Sunteți pe pagina 1din 6

De Beers – Rulers of the

Diamond Industry

The Rise and Fall of a Monopoly

It is crucial to keep in mind that The De Beers Group: Exploring The Diamond Reselling
Opportunity Case Study Solution is among the valuable and leading United States based
multinational energy corporation that has been taken part in almost every element of the gas, oil
and geothermal energy industries such as hydrocarbon production and exploration, marketing,
refining and transportation, chemical production and sales and power generation. The business
has attempted to predict itself as a company which is devoted to the environment security. The
business has done this publicly through "The Chevron Way" document and through advertising.

Case Study Help Comparable to numerous other energy business, The De Beers Group:
Exploring The Diamond Reselling Opportunity Case Study Solution faces significant difficulties
and danger in the routine service operations. It is significantly crucial for the company to be
prudent about the money that it invests on the measures used to handle such difficulties and
threat, also the The De Beers Group: Exploring The Diamond Reselling Opportunity Case Study
Analysis might conflict with the enduring custom of decentralized management.

In September 2014, Tom Montgomery (SVP of strategic initiatives at the De Beers Group) and
his team launched a pilot program in the United States to explore the $1 billion diamond market
for pre-owned (recycled) diamonds. According to Montgomery, the motivation for the pilot
program was to improve the consumer reselling experience and to enhance "diamond equity".
Somewhat paradoxically, consumers typically received very low prices when they tried to sell
diamonds (5-20% of the original retail price) leaving them reluctant to purchase diamonds in the
future and making them into ambassadors of ill will. At a meeting scheduled for November
2015, the De Beers Executive Committee would have to decide whether to end the pilot
program, extend it for another year to gather more information, or convert it into a new
standalone business unit. Because De Beers had historically focused on producing rough
diamonds (the "upstream" business), yet the new business unit offered an opportunity to enter
and enhance the market for polished diamonds (the "downstream" business), the decision was
particularly noteworthy.

This case illustrates the process of strategy execution and the decision to vertically integrate at
one of the world's most iconic brands. In particular, it analyzes the potential to enhance customer
value and, presumably, the willingness to pay for or to buy diamonds by creating a more viable
secondary market supported by greater trust and transparency. The case challenges students to
understand whether and how the secondary market will impact the primary market for diamonds.
Through this analysis, students must resolve two apparent paradoxes. First, why diamonds, a
product with no intrinsic value, sell at such high prices? And second, why "recycled" or "pre-
owned" diamonds, an infinitely durable good, sell at such low prices.

It is essential to note that The De Beers Group Exploring The Diamond Reselling Opportunity
Case Study Solution (USA) is one of the 50 states of the US and is thought about as the fastest
growing economies all around the world. The economy of The De Beers Group Exploring The
Diamond Reselling Opportunity Case Study Analysis tends to exceed the national economy of
the United States. The monetary industry in The De Beers Group Exploring The Diamond
Reselling Opportunity Case Study Solution most likely produce the ultimate outcome for such
growth over the amount of time.

The De Beers Group Exploring The Diamond Reselling Opportunity Case Study Solution has
been the long time leader in supplying financial services, the pro-business legal environment,
and the outcome of the encouraging and favorable tax legislations. It is to inform that the
financial services represented 9 percent of all The De Beers Group Exploring The Diamond
Reselling Opportunity Case Study Analysis tasks, which is thought about the greatest share of
any state in the United States.

Problems
The rise of “conflict” diamonds and undisclosed synthetic (laboratory-grown) diamonds-
threatened to reduce the value of natural diamonds Beginning in the 1990s, the international
community became aware of “conflict” or “blood” diamonds-diamonds mined and then sold to
finance wars-from countries like Sierra Leone and Angola. At the time, it was estimated that 4%
of the world’s diamonds were conflict diamonds.

