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India is one oI the world`s most competitive and rapidly growing gems and jewellery
markets. India is the world's largest diamond cutting and polishing centre in the world with
the country processing 11 out oI 12 diamonds sold in the global market. It accounts Ior
approximately 60 oI the global polished diamonds in value terms, 80 in karatage and
90 in pieces. Australia, Botswana, Russia and South AIrica are the major suppliers oI rough
diamonds. The production oI rough diamonds Irom mines is presently dominated by De
Beers (DTC), which is the largest diamond miner in the world.
The gems and jewellery sector can be categorized into the Iollowing sub-sectors based on
characteristics, processing techniques, preciousness in terms oI price range and marketability.
Gemstones - Diamonds and coloured stones (precious, semi- precious and synthetic)
1ewellery - Plain Gold, Studded, Silver, Costume
According to the Gems & Jewellery export promotion council (GJEPC), the sector is one oI
the leading Ioreign exchange earners Ior India and has accounts Ior nearly 16.67 oI the
country`s merchandise exports. It has witnessed a considerable growth in the volume oI
exports Irom export Iigures oI US$ 29358.49 million in the FY 2009-2010, to US$ 43139.24
million in FY 2010-2011, thus indicating a net increase oI 46.89 in the total Gem &
Jewellery exports. The growth in the sector was primarily driven by Cut & Polished
Diamonds which registered an increase oI 54.91 in FY '11. The exports grew Irom US$
18243.92 million in 2009-10 to US$ 28251.92 million in 2010-2011. Cut & Polished
Diamonds accounted Ior 65.49 oI the total exports baskets with Gold Jewellery comprising
oI 29.86 while Colour Gemstones and other accounted Ior 4.69. Gold Jewellery exports
have also been on a rise with the Iigures accounting Ior a 33.27 increase Irom US$
9678.67million in 2009-2010 to US$ 12885.59 million in 2010-2011.
1.1DEMAND The demand Ior gold and other precious metals have increased continuously
since the 2008 recession due to their acceptance as the saIest investment option during
times oI extreme volatility. The high global demand Ior gold combined with the growing
Indian economy has made it the largest consumer oI gold (around 20 percent oI global
consumption) Iollowed by US having an annual consumption oI around 14. US is the
world`s biggest jewellery market having a market size oI around $40bn. The US alone
accounts Ior nearly 26 oI the gems & jewellery imports Irom India. India`s merchandise
exports to the U.S. grew by 23.8 Irom $ 19.73 billion during the period Jan. August
2010, to $ 24.43 billion in Jan. August 2011. Out oI this nearly 21.6 was accounted
by the precious stones and jewellery segment. Cut and polished diamonds and jewellery
is a major item oI India`s exports to the US, accounting Ior 23.2.
Exports oI this item increased Irom $ 4.56 billion in 2009 to $ 6.85 billion in 2010, an
increase oI 50.3. According to IDEX online research agency, Jewellery sales in the U.S.
market rose by a dramatic 12 percent during June 2011, when compared to the same month a
year ago. The Iollowing table gives the exact sales growth across major product segments

This table clearly shows that people in the US are slowly looking Ior Iashionable and branded
items like watches embedded with gems and other modern light-weighted jewellery items
rather than traditional Indian ornaments.
The Indian jewellery sector is highly Iragmented with nearly 96 oI the business coming
Irom the un-organized sector comprising oI Iamily owned businesses. India is home to about
100000 gold jewellers, 6000 diamond processing players and 8000 diamond jewellers. On the
other hand US market is more dominated by organized players with major Iirms like GraII,
Cartier, Harry Winston, Van cleI & Arpels etc being the top 4 in the list oI top premium
jewellery brands which together account Ior $6.3 billion in jewellery sales. Several organized
players like TiIIany & Co, Piaget, Chopard, DeBeers etc enjoy a position amongst top 10
luxury jewellery brands.
So, the biggest competition Ior new exporters Irom India to US would be Irom the organized
retailers in US who would be having their own sourcing & supply chains network Irom
around the world. Additionally increasing competition Irom countries like China is making
this sector very challenging. In Iact, Analysts expect China to double its share oI global
diamond jewellery demand by 2015 (by 16). The increasing global metal prices is also
leading to an increase in commodity prices resulting in an overall increase in the cost oI
Iinished jewellery articles which may lower the attractiveness oI Indian products in the

