In 1888, De Beers Mine appeared following the emergence of global monopoly of De Beers over 90% of the prevailing world market for rough diamonds for over a century. In 1933, Ernest Oppenheimer founded the Diamond Corporation Ltd., which includes most of South African producers and the Central Selling Organization. It centralized the sale of diamonds around De Beers.
Thus, De Beers buys sorts and stores virtually all the world's diamonds. This allows it to control supply, net sales, prices and stocks of this production. It was not until the 1990s that the monopoly of De Beers began to be challenged. Indeed, in 1989 the UK Office of Competition began an investigation to prove that De Beers is abusing its monopoly in the diamond trade on the London market.
It was not until the 1990s that the De Beers monopoly is beginning to be challenged. Indeed in 1989, the UK Competition Bureau began an investigation to prove that De Beers is abusing its monopoly in the diamond trading on the London market. But in 2000 we are witnessing the end of the last true cartel in the world, as De Beers, pushed by the European Commission considered that its anticompetitive system, implements the strategy of "Supplier of Choice" (supplier of choice).
The company must deal with competitors, and reconsider its former strategy.
The new target of De Beers is to extend over the entire chain, from mine to jewelry. That's why in 2001 he created a partnership with luxury giant LVMH and then opened several jewelers in De Beers-LVMH brand.
How De Beers can maintain its leadership in the global diamond industry? The company must now face the new challenges that are subject of the diamond industry gross antitrust laws that will force him to thoroughly review its approach to supply management, decrease in diamond sales, or overproduction that lurks in the years to come.
After analyzing the identity of the company, the diamond industry gross and jewelry industry, which are the two industries on which De Beers is now present, we will explore different scenarios for De Beers to s expand and maintain its leadership.
Also, after a limited analysis of the diamond industry, we'll see if it is of interest to De Beers to diversify in this field.
Although management of the firm has always played a major role in its creation and development, the company has always been identified with respect to its core business related to the diamond industry.
In 1888, at the time of its founding, the company De Beers already had 90% of the world's rough diamond. Indeed, Cecil B. Rhodes established the firm in its commitment to significantly increase diamond production by combining different small claims De Beers mine in Cape Town in South Africa. It has been the largest mine in Kimberley with the main sites of diamond production, all under one monopoly. The major activities are the extraction and distribution of diamonds is at the heart of the founding of the company.
After grouping the majority of producers in 1933 under the Diamond Corporation Ltd., De Beers decided to centralize distribution through the creation of the CSO (Central Selling Organisation). This organization aims to classify diamonds according to the rules of 4C (Carat, Colour, Clarity & Cut) and then resell them to its own short list of clients and selective known only from the CSO.
Tags: diamonds; De Beers; strategic management of De Beers
[...] Extraction techniques depend on the ground, as the selection and storage are perfectly controlled by the various stakeholders. b-The jewelry industry: strong growth The jewelry industry which is the last stage of the diamond pipeline is an essential step, as it brings added value to the product. This industry, with the emergence of new markets (such as Asia and its new rich), holds great potential for actors, including De Beers as part of the overhaul of its operations. ♣ Growth of the rate of demand: this is average due to the elitist nature of the product, but due to the rise of the new rich (despite a crisis in the diamond in the 90s). [...]
[...] The balance of power was not favorable to clients in the negotiation. - The bargaining power of customers was low and was scored which gives this module a low importance. Bargaining power of suppliers: The industry suppliers of rough diamonds were the institutions that sold the land to farm, whether public or private. In this case, ¬ The demand for land was more concentrated than the offer; + ¬ There was no substitute for a diamond mine; + ¬ Land operations were vital to the diamond; + ¬ There was little risk of forward integration by suppliers, due to the extent of investment and lack of profitability in the early days of mine operation. [...]
[...] The rough diamond industry: a mature industry If we look in more detail at the rough diamond industry, it appears that this industry is mature, and its future is unclear, since opinions vary, especially with regard to its production capacity in the face of uncertain demand: • Growth of the rate of demand: this rate is uncertain, but the overproduction proposed by some experts in 2008 suggests that its growth will be lower than the supply. • Industry potential: this potential remains strong, but weakens the quality of the increasingly remarkable synthetic substitutes (for diamonds for industrial use). • Wide range of products: stabilized. [...]
[...] We grant this module the score of 1/5. Bargaining power of suppliers: ¬ Jewelry is a vital outlet for suppliers - ¬ There is currently no substitute for rough cut diamonds. The development of synthetic diamonds could eventually be an alternative, but it is the rarity of a diamond that contributes to its beauty and its price; + ¬ The product is vital in purchases made by the jewelry industry; + ¬ The risk of downstream integration is important because tailors can go up and market cut diamonds themselves; + ¬ There is no shortage of supply. [...]
[...] Moreover, its policy of total control of the production allowed it to buy diamonds to build up stocks in order not to be out of stock of diamonds. Such a controller could ensure a higher price policy. Recently, driven by its desire to create a brand stamped "De Beers" in the likeness of its fame in the world, the brand continued to show the importance of the concept of prestige and luxury in its strategy and policy development. This was further strengthened recently with the partnership established between De Beers and the world leader of luxury LVMH, to create De Beers-LV jewelry and distribute it worldwide. [...]
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