Skip to main content

Why does De Beers diamond campaign so hard?


  DeBeers is a member of a cartel and many other cartels have collapsed. Running a
diamond business is not as easy as anyone thinks. De Beers enhances the partnership in worldwide
by recruiting the skilled workforce. Inside the organization, it is responsible for creating passion
and maintaining corporate rapport. It maintains policies like vision, worth and purpose and
they are strategic.
DeBeers – Relevant Facts
De Beers is considered to be the world’s largest diamond mining and trading company in
the world. At one time, it was said to be controlling more than 45% of the worldwide production
and had been selling over 80% of all diamonds globally. It used monopolistic practices and by
being a member of a cartel, it used massive size and control of the market to financially punish
smaller miners and retailers who tried to break away from the De Beers cartel diamond “empire".
Only DeBeers controlled most of the diamond cutting and polishing industry thus creating a
monopolistic industry.
Major Issues Identified for DeBeers
 After reading the case study, I have identified the following major issues from the case: 1. Increased Government Oversight: In a monopolistic system, the companies try to maximize their profits by boosting imaginary costs, driving demands and increasing
the price. Since there is no competition, the retail price DeBeers sets is the final price.
With the increased government oversight, DeBeers would not be able to manipulate the
value chain, cost dynamics nor avoid taxes 2. The advent of synthetic diamonds that reduce DeBeers’ monopoly: While DeBeers
controlled more than 80.0% of the global sale, the consumers had to depend on DeBeers
The External Environment because it controlled the entire value chain. But the scientists invented a mechanism to
create synthetic diamonds which meant that DeBeers could not control nor monopolize
the market anymore (McAdams and Reavis, 2008, pp 4 -5. ).

PESTEL Analysis
Table 1. shows the complete PESTEL Analysis for DeBeers
PESTEL Relevant Facts and Description P (Political) The Growing pressure from the local African communities to increase DeBeers’ participation in economic and social development led to DeBeers’ change in strategy to focuse more on the African region. This also caused DeBeers to sell off some of the assets  to African businesses. E (Economic) There is an anticipation in diamond gross sales in the U.S.A. DeBeers is not able to focus on merchandizing and as well as gross sale strategies. It is unable to cope with increased costs S (Social) Due to the increased pressure from the NGOs in the 1990’s, DeBeers, the then cartel, was forced to adopt the Kimberly Process. This meant that all diamonds that will be traded in the global market have to be certified conflict-free. This restricted DeBeers monopolistic and cartel style business. Additionally, DeBeers was required to contribute towards social development in Africa. T (Technological) With the CVD technology, the production of synthetic diamond became viable and cost effective.  DeBeers was not able to control the monopolistic nature of the diamond market anymore. E (Environmental) Natural diamond mining is harmful to wildlife and dangerous to human lives than synthetic diamond production. The pollution attached to diamond mining caused DeBeers to change its strategy so that all stakeholders involved are properly addressed and taken care of.
The External Environment


L (Legal) There have been numerous changes and amendments in laws that indicted DeBeers for violation of Antitrust laws. The laws in African countries too were made stringent which prevented DeBeers from exploiting. DeBeers is now forced to adhere to Kimberly Process. (McAdams and Reavis, 2008, pp. 6 – 10)
DeBeers and Porter’s Five Forces Analysis
Table 2. shows Porter’s Five Forces in the Context of DeBeers
Porter’s Forces DeBeers and Description Potential Entrants Very low. Due to synthetic diamond, the mining for natural diamond would decrease and DeBeers would not have any competition in the natural diamond mining. Threat of Substitutes High. Synthetic diamonds that are flawlessly made pose a great threat to DeBeers Bargaining Power of Buyers High. The buyers have now choices: either natural or synthetic. Synthetic diamonds are cheaper. So, buyers have more power who might ditch DeBeers Bargaining Power of Suppliers Medium. DeBeers do not have control on the market anymore due to many suppliers and regulations. Competitive rivalry High. Since CVD technology produces cheaper diamonds and there is a demand for diamonds, there would be many current players who would adapt technology and pose threat to DeBeers who has lost control of the value chain.  (UKessays, 2017)
Conclusion
 DeBeers was a monopoly but not anymore, thanks to technology that produces synthetic
diamonds and thanks to government regulations, social awareness, media activism and pressures.
The external environment has reduced the stronghold of DeBeers which helped to regulate the
entire diamond industry, making it more responsible.
The External Environment