A) SEGMENTATION - We would be using both demographic and psychographic Iactors to
divide our customers into distinct segments.
1. DEMOGRAPHIC FACTORS-This would include important Iactors like
O Sex - Generally, Iemales are more prone to traditional jewellery, ornaments etc while
males are more attracted towards gem-studded watches, bracelets etc.
O Income - With the rising metal prices around the world, the prices oI jewellery are
also expected to go up and this would directly aIIect its sales depending on the
purchasing power oI people in the country. The rising inIlation, debt crisis etc have
reduced the spending power oI people in US and hence we have to Iocus on the upper
middle class and rich class having high disposable income Ior the sale oI our
2. PSYCHOGRAPHIC FACTORS - This would help us understand the changing behavioural
trends oI people on account oI Iactors like varying tastes/preIerences, Iashion, liIestyle
changes etc. For instance, in both American & European markets, people are more attracted
towards simple but elegant and light-weighted jewellery in comparison to heavy articles.
O CULTURAL FACTORS- in US people used jewellery as an ornament and are not
very conscious oI long time use. They love to use it Ior Iashion and so their Iirst
preIerence is style and good looking jewellery.
B) TARGETING - We would be Iocussing more on the middle class people (both males &
Iemales) having disposable income greater than 3000$-5000$ per year. Also we would like to
target both the young adults having a taste Ior modern and Iashionable jewellery as well as
other higher age groups willing to purchase articles oI good quality and oI high durability.
We would also target the leading diamond importers in US because India is a low cost
destination well known Ior its superior products at competent prices. So we target those
importers who import diamond gems and jewellery Irom other country manuIacturer.
c) POSITIONING - We will position our product as a value Ior money product and would
come up with a range oI gems and gold jewellery products which would include articles
which are high on Iashion quotient but low on durability (priced very low) aimed at young
adults and also articles having very high durability and quality aspects aimed at richer
audience (and priced accordingly). Thus we would be having a diIIerentiated pricing
approach and would apply a skimming strategy in case oI higher end products and a
penetration strategy Ior the lower end articles.

1. Gem & 1ewellery Export promotion council (G1EPC) This is the apex body oI the
gem & jewellery trade in India, which was set up in 1966 Ior promoting precious
stone and jewellery exportations. With strength oI 6500 members spread all over the
country, the council is primarily involved in introducing the Indian Gem & Jewellery
products to the international market & promote their exports. To achieve this council
provides market inIormation to its members through trade enquiries, trade and tariII
regulations, rates oI import duties and inIormation about jewellery trade Iairs &
exhibitions. Some oI the Initiatives taken by this body are

O Promotion oI Indian diamond and jewellery abroad through advertisements, publicity
and participation in international Iairs, buyer seller meet and direct approach to
market retailers.
O arket study through experts in the Iield to identiIy new markets.
O Promotion oI export oI Hallmark jewellery Irom India to assure Ioreign customers oI
quality & purity oI jewellery made in India.
O Preparation oI medium term export strategy Ior various sectors including Gems &
jewellery by the inistry oI commerce.

2. Gem & 1ewellery Trade council of India (G1TCI) This council is established with
the main aim oI boosting the gem & jewellery trade oI India. It plays an important
role in showcasing the Indian gem & jewellery to the International market. It is a
council Iormed to enhance & boost the jewellery trade oI India by resolving various
issues oI the trade by escalating various to the relevant higher authorities. It also
indulge itselI in disseminating latest inIormation to its jewellers members through a
monthly newsletter, various educative & trade motivational events such as seminars,
workshops, exhibitions, Iestivals etc.

O 100 FDI is allowed under automatic route Ior exploration and mining oI minerals
other than diamonds and precious stones.
O For exploration and mining oI diamonds and precious stones FDI is allowed up to
74 under automatic route.
O For exploration and mining oI gold and silver and minerals other than diamonds and
precious stones, metallurgy and processing, FDI is allowed up to 100 under
automatic route.

O In 2004-05 the government lowered import duty on platinum Irom US$ 13.82 per 10
gm to US$ 5.03 and exempted rough coloured precious gems stones Irom customs
duty at the Iirst stage itselI, instead oI claiming reimbursements later.
O Rough, semi-precious stones are already exempt, a move aimed at Iurther promoting
the exports oI studded jewellery and platinum jewellery.
O Import oI gold oI 8 carat and above allowed under the replenishment scheme subject
to the import being accompanied by an Assay CertiIicate speciIying the purity, weight
and alloy content.
O Setting up oI SEZs and gems and jewellery parks to promote investment in the sector.
O In ay 2007, the government abolished import duty on polished diamonds.
O Duty Iree import entitlement oI tools, machinery & equipment has been allowed. For
metals other than gold, platinum, it will be 2 per cent and Ior gold and platinum, it
will be 1 per cent oI FOB value oI exports during the previous Iinancial year.

