...De Beers Diamond Company Social Performance of Organizations Business 475 August 4, 2014 De Beers Diamond Company De Beers is a multinational privately owned diamond mining company established in 1888 by Cecil Rhodes. The company specializes in trading and manufacturing diamonds. Rhodes invested capital made from renting water pumps to miners and started buying mining claims. Rhodes knew the acquirement was on an untapped market. He purchased diamond fields owned by two brothers named “De Beer.” He even began purchasing from his rival Barney Barnato. The Rothchild family, Ernest Oppenheimer and JP Morgan were some of the companies first financial partners, their investments helped expand the business. By 1902 De Beers controlled 90% of the world’s diamond production. Ernest Oppenheimer, a rival diamond producer, owned the production company (Anglo American Corporation). Oppenheimer essentially bought his way onto the De Beers board of directors. In 1927, he became the chairman. Under his leadership, De Beers began making exclusive deals with its suppliers and buyers; this strategy made it impossible to have transactions with other companies and quickly became monopolized. De Beers is known for maintaining a strong hold on the industry and for absorbing its competitors by using it’s dominate position in the diamond industry. De Beers has been implicated in multiple scandals that involve price fixing and antitrust behaviors. There have been revolts against...
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...n previous years De Beers owned a key resource for diamond production – mines. The monopoly’s power stemmed from the company’s ability to collect the world’s rough diamonds and send them out again, anonymously and bereft of origin. Because of turmoil which the company was facing on all fronts: illegal flow of diamonds from Sierra Leone and Angola, Russia’s diamond fiefdoms, etc; the formerly closely-held corporation had to undergo some rapid changes. Today De Beers maintains its monopoly power through marketing activities such as active advertising, e.g. the millennial campaign which was the company’s first attempt to brand gems, to sell a “De Beers diamond” rather than a regular diamond. De Beers tries to remove substitutes for its product and to make it unique in order to increase its market power. The possible substitutes for diamonds can be emeralds, rubies and sapphires. If people view them as diamond’s substitute, De Beer’s market power will be relatively little. On the other hand, if the company tries to increase the price for its product, some people can switch to other gemstones. That’s why De Beer’s makes so much effort to distinguish its product from any others and to support its image of a scarce and unique product. De Beers supports a symbiotic relationship between production and sales. The formation of a single marketing channel contributed to the diamonds price increase. In the past two and a half decades, rough diamonds have out-performed commodities such as...
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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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...De Beers, diamonds and Angola : developing an understanding of the role of sustainable development and corporate citizenship in De Beers’ exploration strategy SUNScholar Repository SUNScholar Home Faculty of Economic and Management Sciences School of Public Leadership Masters Degrees (School of Public Leadership) View ItemDe Beers, diamonds and Angola : developing an understanding of the role of sustainable development and corporate citizenship in De Beers’ exploration strategy Show full item record Title: De Beers, diamonds and Angola : developing an understanding of the role of sustainable development and corporate citizenship in De Beers’ exploration strategy Abstract: The tensions in the definition and practical implementation of sustainable development are clear. A number of international codes outline the principles that are considered as good corporate citizenship, but are often based on the priorities of the developed ‘North’. Africa calls for a more development-orientated approach to sustainable development. The subject of this study, Angola, is emerging from a history of slavery, colonialism and civil war. Although richly endowed with natural resources and exemplifying one of the world’s fastest growing economies, Angola scores near the bottom of the Human Development and Corruption Perceptions Indices, thereby typifying the Natural Resource Curse. Understanding sustainable development in this context, multinational corporations involved in exploiting these...
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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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...Conflict Diamonds in the early 2000s, a common concern emerged among members of an oddly matched group : the diamond industry, the united nations, several goverments, and human rights campaigners. All wished to end the trade in conflict diamonds, gemstonesthat are mined or stolen by rebels fighting internationally recognized goverments. The $6 billion a year diamond industryhas long been dominated by the De Beers Corporation. Founded in south Africa by Cecil Rhodes in the 1880, the beers strategy has been to own as many diamond mine as possible and to sell its rough (uncut) stones exclusively to a small group of preferred dealers at prices set by the company. To maintain its control over supply, De Beers operated buying offices all over the world, “sweeping up” diamonds produced in mines operated by others. The result, for many years, was a virtual monopoly. De Beers has also been a shrewd marketer, pouring millions of dollars over the years into advertising. Using the slogan “a diamond is forever”, the company cultivated and association between diamonds and romance. The company first promoted solitaire engagement rings, later, it shifted its marketing focus to the so called eternity ring, a band of multiple smaller stones aimed at older married couples. In the early 1990s, event in several diamond-rich African nations converged to tarnish the gem’s carefully cultivated image of love and purity. During the cold war, many partisans in civil conflicts in Africa received funding...
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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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...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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...Rise and Fall of De Beer’s Diamond Cartel and Apartheid Introduction Diamonds have always been seen as rare and precious which lead to its expensive price tag. Prior to the 19th century diamonds were rare and scarce because there were only two places on Earth that they could be found and even nobility found them difficult to acquire. In America, Diamonds are seen as the jewel of preference for engagement and wedding rings, as well as, the signature stone to have in your jewelry collection. De Beers and Oppenheimer have succeeded in fostering the image that diamonds are the ‘must have’ jewel through aggressive advertisement campaigns. Unfortunately, the demand for this jewel has resulted in apartheid and blood diamonds. I will explore the creation of the diamond cartel, the catastrophic results of the industry on its mother countries, and the decline of the diamond cartel. The Rise of DeBeers Prior to the 19th century, most of the diamonds were found in Brazil and India until an abundant discovery was made in South Africa around 1867. The diamonds were so plentiful that miner’s fond them lying on the ground like stones and were easily collected. When the surface supply was consumed, miners began to dig to meet demands. As word spread of the new diamond discovery miners started to lay claim to the different areas. Miners soon found the expenses of extracting the diamonds excessive and some miners merged to form small companies to offset their costs. “De Beers Mining Company...
