per cent of the Indian jewellery market, with

the balance comprising fabricated studded jewellery that includes diamond

studded as well as gemstone studded jewellery

The Indian gems and jewellery industry is competitive in the world market due

to its low cost of production and the availability of skilled labor. In addition, the

industry has set up a worldwide distribution network, of more than 3,000 offices

for the promotion and marketing of Indian diamonds


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Diamond distribution was dominated by a few major diamond mining companiesworldwide among which Diamond Trading Corporation (DTC) was the largest

diamond distributor. It accounted for approximately 50 % of worldwide diamond

distribution

Though Indian exports in cut and polished diamonds was growing, it was restricted

to lower-sized and lower-valued diamond market. European manufacturers

dominated the higher-valued diamond market

India was among the largest importer of gold in the world and its sale was sensitive to

income level and price level. Also it was dependent on the purchases based on faith in

the retailer

Tanishq and Gili were among the earliest jewellery brands in India and later there

came a shift in consumer preferences towards diamond jewellery as it was positioned

as affordable and contemporary


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Yesterday Today

Unbranded Branded

Silver & Gold jewellery Gold & Diamond jewellery

Investment Investment + Fashion

Traditional design Fashionable & innovative design

Marriage & festival is peak season Wearability and gifts

Jewellery sold on commodity basis

with labor charges

Jewellery being sold on a per piece basis


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Major Players:

Tanishq Jewellery

Vaibhav Gems Ltd.

Classic Diamond (India) Ltd.

Shrenuj & Company Ltd.

Goldiam international Ltd.

Su-raj Diamonds & Jewellery Ltd.

Rajesh Exports Pvt. Ltd

Gitanjali Gems Ltd


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Established presence

The company is one of Indias largest integrated diamond and jewellery

companies Established in 1986.

Sophisticated and scalable diamond and jewellery manufacturing facilities

Approximately 1,246 retail outlets in India and 143 outlets in the U.S.

Leading brands


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Ramping up the retail chain

Expanding stores in India

Acquisitions including Samuels, Rogers

and Tri-Star

Plans to make further inorganic growthin the U.S. & Far-east

Expanding manufacturing capabilities to

address increasing demand

Gitanjali Lifestyles to focus on

Manufacture and distribution

Of luxury and lifestyle products

Developing 200 acres gems & Jewellery

SEZ in HyderabadPlans to develop more SEZs focused on

gems & jewellery across India

To partner for developing real estate

infrastructure

Expansions Diversification

Further integration within the jewellery

value chain

Higher margins in retail business

Higher value addition

Leverage its key strengths

Large opportunity for incremental

revenue

Diversify business model


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GENERIC BUSINESS LEVEL STRATEGY


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M.PORTERS FIVE FORCEMODEL FOR

JEWELLERY INDUSTRY

POTENTI

NEWENT Y

INDUST Y COMPETITO S

RIV R Y MONG EXISTING

FIRMS

BUYERSSUPPLIER

SUBSTITUTES


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INTER-FIRMRIVALRY : HIGH

Two types of rivalry:

Inside India

Large presence of unorganized sector. 0.2 Million Gold jewelers and over

8,000 Diamond jewelers

Outside India

International rivals Such as, China

Threat from producing nation like S.A. & Russia


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BARGAINING POWEROF SUPPLIERS:

MEDIUM In jewellery industry the suppliers are S.A., UAE, Australia, US,

Congo, Botswana, Russia, DTC.

Few Alternatives of cutting & polishing.

Skilled labor

Bargaining power of India is enhanced because India is largest

consumer of gold jewellery.


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BARGAINING POWEROF BUYERS: LOW

Divided in two types:

1. Domestic buyers &

2. Foreign buyers

As investment (Demand increase)

Bargaining power of Indian exporter is high because Majority of the world's

rough diamond production is cut and polished in India


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THREATOF SUBSTITUTES: LOW

Substitutes are Real assets, Stock market, & Bank deposits & mutual

fund investment and Other types of jewellery like imitation jewellery,

bagasra jewellery, stone jewellery etc.

