Newsletter No. 95 Item 3

A speaker from the Klein Karoo Kooperasie (KKK) discussed a value pyramid during a presentation at The International Industry Strategic Analysis held in 1999 and reported here.  The speaker was suggesting that it was important to keep the price of the product high using DeBeers as an example in the way they maintained the high value of diamonds.  They achieved this by very strict control of the supply of product to the consumer.  Subsequently they have discovered this does not work so well for ostrich as it is not so easy to switch production on and off with livestock and retain profitability in a similar manner.

In this case discussion related to the value of the skins as the KKK’s vision was limited as to the full profit potential of ostrich viewing the meat as of little value and only a by product.  The fear was witnessing ostrich become a high volume, industrial meat production industry where the meat and skins would become commodities and thus low in value.  Which business model creates real value, sustainable employment and the ability to growth the business?

The illustration below is a value pyramid as it can apply to ostrich and other agricultural products. The area in blue in the pyramid illustrates the value Pyramid as presented by the KKK. It illustrates the high value achieved when volume is low and how value reduces when volumes increase. At the bottom end products are sold as a commodity where any competitor can undercut prices.

Ostrich Value Pyramid

To increase volume whilst maintaining value is achieved through product differentiation utilising methods to encourage buyers to come to you rather than a competitor.  The areas in green represent examples of some ways to add value.