Strategies for marketing diamonds in China from the perspective of international diamond SMEs compared to the west

Abstract

Purpose – The Chinese diamond industry is dominated by SMEs. The purpose of this paper examines which of the three business strategies prevalent in the global diamond industry is utilized by Chinese diamond SMEs compared to those used in other western countries. In so doing, it maps the major actors in the Chinese diamond industry and identifies the challenges faced by SMEs when entering the highly competitive but very lucrative Chinese diamond industry. Design/methodology/approach – A two stage approach was undertaken. Step 1 involved exploratory field work with leading institutions. In the second stage a qualitative questionnaire was administered to members of 54 small to medium-sized international diamond SMEs operating in China. The difficulty of acquiring information on this secretive industry was further hindered by the equally secretive nature of Chinese culture. Findings – Guanxi was found not to be prevalent in the Chinese diamond industry. This is an interesting finding as China is a socially embedded and highly networked society. Chinese diamond SMEs conduct business by implementing a transactional-based approach to business strategy that centers on short-term cash-based transactions. Research limitations/implications – Future studies should use a quantitative questionnaire with a larger set of Chinese SME diamond firms. Studies could also examine whether the transformation from a system based on social networks to a system based on market forces as found in the Chinese diamond industry has been transposed to other Chinese industries dominated by SMEs. This may show the rationalization of the Chinese economy and its progression toward western models of exchange. Originality/value – This paper is a pioneering work on the structure and business strategy implemented by SMEs in the Chinese diamond industry.