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...Conflict Diamonds and the Kimberly Process What this case is about was that ion the 2000’s, a common concern emerged among members of the diamond industry, the United Nations, several governments and Human Rights campaigners who all wished to end the trade in Conflict Diamonds which were gemstones that were being mined or stolen by rebels fighting internationally recognized governments. To end this, they embarked an unusual collaboration called the Kimberly Process. The Kimberly Process was a scheme for tracking diamonds all the way from the mine to the jewelry shop, so that consumers could be assured that the gems they were buying were conflict free. 1. Conflict Diamonds are diamonds that are illegally traded to fund conflicts. In recent times, conflicts in some of the poorest parts of Africa have often focused on rebels controlling their country’s natural resources and assets, for example, oil, wood, minerals and also diamonds. They are diamonds that had originated from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments. Conflict diamonds came to the attention of the world media during the extremely brutal conflict in Sierra Leone in the 1990s. The groups that were benefited from the trade in conflict diamonds were the combatants, including the Revolutionary United Front. Diamonds played a key role in obtaining funds to provide these...
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...Monopoly is nearly always seen as something undesirable. Courts have wrestled with monopoly for ages, sometimes defining it as: "the power to control prices and exclude competition", "restraining trade", or "unfair and anti-competitive behavior." Should monopolistic practices be condemned and outlawed? Let's look at anti-competitive behavior and practices, but let's not confine ourselves to what's traditionally seen as monopoly. Monopoly means that a firm is sole seller of a product without any close substitutes, controls over the prices the firms charge. Government sometime grants a monopoly because doing so is viewed not only to be in the public interest, but also to encourage it with price incentives. However, monopolies fail to meet their resource allocation efficiently, producing less than the socially desirable quantities of output and charging prices above marginal cost. Thus, this inefficiency of monopoly causes the quantity sold to fall short of social needs. Law The existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share company's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power a monopoly may confer, for instance through exclusionary practices (i.e. pricing high just because you are the only one around.) It may also be noted that it is illegal to try to obtain a monopoly, by practices...
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...1.0 Executive Summary The purpose of this business plan is to raise TK.15,00,00,000 for the development of a jewelry store while showcasing the expected financials and operations over the next three years. Jewelry Store, Inc. (“the Company”) is a Dhaka city based corporation that will provide a substantial inventory of jewelry products and jewelry related services to customers in its targeted market. The Company was founded in 2009 by John Gomes. 1.1 Products and Services The primary source of revenue for the Company will come from the direct retail sale of silvery, gold, and platinum jewelry which may or may not contain precious stones. Mr. Gomes is currently sourcing a number of inventories from wholesalers so that the business will have an extensive collection to offer to its customer base. Jewelry Store, Inc. will also generate secondary streams of revenue from jewelry repair and customization services, which will be provided on site. This is an important revenue center for the business as the income produced from these services carries very high margins. The third section of the business plan will further describe the services offered by the Jewelry Store. 1.2 The Financing Mr. Gomes is seeking to raise TK.15,00,00,000 from as a bank loan. The interest rate and loan agreement are to be further discussed during negotiation. This business plan assumes that the business will receive a 10 year loan with a 9% fixed interest rate. 1.3 Mission Statement The Jewelry Store’s mission...
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...was up until the mid-19th century that India and Brazil were the only producers that supplied the world with diamonds. Diamonds were so scarce that royalty found it extremely difficult to acquire them and the conception of making diamonds available to the public was unthinkable (Tsounta). In 1867 diamonds were discovered in South Africa and the diamond supply increased but this did not displace the ideology that diamonds are a precious and rare commodity that exists to this very day. Cecil Rhodes was a businessman that rented pumping equipment to diamond miners. Through his business he recognized the potential of the expanding diamond mining industry. He reinvested his profits in the acquisition of time and claims and by 1880 he had a large enough share of claims form a separate company that focused on managing the diamond mines. This was the beginning of the DeBeers Consolidated Mines Limited in 1888 (Kretschmer). DeBeers then began to exploit the diamond mines in South Africa. While diamonds were a rare resource only a couple of centuries ago, the prices began to fall due to the discovery of the extremely rich mines in South Africa and other countries of Africa. DeBeers worked with other producers in a parallel effort, successfully set up a cartel to control international prices of diamonds (St. Antoninus Institute). DeBeers had control of 95% of the world's diamond production by 1890. Ernest Oppenheimer and J.P. Morgan founded mining giant Anglo American PLC. They were DeBeers’s...
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...Environment Our commitment to good environmental stewardship is shaped firstly by the need to respond appropriately to global imperatives concerning climate change, biodiversity conservation, energy use and water security; and secondly by our belief that the sustainable management of the natural environment is key to the future prosperity of all the countries where we operate. Our approach to managing environmental issues is built on the effective integration of the environment discipline into our core business and the development of appropriate policies and tools to aid their implementation. This process is underpinned by our ISO 14001 compliant management systems. Within this framework we develop holistic management solutions individually tailored to the environmental, social and economic contexts of each of our operations. This in turn means that we are sensitive to local needs and place particular emphasis on forging strategic partnerships with governments, local communities and Non-Governmental Organisations to find creative solutions to environmental challenges wherever we operate. In addition to our focus on developing effective management systems, our ongoing investment in building the capability of the environment discipline across the Family of Companies has also enabled us to respond to environmental challenges beyond the traditional mining focus area of land rehabilitation. Biodiversity, energy and water management are now specific areas of...
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