Let us analyze both the external & internal Iactors in order to arrive at a suitable mode oI
EXTERNAL FACTORS We have already mentioned the arket size, arket growth &
Government Regulation in this sector. A Iew Iactors are
O LEVEL OF COMPETITION As we have seen, Indian gems & Jewellery sector is
highly Iragmented with less than 10 oI the business under organized retail. So, the
main competition would be Irom the Iamily run export houses involved in sourcing,
processing & export oI diamonds, gemstones and other gold ornaments etc. However,
the major brands like Tanishq, Asian Star Co ltd, Rajesh exports ltd etc have managed
to grow their export volumes at a CAGR oI 20-25 which is posing a big competition
Irom the organized players as well.
O LEVEL OF RISK The greatest risk in Gems & jewellery sector is associated with the
task oI sourcing the raw-materials i.e. precious stones, gold etc at cost eIIective prices
against the rising commodity prices and increasing import export duties. The Iact that
India is not very rich in these precious metals and stones makes it more challenging to
adequate proper proIit margins. Also, the Kimberley certiIication procedure has made
it more diIIicult to obtain the necessary certiIications Irom regulatory bodies beIore
export oI diamonds to US and other countries.
O PHYSICAL INFRASTRUCTURE Despite the Iact that we are one oI the largest gold
consumers in the world besides being the leading processed diamond exporters, still
our country is not well equipped with the latest technologies in metal processing
which can greatly bring down the overall cost in mass production. ost oI the export
houses in the unorganized sector still rely on the manual operations Ior cutting,
polishing and other operations involved. Also, improvements in supply chain network
and logistics can greatly beneIit overall trade.
INTERNAL FACTORS Now coming to our company related Iactors.
O COMPANY OVERVIEW We have assumed our company to be a very small Iirm
involved in manuIacturing and distribution oI gold and diamond jewellery, both in the
domestic & international markets. We would be more Iocussed on export oI jewellery
to US & UAE markets on account oI their growing imports Irom India. We would
also be prepared to tie up with any Ioreign Iirm wishing to enter the Indian market
through the 51 FDI in single brand retail (automatic route).
O AVAILABILITY OF RAW-MATERIALS Since we are a very small Iirm without a
well built supply chains network, We would be sourcing our raw-materials Irom
leading importers (mostly in the unorganized sector) and processing them and
exporting them in the Iorm oI polished stones and also as jewellery through direct and
indirect exporting as well. As our business grows, we would be setting up our own
exploration units both in India and abroad Ior cheaper sourcing oI metals.
O INTERNATIONAL EXPERIENCE- Since our exposure to the area oI International
business is very low, we would be initially Iocussing on building exposure by
adopting indirect exporting (in which we would be tying up with leading export
houses in the country and organized retailers involved in exports and render services
like metal processing ) and also piggyback exporting in which we would be
incorporating our processed gems, diamonds and gold in other objects like Watches,
Bracelets etc meant Ior export thereby minimizing direct risks and gaining revenues
as well.
Thus, our desired mode oI entry would be to choose production Irom Home country and
catering to International markets by adopting indirect & piggyback exporting in the Iirst Iew
years (roughly 3-4 yrs) aIter which we would delve into direct exporting and rendering oI
oIIshore services.
O STANDARDIZED vs. ADAPTIVE- As mentioned beIore, we would be delving into
one oI the most competent and high potential sectors where in we cannot adopt a
standardized approach Ior production and would rather have to adopt a customized
approach in designing the jewellery. The latest trends in jewellery indicate that people
(even in domestic market) preIer Plain metals and eco Iriendly materials wood, bone,
simple and soIt semi-precious stones with Earth colours and a simple palette. Gone
are the statement necklaces oI the past two years and in with the thinner, yet charming
and graceIul strands. Creativity will overrun our need Ior security and gentle pairings
oI blackened metals and all natural materials pearls, bamboo and recycled media will
tone things down considerably.

O SPRINKLER vs. WATERFALL APPROACH The US market has always appreciated
thin, elegant and stone laden jewellery which is light and elegant. On the other hand,
our domestic taste and preIerences are very diIIerent and Indians preIer gold
ornaments which are thick but not heavy. The domestic sales oI diamond and other
gems laden jewels are much lesser than the ones consumed in western markets. Thus,
we have to cater to the US and domestic markets simultaneously by adopting a
Sprinkler approach which would require us to have separate units working on
domestic and Ioreign designs with a common production & processing department.

