...De Beers Diamond Company is an industry that currently produces $13 billion worth of rough diamonds each year, leading to the employment of 10 million people globally from mining to retailing. 70% of rough diamonds are sold for industrial purposes with the remaining 30% “gem quality” being distributed to experts for cutting, polishing and jewelry manufacturing (Stein, 2001). The global jewelry market has increased three-fold in the last 25 years and is currently worth $72 billion each year. Jewelry diamonds are unjustifiably expensive given that they are not actually scarce. Upon the discovery of other diamond reserves globally, De Beers set up a subsidiary called the Central Selling Organization (CSO), responsible for buying the production for all mines worldwide then selling the produce to dealers in return for a percentage fee (10 – 20 %) from producers (Stein, 2001). The CSO was able to maintain illusion of scarcity by deciding the quantity of diamonds to be supplied to the world market and in turn, allowing individual producers to produce a certain percentage of that amount (De Beers Group, 2012). De Beers have been connecting with people around the world. With one of the earth’s natural treasures, De Beers has been helping to create countless memorable moments. It takes years of searching, cutting-edge science and sophisticated technology, coupled with traditional mining know-how to find diamonds. They (De Beers Diamond Company) explore in two stages, each supported...
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...De Beers' Multifaceted Strategy Shift Faced with such challenges as new sources of competition and suspicion about conflict diamonds, Gareth Penny had to rethink the basics A diamond may be forever, as De Beers' famous advertising slogan contends, but is the same true of a business model? That was the question facing Gareth Penny, managing director of De Beers, in the late 19'90s, when the famed diamond cartel found itself beset by a series of events that ultimately forced it to examine and then retool its business strategy. Since the company was founded in 1888, De Beers followed a strategy of supply control. In addition to mining its own diamonds, it bought diamonds from other producers and had what it called the "central selling organization," controlling some 90% of the world's diamonds. Its tight control over such a vast amount of supply enabled De Beers to keep prices high for a commodity that is neither particularly scarce nor useful. If a competitor offered diamonds on the market outside of De Beers' central selling organization, De Beers would simply flood the market with similar stones, thus eliminating any pricing power the competitor might offer. By the end of the 1990s, the business model of controlling supply and managing how much of its inventory went to market at any time was no longer effective: New sources of diamonds were discovered in sufficient quantity that they could be sold competitively outside of De Beers' central selling organization. Demand for...
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...DeBeers “A Diamond is Forever” Prepared April 16, 2012 For decades, De Beers has been the preeminent name in diamonds. Thanks to a stockpile of the world's rough diamond supply, indelible marketing schemes and even negotiations with foreign governments for their diamonds, De Beers has been the most important name in one of the world's most lucrative businesses for almost a century. This paper will review the billion dollar rise and fall of a monopoly that has crushed competitors and cash-strapped governments since the 1800s. Diamonds became a symbol of love thanks to De Beers, which is fitting, since De Beers became what it is today because of a love story: the love of money. In the beginning, the diamond trade took place mostly in India and Brazil. With the discovery of diamonds in South Africa, the trade simultaneously took off and became much less profitable. Up until the mid-1800s, diamonds were a rarity and could be seen only on the hand of a monarch. But the diamond rush that began in South Africa in the second half of the 19th century flooded the market with diamonds, killing demand. It would take some ingenious plotting and advertising to keep the diamond's reputation as intrinsically valuable and desirable, which is where De Beers comes in (Goldschein, 2011). Company History and Overview De Beers got its start when English-born businessman Cecil Rhodes, broke into the diamond business in South Africa by renting water pumps to miners before buying diamond fields...
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...Impact of Vertical Integration Table of Contents What is Vertical Integration?3 De Beers Summary3 Internal strengths of vertical integration5 External strengths of vertical integration6 Disadvantages of vertical integration7 Quad/Graphics and vertical integration7 Four types of Vertical Integration 7 Ownership and Breadth of De Beers 9 Conclusion 10 References11 What is Vertical Integration? Vertical integration is a powerful corporate strategy that when implemented under the right circumstances can work towards the organizations advantage. Vertical integration describes a firm's control over several or all of the production and or distribution steps involved in the creation of its product or service. This integration takes the assets that was owned by two organizations and combines it into a single business; this creates either a joint ownership, or the sale of one firm’s assets to another business. This strategy is more advantageous then contracting with an outside company since usually it creates lower operating costs and more control over quality of its products or services. Forward and backward integration in an organizations’ value chain is an attempt to strengthen a company’s business model. Although there are different forms of vertical integration, its main approach is either to expand operations backward into an industry that produces inputs for the company, or forward into an industry that distributes the company’s products. According to Harrigan...
