...以前的情况和遇到的问题： In early 1990s, DeBeers ruled the diamond industry (while at one time, it produced 45% of the world’s rough diamond and sold 80% of total supply). Its market dominance enabled its Central Selling Orgainzation to choose whom to sell to, how much to sell, and at what price.(掌控钻石产业，掌握供应链，决定买家，销售量已经价格。) First hit: Collapse of the Soviet Union（苏联解体，重要合同终止）. Second hit: Australian mine terminated contract with DeBeers（合同终止）. Finally: Emergence of Canada as a producer(加拿大大量的矿区都不受DEBEERS控制). Additionally: Antitrust Act prohibited DeBeers’ sales in United States（因为触犯反托拉斯法被禁止在美国进行商业活动）. Publically: A public relations nightmare(公关危机，DEBEERS为了掌控供应链，曾经支持反政府武装) Strategy focus: Supply-side. Controlling large portion of the diamond supply chain.（以往的战略更注重供应端） PEST ANALYSIS Political: () Before the Kimberley treaty, DeBeers was used by some factions to have an indirect control of some countries in conflict area. With time past, DeBeers bit by bit lose his absolutely control position. More and more diamond mining were founded in the world. The output of rough diamonds got a significant decline from 90% to 10%. On one hand, de beers don’t have enough money to buy all of the mining, on the other hand, most of other country’s government prevents de beers to buy their diamond mining, in order to protect local economic. Economic: DeBeers makes alliance with Russia, exploring diamonds with Tanzania, Namibia and so on. De beers put their manufacture factory in some country which...
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...the product, influence the whole company. As an example we can say that the association with blood diamonds reflect badly on the whole company. * An other weakness is that the mining of diamonds is a very cost intensive process. * Last weakness is that is hard for them to find a complementary strategy, so they can gain market share. A big opportunity arises for them, as there is an upcoming new market for their diamonds in the emerging economies; India and China. * Through their partnership with LVMH they’ve been able to increase their brand recognition and represent themselves al over the world. * The acquisition of new mines in Canada brought is another opportunity for the company. Finaly we the threats for DeBeers company: * The diamond market is well known for its fierce competition: not only from competitors but as well as not being able to buy certain mines in countries as Canada and Australia. * Negative publicity as the association with blood diamonds have had a bad reflection on the company as well. * Recent laws and contracts are putting a big constraint to the operating part of the company. And last but not least there is the market of the synthetic diamonds which have been taking away customers. Porter’s 5 forces The first force is the bargaining power of suppliers: * this is...
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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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...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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...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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...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 main competitor. Oppenheimer eventually gained control of the DeBeers Empire in 1927. He built and consolidated the DeBeers’s global monopoly in the diamond industry. Oppenheimer was linked to many controversies which included price fixing, antitrust behavior while stockpiling diamonds produced by other manufacturers to control prices by controlling the supply. He was also...
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...DeBeers | | 1. What functions does the CSO perform as a global intermediary? How do these functions help expand the economic pie in the diamond industry? The CSO performed the following functions before the diamond market bubble collapse in 1980: * Buffering the rough diamond supply by continuing to purchase rough diamonds of even the mines which De Beers didn’t own under contract to control the supply to the downstream market and stabilize the price. * (De Beers) Interdicting unofficial routes of rough diamonds by buying smuggled rough diamonds on the open market along with other security measures. * Sorting rough diamonds into more than 3,000 grades to frame the accurately classified price structure and add value to gem-quality diamonds. * Controlling selling routine called a “sight” to make “sightholders” obey stringent rules to maintain pricing stability further downstream. * Conducting an extensive consumer survey and monitoring the inventory in the market to adjust the quantity of diamonds to be released. With these functions, the CSO (and De Beers) controlled the price and quantity of diamonds on both the supply-side and demand-side to expand the economic pie in the diamond industry. 2. How does that expanded economic pie end up getting divided among the various players in the diamond industry? Why? The expansion of economic pie in the diamond industry under the quasi-monopoly of De Beers ended up in the following situation: ...
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...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 was founded by Cecil Rhodes in 1880” (Unknown, p. 1). Rhodes use to rent mining equipment to miners and used the money to purchase smaller mining operations...
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...is DeBeers anti-competitive? From 1945 to 1994, government tried several times to prosecute DeBeers for violating antitrust laws, as you can see from the slides. So from the point of government, DeBeers really is anti-competitive. Despite the fact that DeBeers retained no U.S. presence and was competitively run by South African nationals, it was still subject to the reach of U.S. law. Because in 1995 document, the justice department made its interpretation clear: “The reach of antitrust laws is not limited, however, to conduct and transactions that occur within the boundaries of the United States. Anti-competitive conduct that affects U.S. domestic or foreign commerce may violate the U.S. antitrust laws regardless of where such conduct occurs or the nationality of the parties involved.” Although DeBeers had no legal presence in the U.S. market, no U.S. directors, and even no direct sale in the United States, it sold all of diamonds in London, and let its middlemen exported them into U.S. market, which still had huge influence on U.S market on diamonds. What’s more, the most important point to prove DeBeers is anti-competitive is that DeBeers set prices for mined and rough diamonds, which means diamonds can’t have a legal and competitive market. In 1945, President Roosevelt’s administration requested the justice department to investigate DeBeers’ existing contracts with United States. In 1976, the department of justice filed a civil and criminal suit against DeBeers, ANCO...