References
McAdams, D and Reavis, C (2008, Jan 07). DeBeers’s Diamond Dilemma. Retrieved Jul 10,
2019 from
https://my.uopeople.edu/pluginfile.php/515756/mod_workshop/instructauthors/U3%20De
Beers%20Diamond%20Dilemma%20McAdams.pdf
McAdams, D and Reavis, C (2008, Jan 07). DeBeers’s Diamond Dilemma. Retrieved Jul 10,
2019 from
https://my.uopeople.edu/pluginfile.php/515756/mod_workshop/instructauthors/U3%20De
Beers%20Diamond%20Dilemma%20McAdams.pdf
UKessays (2017, Jan 17). De Beers Case Study. Retrieved Jul 10, 2019 from
https://www.ukessays.com/essays/economics/diamond-industry-case-study-de-beers
economics-essay.php 

Comments

Post a Comment

Popular posts from this blog

DeBeers - the diamond trading company

PESTEL analysis Political aspect: In 1994 the DeBeers operation was prohibited in the United States territory because of antitrust legislation. These facts complicate the DeBeers operation and shake the whole company. Economic aspect: Although in 1990s DeBeers ruled the whole industry, after several events such as Soviet Union collapse and Alrosa’s appearing, DeBeers lost its control over the market. In addition, Canada’s appearing in the diamond market forced DeBeers to hold back a large portion of its diamonds from the market and purchase much of the excess supply from these producing countries often at inflated prices (McAdams, Reavis, 2008, p.7). Social aspect: In the mid-1990, Angola, Sierra Leone, Liberia and Democratic Republic Congo were outflanked by rebel forces opposed to the government. DeBeers sponsored this military conflict by “blood diamonds” purchasing. Technological aspect: The main threat is the synthetic diamonds grown is the lab-conditions. This tec...
Post a Comment
Read more

What are the Cultural Makeup We are Unaware Of?

          Having a thorough understanding of cultural influences and components is a prerequisite that helps employers and the human capital managers tolerate and better manage individuals and employees with cultural differences to avoid misconceptions and altercations due to “cultural misunderstandings” (Lynch, 2017).           In as much as there are tangible aspects/elements of culture such as dressing, language, food, etc., the biggest components of culture are actually hidden beneath the surface. This comprises of the invisible values and rules that differentiate one culture from the other (Penstone, 2011). It is always difficult to use the rule of culture to interpret the components of another culture. Crucially, the tangible and visible aspect of a culture is usually influenced by the hidden components, such as values, notion, attitudes, and assumptions (Penstone, 2011). Edward T. Hall in his 1976 theory de...
Post a Comment
Read more

how can HR Managers help raise the cultural intelligence of an organization.

I will start by saying that, I have worked for 2 employers so far in my 12 years career and I do not think the HR took any substantial step to raise cultural awareness. Saying that I will share my thoughts on what the HR can do.             I have always worked in multinational companies with people from various national backgrounds. While working regardless of cultural differences you are supposed to know your work and deliver. So, there is no bonding or cultural exchanges happen. But someone like myself who worked in multiple geographies can easily distinguish between work culture in India, USA, and Australia.             So, first thing, HR can do, before sending employees in foreign assignments they can train them about the countries culture and people. Along with any other training that is useful. In fact, I would say, learning the language and being able to follow accent i...
Post a Comment
Read more