The creation of synthetic or lab-grown diamonds, which were used for industrial purposes.
Increasingly, however, synthetics were being sold as gemstones. By one estimate, factories might
produce up to one million carats of synthetic diamond gemstones in 2015, and up to six million
carats per year by 2025, though industry experts disputed these figures.

The trading of recycled diamonds was worth approximately $1 billion in 2014, representing 3%
to 5% of the wholesale segment (~1 million carats), but was unlikely to become a significant
source of diamond supply Yet a concurrent study of the diamond industry by McKinsey &
Company concluded that even,under the most aggressive assumptions, recycling will likely only
represent about 1/3 of supply by 2025. If the supply of recycled diamonds did reach this level, it
would be on par with recycled (re-smelted) gold, which represented approximately 35% of gold
supply in any given year. Recycled diamonds were sold to both wholesale and retail buyers with
no obligation to describe them as “recycled

People trying to sell diamonds to other individuals faced several problems that prevented them
from getting offers anywhere close to retail prices, and prevented buyers from paying retail
prices. To begin with, there was risk: would a buyer send a large amount of cash to an unknown
seller Moreover, most individuals could not assess diamond quality or history (e.g., was it stolen
was it synthetic? etc.), and did not know current prices. Even if a seller had a grading certificate,
a buyer might not trust its authenticity. In short, the absence of trust, and the lack of transparent
pricing, made it difficult to transact on a C-to-C basis. While “trade-ins” did occur, they were
invariably “trade-ups,” meaning the customer had to buy a considerably more expensive
diamond, which most people who were selling did not want to do.

At the same time, it was difficult for sellers to get offers anywhere close to wholesale prices, in
part because jewelers could buy newly-mined diamonds at wholesale prices. In fact, jewelers
would frequently offer significantly less than wholesale because the diamonds being offered
were not something they necessarily wanted. Low offers could easily offend customers,
preventing most jewelers from making offers in the first place. Even when jewelers did make
offers, they offered discounted prices because it was difficult to assess the quality of a stone
accurately when it was mounted in a piece of jewelry. They also ran the risk of buying an
undisclosed synthetic stone, because most jewelers could not afford the cost of the most
advanced detection machines. And finally, some jewelers and most pawn shops used a business
model based on “buying low and selling high” to maximize their profit margins, particularly if
they spotted someone desperate to sell. This created a zero-sum game, where the jeweler placed
greater emphasis on achieving short-term profits than on,For these reasons, prices of recycled
diamonds were far below wholesale prices. Bart Marks, CEO of Rogers Jewelers, said that
reselling was a “depressing experience” for many customers because “they are getting pennies
on the dollar.” In fact, he noted, “A lot of the places that say ‘we pay the most’ actually pay the
least.

Consumers who get lowball offers don’t believe that diamonds have lasting value. As a result,
they are less likely to buy diamonds in the future, and they tell people about their negative
experience. We all know that a negative experience has a far greater impact than a positive
experience, and is repeated more often. The end result is that the current selling experience could
be damaging consumers’ confidence in the value of their diamonds. We knew we had to do
something to fix this problem.

The De Beers Group:

Solutions and justification of the problems:

 Focussing about the role of advertising in creating a strategic asset, the difference
between creating common value and creating competitive advantage as well as the
challenge of selling durable goods.
 The vital point is developing strategy on the most suitable small business situation and
developing a proper strategy, and also setting up a solid organisation situation based upon
the strategy.
 Conducting a SWOT analysis of The De Beers Group Exploring the Diamond Reselling
Opportunity. The SWOT analysis will help in strategic management in order to list down
the internal strengths and weaknesses, and external opportunities and threats faced by the
company. Narrow down the concentration to the central issue and afterward focus
towards other related issues.
 Conducting a Porter’s 5 Forces Analysis / Strategic Analysis of Industry for The De
Beers Group Exploring the Diamond Reselling Opportunity. This is a strategic tool used
in strategic management that helps one understand the relative power of five forces
within any industry. These five forces are essential key players in the industry. By
gaining insights regarding such industry dynamics, one could come up with practical
solutions that are compatible with the industry dynamics of The De Beers Group
Exploring the Diamond Reselling Opportunity.
 Conducting a PESTEL, PEST / STEP Analysis of The De Beers Group Exploring the
Diamond Reselling Opportunity.  The PESTEL analysis will help in clearly identifying
the company’s source of competitive advantage and also what its core competencies are.