2. PLANNING & STRATEGY - Since we have adopted a customized approach, we would
have to very clearly choose diIIerent designs oI jewellery Ior attracting people in western and
domestic markets. This would require us to
O Outsource our designs to experts in US market having proIound experience and grip
over the latest trends in Jewellery tastes and preIerences oI American people.
However, to cater to the domestic market simultaneously, we would have to obtain
data Irom regulating bodies like GJPEC to become aware oI the domestic preIerences
oI people. In the beginning, it would be wiser to divide the design department into 2
sections, one Ior domestic design and the other Ior Ioreign designs. The production
team however, would be the same and would process and produce products
simultaneously Ior the Indian and US markets. The packaging and other logistics
responsibilities can be given to the export house with which we have the contract.
O To have a joint venture with a Ioreign player (Irom US) who would provide us with
the inputs needed during design oI jewellery meant Ior export in return Ior the
expertise we provide w.r.t the domestic market.
PRODUCT LIFE CYCLE Looking at the gems & jewellery market`s CAGR it becomes clear
that with a consistent growth oI 13-15 in exports Irom India, this is sector is in a
booming/growth phase oI the PLC. Also, being the biggest processors oI Diamonds and other
precious stones, gives us the edge to become the gems & jewellery hub in the world. Thus,
looking at the International PLC, we are now in the Export stage which is expected to get
accelerated with increased trade with other high income countries like US. Thus, our
company needs to enter this sector at the present and try to take advantage oI the relaxation in
import duties oI raw cut diamonds and gems and also the cuts in export duties and relaxation
in credit collection period (both pre-shipment & post shipment) and try to grow our business
by slowly expanding to emerging markets like UAE, Hong Kong etc in the Iuture.