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...The diamond industry is a lucrative industry that consists of segments that processes, mines, and markets industrial and gem diamonds. The start of the diamond industry was in India and Brazil. Before the mid-1800s diamonds were rare and only seen on monarchs. Before diamonds were discovered in South Africa the diamond trade industry was more profitable. However, the discovery of diamonds in South Africa initiated the simultaneous trading of diamonds that flooded the market with diamonds. Among the industry giants is De Beers. For over a century De Beers has controlled a significant portion of the diamond industry. De Beers Consolidated Mining, Ltd was formed in 1888. The forming of De Beers Consolidated Mining, Ltd created a monopoly for all diamonds produced and distributed from the diamond mines of South Africa. The market structure in which De Beers competes in is considered to be a monopoly. The fact that De Beers has the control over the distribution of rough diamonds clearly establishes a monopoly in the diamond industry. This market structure differentiates from other market structures uniquely because De Beers has dominated the market by having sole rights to sale rough gem quality diamonds. Even though other organizations within the same industry exist worldwide, De Beers is unique in the market because of the monopoly. A competitive strategy used by De Beers is controlling the market by limiting the supply of rough diamond to other companies because De Beers a monopoly...
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...The Price Of Diamonds Is Too High There are many arguments about the price of diamonds being too high considering that diamonds are not actually a scarce resource. Up until recently only De Beers controlled the diamond industry making the diamond industry monopolistic. (Zimnisky, 2014) However, over the last 25 years a series of events led to the dismantling of the De Beers monopoly. De Beers no longer has complete control over the diamond industry and instead it is market forces, not the De Beers monopoly, driving the diamond market. (Zimnisky, 2014) The following essay will discuss what events led to the dismantling of the De Beers monopoly, the role of the diamond cartel in determining the price of diamonds as well as the history of the diamond cartel. diamonds in South Africa and businessman Cecil Rhodes purchased as many diamond mining claims as he could including the farmland owned by the De Beer family. (Zimnisky, 2014) Eventually, Rhodes had acquired enough properties of the majority of the world’s supply of rough diamonds and he called his company De Beers Consolidated Mines Limited. De Beers effectively influenced all the world’s rough suppliers to sell production through the de Beers channel, acquiring full control of the global supply not produced by the de Beer mines. (Zimnisky, 2014) This power gave rise to the diamond cartel. De Beers is the dominant company in the industry and has been around since 1880. (FALL, 2007) Since 1925, the Oppenheimer family...
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...Case study De Beers- An Ethical Idealism “At De Beers there has always been a clear recognition that, while our primary purpose as a business shapes what it is that we do, it is how we work that defines who we are.” -Nicky Oppenheimer Executive Chairman, De Beers Introduction For generations, diamonds have been marketed as tokens of power and love. For some however, diamonds have a more utilitarian appeal. Easily concealed, immensely valuable and largely untraceable, stones from rebel-held mines have raised billions of dollars on world markets to finance revolution in Angola, Sierra Leone and the Democratic Republic of Congo (DRC). For years these "conflict diamonds" have encourage rebel leaders to arm and equip their armies in violation of UN weapons and financial sanctions. Diamond monopoly De Beers is notable for its monopolistic practices throughout the 20th century, whereby it used its dominant position to control the international diamond market. The company used several techniques to exercise this manipulation over the market: Firstly, it persuade independent producers to join its single channel monopoly, it flooded the market with diamonds similar to those of producers who refused to join the cartel, and lastly, it purchased and stockpiled diamonds produced by other manufacturers in order to price control through supply. In 2000, the De Beers forced to change the model, due to certain unavoidable factors such as the decision by producers in Russia,...