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...the DeBeers corporation headed by Cecil Rhodes (also of the Rhodes Scholarship title) and explains how DeBeers has chosen to practice unethical research behavior. Also, as a result of DeBeers unethical research behavior they have been convicted along with the General Electric Company by the US justice department for conspiracy to raise prices in the $500 millions-a-year industrial diamond industry. "The indictment charges GE and DeBeers, which account for 80 percent of the industrial diamond market, with conspiring to fix and raise prices worldwide."(San Antonious, 2012) The DeBeers corporation was first guilty and second showed a direct correlation of purposely breaking the no-tolerance segment of the US law called the Sherman Act. Cartels: The Sherman Act’s first offence for even operation are unafraid thru intimidation and threats to acquire or control whatever item they go for to all suppliers/workers, businesses, the public or middle-man altogether. Next, DeBeers illegal cartels withheld large sums of the discovered diamonds they had acquired so they can hike up diamond prices. So, DeBeers could make it seem publicly that there was a perception that there was a shortage in supply of available diamonds to buy, therefore causing the public market to scurry to buy them at absorbent prices because they had to. Later as the demand of the market became more financially beneficial to them as a corporation, they made the diamonds more available, therefore allowing DeBeers to have...
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...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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...Assignment 1: Social Performance of Organizations Business 475-Business and Society Professor-Dr. Romy Lu Student-Jose Echavarria 01/30/2014 Assignment 1: Social Performance of Organizations Specify the nature, structure, types of products or service of 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...
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...钻石既没有什么价值，数量也不稀少。事实上，钻石矿是地球上很普遍的矿产，在欧美地区，已经切割好的钻石数量比汽车还多。虽然它们非常昂贵，可是却难以像商品一样被自由交易，因为二手钻石的价格远低于原价。天然钻石反射的美丽光芒，也已可以用人造钻石取代。如果钻石没有那传统浪漫的形象，它可能一点儿都不值钱。 Diamonds are not such high in value and rare in amount. On the contrary, diamond mine are one of the common minerals. In fact, in European and American areas, there are even more cut- diamonds than vehicles. They are valuable, however, they could not be exchanged freely like other products as the prices for second-hand diamonds are far below its origin. Besides, the natural diamonds can now be replaced by rhinestones. Actually, diamond might be worthless without its traditional image of romance. 钻石市场供大于求。世界上钻石的供给量，一直都超过它的需求，按照经济学供需规律，钻石应该会跌价，变得很便宜才对。但是，戴比尔斯通过持续买进市场上多余的钻石，来维持它的高价，估计到目前为止，戴比尔斯已囤积了价值超过百亿美元的钻石了。戴比尔斯还能支撑多久，还能持续买进多少市场上的钻石，没人能回答。 In diamond market, supply always exceeds demand. According to economic rules, the price will finally drop. However, De Beers have controlled and manipulated the price by continuously purchasing the stockpiles of diamond that come from other competitors. The price of which, has amounted to more than $10 billion up till now. How long can De Beers last and how much diamonds can they buy? No one knows. 天价打造的“浪漫形象”。戴比尔斯在世界钻石市场的成功，可以说是一个近乎达到垄断的完美范例。它一方面总能刺激市场对钻石的需求，另一方面则减少钻石供给，即使在1955年通用公司（GE）研究实验室宣布发明了人造钻石后，戴比尔斯公司仍能成功维持钻石的高价完美形象。事实上，戴比尔斯公司每年花在广告上的费用多达1.6亿美元，不断传递着“Diamonds are Forever”的信息，持续钻石浪漫的传奇。 They has put much emphasis as well as financial resources on preserving the romantic image of diamonds...
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...DeBeers Alternative Solutions 1. Stay in current industry and go into synthetic diamonds for industrial purposes. * This will not damage the brand name that they have created for themselves in the natural diamond industry as opposed to if they decided to do both synthetic and natural diamond industry. * Less risk if they decide not to enter a new industry that is growing, however not positive if maybe just a fad. * If they stay in current they have to do product development which means to stay in the same market but develop new products. * This way they can differentiate themselves from other natural diamond companies and capture more market share because there is more competition now. * Have to come up with new occasions to use the diamonds for other than just weddings because industry is currently in the mature stage so profits may be increasing at a decreasing rate. * Make synthetic diamonds only for industrial purposes and not more jewellery, that way they don’t lose any brand loyalty from existing customers. 2. Stay in current industry; however go into synthetic diamond industry with a new brand name. * that way the DeBeers reputation and name is not destroyed if they use same name brand * huge risk going into different market which is a substitute for current industry * synthetic diamond industry is in early growth stage because it is growing by 10-15% every year. * Synthetic diamonds are much more eco-friendly to produce...
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...outlined in the Course Handbook in the production of this dissertation and that it is my own, unaided work.Signature:__________________________________________ | | This work is dedicated to the memory of my beloved grandfather Ivan Smolin. He was a sweet, kind and sensitive man who devoted his life to studying precious stones and metals. He enriched my life with passion to beauty. If God wanted us to bend over he'd put diamonds on the floor Joan Rivers Contents Acknowledgements 3 Executive summary 7 I Introduction 10 Ground for discussion 10 Objectives 10 Methodology 11 II Literature review and hypothesis development 12 Overview 12 Introduction 12 History of diamonds 12 Industry structure 13 DeBeers cartel 15 Diamond valuation 16 Diamond valuation process 16 Determinants of diamond prices 18 Diamond as an investment 19 Types of investment 19 Problems associated with investing in diamonds 20 Benefits associated with investing in diamonds 20 Alternatives to investing in diamonds 23 Hypothesis development 25 III Methodology 26 Data collection 26 Primary research 26 Secondary research 27 Methodology 28 Descriptive statistics 28 Regression analysis 28 Variables 29 Limitations and assumptions 30 IV Analysis and results 32 Interview results 32 Summary statistics 36 Explanation of variables 36 Descriptive statistics 38 Correlation 44 Regression analysis 46 V Conclusions and recommendations...
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