PRICING OB1ECTIVES - Our primary objective in this case would be to achieve brand
popularity in the medium term (oI 4-5 yrs). For this sake, we would be adopting a pricing
strategy that would aim at achieving market penetration primarily in the domestic market and
utilize this brand positioning to strengthen our export volumes in the US. Thus, we would be
pricing our products with medium proIit margins and at rates lower than most oI the leading
players in the market and would also try to achieve economy by reducing processing &
storage expenditures along with economic sourcing oI raw-materials.
PRICING STRATEGIES - We would be adopting the cost based pricing approach in this
case. This is primarily because we would be involved in indirect exporting where in we
would be obtaining the service/processing charges (based on volume processed) besides other
Iixed charges based on our Iactory, labour and other maintenance charges. Also, we would be
aiming to obtain a proIit margin oI 10 along with above charges.
Thus, our break up would be
Price fixed Fixed charges (i.e. factory cost+ maintenance expenses) + variable charges
(i.e. volume processed ` labour charges) + profit (10 of volume processed)
However, aIter the initial period oI 3-4 yrs, we would be entering into direct exporting and
then we would slowly change the above pricing into Full cost pricing as we would be
delivering our products to the US ports and hence would be applying the CIF based pricing.
In that case, the other charges like insurance, logistics, packaging and other Ireight charges
would be added to the above expenses.
Also, we would be adopting a diIIerentiated pricing approach Ior diIIerent product types like
diamond/ gem embedded jewels, gold ornaments etc depending on the respective
international commodity rates Iixed by international trade organizations.
3.3 INTERNATIONAL PRODUCT PROMOTION - As we have already stated we would be
designing our products in a manner adaptive to that tastes and preIerences oI domestic &
American markets. Thus, along with the product we would also need to adopt an adaptive
promotional strategy i.e. dual adaptation. For instance, in case oI domestic market, we could
build our brand and product reputation through extensive celebrity endorsements and
improve our popularity by oIIering a creative set oI products and take up orders Irom HNI
clients (which would be designed and made exclusively Ior them as per their requirements).
Also, considerable discounts and special Iestival oIIers may attract more customers Irom
middle class as well. As Iar as the international markets are concerned, we would have to
attract leading export houses by oIIering products at much lower prices than other
competitors. Also, tie-ups with leading American brands (especially watch and even mobile
brands) may help in improving prospects oI piggyback exporting and improving brand
popularity in US through established brand partners.
Thus, by collaborating to well-established players in US market, we would be able to
mutually beneIit each other by obtaining inIormation on the Ioreign market besides gaining a
good brand image.
In the Iirst Iew years oI business, we would essentially be positioning our Iirm as a producer/
manuIacturer oI jewellery in the international market. We would be tying up with the leading
suppliers oI gold and other precious stones in the country Ior the procurement oI raw-
materials and would be employing our production unit to process and transIorm the rough
pieces into jewels as per the design requirements. Then we would be delivering our products
to the export houses and other domestic retail chains using our very own logistics network.
Thus, we would not have to directly need to distribute our products to the market and would
mainly have to deliver it to the distributors or other channel partners.
But during this period, we would be building our supply chains by Iorging long term relation
with suppliers and partnering with leading logistics service providers in order to slowly get
into direct exporting to US market. Thus we would be outsourcing our distribution to outside
players till we attain the requisite expertise in international trade. Also, in case oI any
successIul joint ventures or partnerships with Ioreign Iirms, we could utilize their well built
distribution channel to distribute our products in the Ioreign markets.
As Iar as, the domestic distribution is concerned, we would be initially Iocussing on
establishing business in a particular city (like Delhi, umbai etc) and source the raw-
materials Irom local suppliers besides develop a single retail outlet to reach out to customers
besides providing services to other leading retail chains and distributors in the area.
In case oI the gems & jewellery segment, the critical issues which need to be handled prior to
launching the product are
O Sourcing oI raw materials (rough cut stones, gold etc) Irom Ioreign destinations and
other local suppliers.
O Having a good inIrastructure with adequate capital (pre-shipment & post shipment
credit) and other Iacilities (land, equipment) etc to ensure continuous production oI
O Training oI employees and selection oI skilled workers to convert the designs into
O Deciding on a price which would ensure proper penetration oI product in both
domestic & Ioreign markets (diIIerentiated pricing)
O Obtaining the designs Ior jewels (designed speciIically Ior US market) Irom a panel
oI experts selected as part oI the company`s international team.
O Building a sound channel Ior distribution and retail in order to reach the customers.
O Obtaining the certiIications associated with Kimberly process (in case oI diamond
products) and other regulatory bodies like EXI bank, GJPEC etc besides registering
in the exporters association oI India.
AIter clearing all the above hurdles, we would have to begin a campaign along with the well-
established channel partners (Ioreign retail partners, domestic export houses, distributors etc)
which would Iocus essentially on the product quality, pricing and reliability. This entire
campaign would aim at building a reputation Ior our products amongst our partners and also
amongst the domestic and international customers.
We would be positioning our product essentially as an economic and highly Iashionable
range oI products aimed at both the middle and upper classes. We would be Iocussing on
both organized retailers in Ioreign markets and the general public as well (in domestic &
Ioreign markets). We would build our reputation on the basis oI customized production oI
jewels Ior rich clients and exclusive discounts Ior huge corporate chains and other Irequent
One oI the key necessities to popularize our brand and develop good brand equity would be
to indulge in socially responsible activities which would boost our image in the minds oI our
customers and general public. A Iew key activities that can be done are
O Coming up with a highly eIIicient production unit which is Iree Irom wastage oI
materials and with minimum emission oI harmIul gases into the atmosphere.
O Indulging in recycling oI material remains and other by products besides proper
utilization oI water resources which can make our Iirm carbon ve, water ve and
solid waste ve Iirm and become a truly green company (triple bottom line concept).
O We would try to incorporate environment Iriendly materials like natural/earth colours
besides using materials like bone, wood etc in the innovative product designs.
O We would try to provide direct employment to a large number oI skilled workers and
thereby ease the unemployment in the areas oI operation.
O Try to come up with special oIIers on key days like Ozone day, environment day etc
in order to promote awareness amongst people besides attracting more customers.
O Try to collaborate with NGOs and other social organizations by Iunding their
campaigns and thereby increase both brand visibility and promoting good social

The huge growth oI the Indian gems and jewellery industry has seen the advent many new
branded jewellery shops in various metros oI this country. The availability oI cheap labour
and presence oI well skilled people in various states oI India is helping in the growth oI
diamond polishing and gold jewellery markets. India will soon overtake the US in the not so
distant Iuture, according to a statement given by Rapaport Group, the well known keeper oI
global diamond related data. Thus, this growth phase along with several government
initiatives like extension oI credit period, reduction in import duties ( Ior speciIic products)
etc can provide the ideal time Ior entering Ioreign trade. Also the FDI initiatives like 51
FDI through automatic route in single brand retail besides 100 FDI Ior exploration/mining
activities Ior minerals (other than diamond and precious stones)etc provide lots oI
opportunities Ior collaboration with Ioreign companies wishing to enter India.
Thus the sector is bound to grow Iurther in the coming years and our Iirm would aim at
transIorming itselI Irom a mere exporter oI jewels to a reputed organized retail chain having
presence in all major destinations like USA, UAE, South AIrica etc over the next 10-15