Second preferred investment behind bank deposits

Status and standard of living increase so demand is increasing at high

rate


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BARRIERS TO ENTRY : LOW TOMEDIUM

Low capital requirement

Government subsidy

EXIM policy & governments rules-regulations are high

Skilled manpower is essential

Advanced technology required


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SWOT ANALYSIS OF GITANJALIJEWELLERY LTD.

Strengths: Large integrated diamond & jewellery player and having an international presence.

Pioneers of branded jewellery in India

Strong marketing & distribution network. Strong retail presence in India and in U.S.

112 distributors and 1246 outlets in India and 143 outlets in U.S Strong brand equity and broad product range Such as, Gili, Asmi, Nakshatra,

Sangini, Ddamas, Vivaaha, Maya, Giantti, Desire, Samuels etc.

Visionary leadership (Acquiring Nakshatra, Samuels, Rogers etc.)

Expanding manufacturing capabilities in Mumbai and at special economic zone in

Surat to address increasing demand

Net Worth is 3,460.37 million Rs. So we can say that it is financially very strong

company

Sight holder status with DTC through a promoter group company

Highly skilled, qualified and motivated employee


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Weaknesses:

There may be conflicts of interest between them and certain of their Promoter groupcompanies.

As the major raw material requirements need to be imported, companies normallystock huge quantities of inventory resulting high inventory carrying costs.

Technology is less improved compared to China and Thailands company.

Opportunities:

New markets in Europe & Latin America.

Growing demand in South Asian & Far East countries.

Industry moving from a phase of consolidation.

Expansion possibilities in lifestyle and luxury products in India like watches, leathergoods, Platinum jewellery because increasing disposable income of people.



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Threats:

International Competition:-China, Sri Lanka and Thailand's entry in smalldiamond jewellery

Increase in the price of Gold & Diamonds

Other local competitors. According to the data 97% jewellery sales are by family

jewelers Threat from producing nation like S.A. & Russia



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High priorityResistance from suppliers

and decrease in availability

of diamond .

Fluctuation in prices of

material.(gold,diamnd)

High priorityEmergence of new

technology

Diamond processing and

cutting.

Medium priorityChanging tastes of

consumers.

High priority

Change in exim rates

And trade policies

Medium priority

Defragmented Indian

market.

Low priority

Medium priority

Extinction of gold mines

Economic slowdown

Low priority Low priority

Disaster and mishaps

PRIORITYPRIORITY IMPACTMATRIXIMPACTMATRIX


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VALUE CHAINDiamond Polishing

Direct FromMines

Rough Distribution

Diamond Distribution

Jewellery

Manufacturing

JewelleryWhole SellingJewellery Branding

Jewellery Retailing

Shopping Experience


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Finance:

The companys operations running across the whole value chain so finance is the

very much important factor. Working capital requirement is much more. The

company is having finance from various sources like shares, bank loan, and credit

line

Infrastructure:

The company is having latest technological manufacturing plants. Its branded

showrooms & other outlets are having good infrastructure. It is also having plants

in special economic zone at various places

Procurement:

The company procures its raw materials, machinery & other ancillary things from

recognized sources. The company is having good creditability with supplier. It has to

maintain its relations with different sight holder for procurement of diamond foreweller makin

VALUE CHAIN (CONTu)VALUE CHAIN (CONTu)


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Technology:

The company is using latest technology in processing means jewellery

manufacturing & also in designing. The company is having business in so many

countries so that it has to pay attention over the designing, manufacturing etc. with

the high technology to satisfy buyers needsHuman Resources:

As of September 30, 2005, the Company had 410 full-time employees, of which

approximately 117 employees were employed at its corporate offices in Mumbai. In

addition, as of September 30, 2005, its subsidiaries, joint ventures and associate

companies employed in the aggregate more than 740 employees, including 250

employees in its retail operations.

VALUE CHAIN (CONTu)VALUE CHAIN (CONTu)


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KEY SUCCESS FACTOR S

Marketing & Distribution related factor:

Strong retail presence in India and the U.S.: The company is occupying good position in

retail jewellery provider in both India as well as U.S. Gitanjali has a strong network of

distribution. Here Strong retail presence in India and in US. It has 112 distributors and

1246 outlets in India and 143 outlets in US.Strong brand equity and broad product range: It is the pioneer of branded jewellery in

India. It brand equity is too high.