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...De Beers and the Conflict Diamonds De Beers is the most recognizable name in the diamond industry and since it was established in 1888 by Cecil Rhodes; the company have been linked to the “blood diamond” trade because for a long time they had the control of supply and demand of the diamond industry. De beers dominated the diamond market for the best part of the 20th century, but the creation of synthetic diamonds and the discovery of new diamond deposits in other countries have created new challenges and De Beers have been obligated to deviate from their traditional ways of doing business. Q1. The diamond industry is exclusive in comparison to other industries because of the nature of their product. Diamonds are unique and the competitive rivalry is limited to only a few producers. The diamond industry has been able to create a high demand of their product because they have the ability to control the supply. Other industries such as electronics and technology face stiff competition and do not have the ability to control the market as the diamond industry does. Industries other than the diamond industries offer a great deal of alternatives for their services and products, but when it comes to the diamond industry; the alternatives are somewhat limited. While other industries struggle to stay afloat; the diamond industry continues to grow and presents an attractive opportunity for investors. Q2. I believe that anyone or any company that purchase conflict diamond has no regards...
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...SPAR Forever: De Beers and U.S. Antitrust Law Educational material supplied by The Case Centre Copyright encoded A76HM-JUJ9K-PJMN9I Order reference F267708 CoursePack code C-788-275379-STU “As a worldwide dealer in enchanting illusions, Disney has nothing on De Beers.” - The Economist1 In 1999, a series of spectacular advertisements adorned the bus-sides and billboards of major American cities. Set against a lush black background, the ads displayed a perfect set of diamond earrings, or a single sparkling solitaire. The lettering, in white, was sparse and to the point: “What better time to celebrate the timelessness of love?” they asked. Or, “What are you waiting for, the year 3000?” Some were even more direct: “This wouldn't exactly be the year,” they noted, “to give her a toaster oven.” Coyly, the ads captured a joint fascination with the new millennium and the enduring allure of diamonds. How better to capture time than with a diamond, they urged. How better to herald eternal love? Indeed. According to analysts, U.S. diamond sales (30% of which occurred during the Christmas season) were expected to surge by more than 10%, hitting a high of over $20 billion for 1999.2 A significant portion of this windfall would flow to De Beers, one of the world’s most successful corporations and the controlling force of the international diamond market. There were many ironies behind De Beers’s millennial campaign, not least of which was that diamonds — those eternal...
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...your chosen organization, and two (2) key factors in the organization’s external environment that can affect its success. Provide explanation to support the rationale. De Beers Diamond Company is an industry that currently produces $13 billion worth of rough diamonds each year, leading to the employment of 10 million people globally from mining to retailing. 70% of rough diamonds are sold for industrial purposes with the remaining 30% “gem quality” being distributed to experts for cutting, polishing and jewelry manufacturing (Stein, 2001). The global jewelry market has increased three-fold in the last 25 years and is currently worth $72 billion each year. Jewelry diamonds are unjustifiably expensive given that they are not actually scarce. Upon the discovery of other diamond reserves globally, De Beers set up a subsidiary called the Central Selling Organization (CSO), responsible for buying the production for all mines worldwide then selling the produce to dealers in return for a percentage fee (10 – 20 %) from producers (Stein, 2001). The CSO was able to maintain illusion of scarcity by deciding the quantity of diamonds to be supplied to the world market and in turn, allowing individual producers to produce a certain percentage of that amount (De Beers Group, 2012). The CSO then sold batches of rough diamonds to selected dealers at their exclusive sightings. The CSO were able to dictate inflated prices to dealers, as if dealers tried to negotiate on price, they were not invited...
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...technology, medicine, and many production lines may harm people if there is a lack of honesty or deception in the results from research. De Beers is the world’s largest diamond producer. De Beers has been charged with price-fixing and other anticompetitive conduct. Under scrutiny since World War II for refusing to provide industrial diamonds for the war effort they were forced to leave the American market. In 1994, an indictment was filed against the De Beers Diamond Company for violating the Sherman Antitrust Act by fixing the price of industrial diamonds. In this indictment the Government contended that the subsidiary company General Electric (G.E.) conspired with De Beers to fix the price of industrial diamonds. These acts that De Beers were accused of were unethical because being the world’s largest diamond producer they were able to control the market and keep the prices high by making the world believe that diamonds were scarce. The purpose of DeBeers was the exploitation of diamond mines in South Africa. Along with deceiving the market on price fixing and forcing competitors to buy their products De Beers committed other 3 unethical acts towards their employees and as well as diamond consumers. The DeBeers diamonds are extracted from the South African mines and marketed in London, at the address of the Diamond Trading Company,...
