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De Beers and the Global Diamond Industry Case Solution
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 2858 | 1429 Words (7 Pages) | David W. Conklin and Danielle Cadieux | Ivey Publishing : 905M40 |
A Word File
De Beers, a renowned diamond mining and selling corporation, had a vital influence on the global diamond market. South African organization De Beers made sure by passing years about the insufficiency of diamonds which will remain constantly intact. De Beers has given notable to the industry's development over time and created a strong position. The issues the De Beers organisation is having are widespread and affect a number of businesses. The difficulty with the scenario is that despite having a solid reputation in society, this organisation is not growing gradually as it has over the past century. They are seeing a decline in profits and revenues, and this issue has been for more than ten years. De Beers' impact on the diamond industry will be explained in this case study involving the guidelines they fixed. The value chain that they manage, customer satisfaction affected by them and the pros and cons of the business model they gave.
Following questions are answered in this case study solution:
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Who wrote the rules of the international diamond market? How were they enforced?
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What were the key mechanisms that De Beers used to manage the value chain in the past?
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Did De Beers increase customer satisfaction above the levels that might have existed without De Beers’ leadership?
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What are some pros and cons of De Beers’ strategy? Did De Beers increase profitability for all participants? Were De Beer’s activities good for everyone?
Case Study Questions Answers
1. Who wrote the rules of the international diamond market? How were they enforced?
De Beers, a diamond mining and trading business, acted as a head role in setting and imposing the laws that control the diamond industry. Cecil Rhodes, the Creator of De Beers, first used his inventory of diamonds to exploit pricing and seize control of his competitors ' businesses. In the world, 95% of the diamonds were under De Beers' hands by 1888.
De Beers was taken over by Ernest Oppenheimer, after Rhodes, who cemented the company's hegemony furthermore. (CSO) Central Selling Organisation came into being in the 1930s by Oppenheimer, which was a reaction to the threat of decreasing diamond prices during the Depression. In the world, being the only supplier of rough diamonds in the CSO takes as a marketing division of De Beers, managing supply on a demand basis.
Below are some techniques De Beers used to enforce their rules for diamonds in the international market.
Vertical Integration is used to enforce dominance by managing every step of the diamond value chain. That includes grading and sorting rough diamonds, running the distribution networks, and owning mines of diamonds. De Beers developed a monopoly over the supply of diamonds By convincing diamond producers all over the globe to sign long-term contracts with the company. At set prices, producers were required to sell their raw diamonds only to De Beers. Basically, this is a supplier monopoly. In order to control the world supply and control diamond prices De Beers gathered huge amounts of diamonds. They managed increased prices by accurately controlling scarcity. Releasing diamonds onto the market also include in it. This is Diamond Stockpiling. De Beers substantially spent on marketing initiatives to change consumer attitudes and boomed demand for diamonds. "A Diamond Is Forever," their catchphrase, was successful in establishing diamonds as signs of sharing love and devotion. In this way, they did marketing and branding of their product.
2. What were the key mechanisms that De Beers used to manage the value chain in the past?
In the past, De Beers used a number of important techniques to rule the diamond industry's value chain. These systems consist of the following:
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