Significant focus on retail and distribution network to drive growth: It also keeps in

mind distribution network which provide the product to end users. The company is

having its retail outlets also.


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KEY SUCCESS FACTOR S

Manufacturing related factor:

Sophisticated manufacturing facilities including upcoming Hyderabad SEZ:

The company is having good infrastructure facility in various special economic zones.

Gitanjali has been achieved economies of scale and learning curve effects which is

benefited in low cost production because in India skilled labor is available at cheaperrate.


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Technology Related factor:

Gitanjali has expertise in cutting, polishing the diamonds and in designing the

jewellery (specifically in small design).

Presence across the whole value chain : The first & foremost success factor for the

company is of its presence across the entire value chain

Human Resource and TopManagement related factor:

Visionary leadership and a deep management team

Strategic Acquisition of Tri-Star: Manufacturer and global distributor of Canadia

brand diamonds and diamond jewellery in various countries, such as Australia,

Canada, England, Ireland, Northern Ireland, New Zealand, Scotland, and the

United States

KEY SUCCESS FACTOR S (CONTu)


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The industry registered exports worth US$ 15 billion in April-December 2008

(Provisional), compared to US$ 14.9 billion in the corresponding period of 2007,

registering a growth of .59 per cent.

Export of cut and polished diamonds grew from US$ 10.9 billion in 2006-07 to US$

14.2 billion in 2007-08, witnessing a growth of nearly 68 per cent.

The total gems and jewellery exports from India stood at US$ 20.8 billion in thefinancial year 2007-08, against US$ 17.1 billion in the previous year, witnessing a

growth of 22.27 percent. The sector accounted for 13.41 per cent of India's total

merchandise exports.

More than 100,000 skilled and unskilled labors being laid-off due to poor demand

from the US market. In fact, Indias jewellery sales to the US declined over 20 percent even during the holiday season, i.e. Christmas and New Year.

The domestic jewellery demand has also decreased by over 20 per cent.

Positive government policies such as 100 per cent Foreign Direct Investment (FDI)

in gems and jewellery through the automatic route, has further provided an impetus

to the booming gems and jewellery industry.

CURRENT SCENARIOOF GEMS ANDCURRENT SCENARIOOF GEMS AND

JEWELLERYJEWELLERY INDUSTRY (CONTu)INDUSTRY (CONTu)


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CURRENTPOSITION OF GITANJALICURRENTPOSITION OF GITANJALIJEWELERSJEWELERS Gitanjali Gems reported that consolidated net profits fell 42 percent to INR 291.52

million ($5.97 million) in the third fiscal quarter ending December 31, 2008 as a

result of the companys diamond and jewelry segments contracting during the period

Gitanjalis third quarter net sales fell 11 percent to INR 11.109 billion ($227.55

million), as diamond revenues declined 19 percent to INR 5.366 billion ($109.98

million) The company noted a 17 percent decline in revenues at its India operations during

the quarter and a 7.8 percent drop in revenues from the rest of the world.

For the first nine months of the fiscal year, Gitanjalis net profit fell 6 percent to INR

1.195 billion ($24.48 million). The companys diamond business saw pre-tax profits

fall 16 percent during the period, while its jewelry unit profits grew 27 percent.Group net sales rose 8.3 percent to INR 36.207 billion ($741.56 million)


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FUTUREPERSPECTIVESFUTUREPERSPECTIVES

As perResearch and Markets, the gold processing industry in India although, has

around 15,000 players, Only 80 players generate revenues overUS$ 5 million.

Therefore, there is high growth potential for Indian gems and jewellery in the global

market.

Furthermore, in spite of the fact that India is not a major miner of precious metals

and stones, the countrys inexpensive and skilled workforce are one of the best in the

world for processing of diamonds, which makes the country a favored destination

with the exporters.

Additionally, there is a huge potential in promoting traditional Indian designs and

styles. There is a massive demand for hand-made jewellery, especially in ethnic

Indian designs, from the sizeable Indian emigrant population in the Middle-East,

South-East Asian countries, the US and Canada among others.


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Case Study on Geetanjali Gems Final