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...Business Model of De Beers: Rhodes and Oppenheimer followed both a strategy of supply control. Due to the fact that supply overtook demand, the prices for diamonds were supposed to be lower. In this case the company would not have been that profitable. Therefore Rhodes established the “London Diamond Syndicate” and Oppenheimer transformed it into the “CSO - Central Selling Organization”. Both companies were founded to prevent an oversupply. By buying the diamond supplies of other producers, the CSO controlled 90% of the world trade. In order to conceal the monopoly position externally, these subsidiaries were never named after the parent company De Beers. They were supposed to appear as independent companies of the diamond trade. The core business of the CSO was to intermediate between the purchase of the diamonds from mines and the distribution of gems to different customers, such as diamond polishers or cutters. These customers were tied to the company with exclusive contracts, which made it possible to deal with diamonds outside of De Beers. The contracts included many special conditions. For example, it was not allowed to sell diamonds to retailers who could reduce prices in the market. The contracts turned the customers to slightholders, the only people who were able to buy diamonds from De Beers. For their position as slightholders they had to pay a basic fee twice a year. Once they could no longer pay the fee, they lost their position and were expelled. Each...
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...Unethical Values Within De Beers Consolidated Mines Limited De Beers Consolidated Mines Limited is a South African-based mining and trading company, which controls the flow of diamonds in the United States marketplace (Aurora, 2008). De Beers distributes diamonds, ships them, and distributes them to significant intermediaries, wholesalers and retailers (Atkinson, 2000). 1. Unethical behaviour: Unfair trading and competition The first unethical conduct identified within the De Beers example is unfair trading and competition, particularly in the formation of cartels. Unfair competition is unethical in terms of the Teleological Framework, as it focuses on the negative result of the conduct of an individual or company as a juristic person, which forms the basis of self-interest (ethical egoism), thereby going against the rights of others (Stanwick & Stanwick, 2009). This section will briefly explain the De Beers example of this form of unethical conduct, and look at ways in which De Beers could redeem their reputation. We will begin with the definition of a cartel. A cartel is a group of people, organisations, or companies that cooperate together to control production, marketing, and pricing of a product (Smith, 2003). Cartels are an example of unethical conduct and are thus explicitly illegal under antitrust laws in many countries of the world, as they eliminate fair market competition. A cartel’s biggest effect is driving the price of a commodity up and well beyond what is...
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...Strayer University BUS475 May 1, 2014 Instructor: The De Beers Company is one of the wealthiest companies in the world. De Beers leads and dominates the diamond industry in diamond mining, diamond trading, and industrial diamond manufacturing. In 1871 a South African man named Cecil Rhodes created De Beers. Rhodes rented water pumps to miners then invested his profits by buying up small mining operations. In 2011 the De Beers Group sold their remaining stake to Anglo American for $5.1 billion in cash. (DeMarco, 2011). Before the sale the diamond company was owned by the Oppenheimer family. Now Anglo American own 85 percent of De Beers making them the primary stockholder while the Republic of Botswana owns the remaining 15 percent of the company. Mining diamonds involves a lot of factors that can effect a company’s external environment. In order for De Beers to operate it has to account for things such as: local and foreign governments, globalization and trade, the ethics of business and labor, the effect on the environment, the perception of society, and the importance of new technology. In the case of the De Beers Diamond Company the two most important factors to the organization’s external environment are globalization and trade, and the perception of society. Salient Stakeholders When producing a product as fragile such as diamonds, a company needs many factors to come in place. In actuality a diamond is just a shiny rock found in the earth. A lot of people...
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...Organizations The De Beers Diamond Corporation Dr. Beth Kane Business 475: Business and Society January 28, 2014 The De Beers Diamond Corporation is a multinational diamond mining, hops, trading, and manufacturing business. In this paper the nature, structure, and types of product this corporation is involved well be analyzed. As with every large corporation stakeholders salient stakeholders are involved with the shaping of the companies direction, three key stakeholders relationships and roles will be evaluated. There are five key points for primary stakeholders wielding influence inside the corporations mainframe and the evidence of this behavior at De Beers. During the building and development of most businesses there are social issues that arise to challenge the structure and integrity of the corporation, De Beers faced this as well. This paper will detail the issue in which De Beers faced as well as the corporate and social changes that were wrought from the situation. This paper will also cover a hypothetical situation were a first person narrative of the roles of forming a stakeholder coalition. During this hypothetical situation the leader role will explore three (3) potential holdups for the the forming of a stakeholder coalition. The De Beers Diamond Corporation is a privately owned multinational conglomerate established in 1888 by Cecil Rhodes. Rhodes invested money made from renting water pumps to diamond miners into buying...
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