Joint Venture, Essay Example
Joint Venture between De Beers Diamond Company and Botswana
De Beers Company, the dominant seller of “rough stones” in the world discovered a massive diamond mine in Orapa, a town in Botswana in 1967. The company thus spent $33 million, and four years later, the mine was ready for production of diamonds. The opening of mine officiated by the country’s president, Seretse Khama. De Beers Company built relations with the country with a 50-50 joint venture where it agreed to sell 15% of the Company to the government. De Beers Company decided to contribute in helping to build a civil society by donating money, building roads, hospitals, and schools for the country. De Beers worked together with the government of Botswana to deal with H.I.V and AIDS. Employment in Botswana promoted where executives in the company were Black African (Diamonds, 8/9/2008). In March 2008, De Beers opted to shut down its diamond sorting facility in London to open a larger facility in Gaborone. This helped Botswana’s economy grow by hiring staff from Botswana. The opening of this mine facilitated the economic growth of Botswana from being the world’s poorest country to being a prosperous country in Africa. Botswana’s per capita income increased from $80 to $6000 per year in Botswana. De Beers Company formed just a competitive advantage that benefits both parties. It forms an admirable example of a good citizen as it subscribes to the philosophy that its success supported by social and economic responsibility. It did not only maximize its profit, but also helped to improve the economy and the living standards for Botswana and the people.
A challenge occurred in the 20th century where De Beers became a cruel monopolistic competitor. De Beers Company dominated 80 % of the market and became a failure since they charged whatever they wanted sine consumers had no other choice (Goldman, Ch.2, p.30).They used a strategy of raising the prices of diamond every other time to control supply. They only sold enough diamonds to meet demand to merchants and traders, creating scarcity. In 1990, the demand dropped, and inventory increased up to $5 billion. De Beers Company failed to ask Canada to be its cartel even though it is another country with high supply of diamonds (Goldsmith, Ch.12, p.244). This created a rebel where people mined diamond and sold it to buy weapons. The blood diamond trade then started, and it seriously affected the diamond market. De Beers stopped buying diamonds from third parties and only focused on its own selling. It was able to get 100 other dealers to follow this rule and worked together to boycott the other groups. De Beers Company and the other dealers formed a group of competitors who jointly refuse to deal with any another competitor or group of competitors (Goldsmith, Ch.12, p.247). Kimberly Process came in and significantly reduced the blood diamond trade. The process ensured that buyers obtained legally mined diamonds (Friedman, 10/8/2008). Joint ventures were there after formed which have slowly corrected the monopolistic competition. The De Beers Company no longer held the supply to raise prices unreasonably. Joint Ventures also increased manufacturing capacity at lower cost. Therefore, De Beers earned more profit when it controlled only 40% of the diamond market rather than 80% of it.
The government of Botswana has a role of controlling all economic activities within the country with intelligence. It should have the power to block companies from gaining market power and employ public to prompt companies to contest one another in the marketplace. The government of Botswana should have control over companies that reach a point of being monopolies with self-interests. The government should protect the consumer. It should be intelligent enough to sit on the sidelines since innovation and international rivalry does a better job of checking corporate power than the government can. The government ought to build strong relationships with innovators and inventors to gain its advantage. This is evident that the Botswana government played it honestly and intelligently as it worked hand in hand with De Beers. With its support and encouragement, De Beers helped the economic growth of the country; the living standard of Botswana’s and at the same time, the government helped the company in earning profit and getting resources.
Flush with Energy
Denmark badly hammed by the 1973 Arab oil embargo created an energy policy. They responded to that crisis in a systematic way that makes it energy dependent today. The first thing they did was burning the Sunday driving for a while. There was an imposed set of gasoline taxes, the buildings and appliances had to be energy efficient, and there were CO2 taxes for the Danes. The shaping the market with energy taxes by the government-stimulated innovations in clean power and the Danes forced to innovate more. They recycled waste heat from coal-fired power plants for home heating and hot water. They also incinerated their trash in central stations to provide home heating. Prices of gasoline further increased to break addiction to oil. This forced 50% of the Danes using bicycles to reach their places during rush hour. Other energy efficient practices included ensuring lights in such places as hotels triggered by energy-saving motion detectors. The toilets too fixed with two flushing powers depending on what exactly one is flushing.
These allowed them to grow their economy where Denmark’s exports of energy efficiency products grew. Energy technology exports rose by 8 % in 2007. This was a recommendable increase compared to a 2% rise in 2007. Now, unemployment in Denmark is 1.6 percent, which is relatively low while its 99% energy importation from Middle East has reduced to 0%. Other economic benefits associated include reduced traffic during rush hour. This ensures less pollution compared to when there is a traffic jam.
The social benefits associated with these inventions were the birth to a Danish clean-power industry because of the 20% energy from wind, which is non-pollutant. Less obesity experienced as people do exercise as during cycling.
Smart taxes and incentives have spurred Danish energy companies to innovate. Right now, Denmark’s is the world’s biggest wind turbine company that is most competitive in the world today. It, however, has had 35 new competitors coming out of China in the last 18 months.
The US will certainly adopt the Denmark energy policy in due time to produce clean power. This is especially due to its climate change. The US congress will certainly encourage and adapt the extension of production tax credits in order to develop wind energy in America.
The tax-brakes policy idea is an excellent one. The society will benefit considerably by its introduction, as it encourages less consumption of energy by people which in turn reduces national demand for energy and contributions to global warming, it ease traffic congestion and bring down the cost of road maintenance. They also lighten the financial and social burdens associated with auto accidents.
The government uses a subsidiary incentive by giving tax credits for driving less. It rewards taxpayers for behavior like avoiding the car to take public transportation, walking, or biking where everyone saved money. The federal government could set a baseline annual driving distance per registered vehicle. In this pay-per-mile system, drivers awarded tax credits regarding on the number of fewer miles they drove. Taxpayers who do not drive altogether obtain or rather receive the highest possible number of credits. The government increases tax credits for people who drive at off-peak hours or maintain moderate speeds.
This approach is a fair policy that advantages both the taxpayers and the government. While the taxpayers benefit from the less costs incurred on fuel and the tax incentives, the government on the other hand saves on revenue spent on bringing in energy. The society also benefits from the reduced environmental pollution and global warming.
Goldsmith, Elizabeth. Resource Management for Individuals and Families. Cengage Learning, 2005.
Friedman, Thomas. Flush With Energy. Policy Issue II A, August 10, 2008.
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