Conclusion
There are four top precious stone makers on the planet ALROSA, BHP Billiton, Rio Tinto and
De Beers. Very little time has passed when De Beers was the one and only one.

Precious stone, albeit found first in Quite a while in fourth century BC, turned into an entirely
significant product during the 1800s when European ladies began wearing it at exceptionally
significant get-togethers.

The disclosure of precious stones in South Africa in 1870s assumed a significant job in molding
the jewels as we see them today. One ranch where jewels were found was claimed by Diederik
and Johannes de Beer. This homestead was purchased (mightily) by Cecil Rhodes who
established the De Beers business mining organization in 1871.

Numerous new mines were found around then and European agents expected that the revelation
of new mines would build the stockpile of the pearl and will bring about it turning into a semi-
valuable diamond. Consequently De Beers, in 1888, turned into a combined establishment
(cartel) which controlled the vast majority of the generation and circulation and propagated the
fantasy of shortage of precious stones. This fantasy helped them in balancing out the costs of the
jewel.

The credit of development regarding mining, exchanging, and showcasing of De Beers goes to
Ernest Oppenheimer who subsequent to purchasing its critical offers turned into the
administrator of the De Beers gathering and advanced it as a worldwide pioneer of the precious
stone industry. By 1902, De Beers represented 90 percent of the world's unpleasant precious
stone creation and dispersion.

The association demonstrated to be the best cartel course of action throughout the entire
existence of present day trade. In contrast to gold, silver, and so on., the costs of precious stone
were not subject to the monetary conditions and continued rising each year. The business took an
advantage of the system impact that made a hallucination of the precious stone being an
uncommon and helpful jewel which even tricked theorists who, during the 1970s, purchased
precious stones as a make preparations for variable swelling and downturn conditions.

The interest for precious stones was made when its utilization was concocted by De Beers. The
precious stone use creation was in excess of a restraining infrastructure for De Beers as they
were among the not many ones who controlled its dissemination. At first, a precious stone was
viewed as an extravagance and a jewel just for the rich. In any case, the extraordinary gloom of
1930s came about as an incredible fallback for De Beers and constrained them to search for
approaches to keep up and make an interest for precious stones which isn't influenced by the
economy.

They required a promoting plan to make jewels put being used until the end of time. Precious
stones didn't have a lot of resale worth and this could hamper the interest for the equivalent.
Consequently this was another point which was remembered while shaping the advertising
system. Every one of these elements were talked about by Harry Oppenheimer, the child of
Ernest Oppenheimer, to N. W. Ayer, the main publicizing organization they drew nearer for their
promoting correspondence systems.

Since Europe was under a risk of war during the 1930s, the USA was chosen as the nation with
the most potential to help a developing precious stone market. N.W. Ayer directed broad
research on the social frames of mind and view of individuals about jewels and turned out with
an end that precious stones were viewed as an extravagance held uniquely for the super-affluent.
The necessity around then was to have a more enthusiastic association with the jewel as opposed
to having it as an extravagance.

This made them concoct a thought of partner love, duty and marriage with precious stones.

Obviously the law of interest and supply doesn't make a difference on precious stones as each
jewel burrowed will reduce its fairly estimated worth in light of the fact that, as we as a whole
know, jewels are until the end of time. However, this doesn't occur really; the costs of precious
stones are not subject to supply, yet just on advertise request. It's the impact of a similar
showcasing methodology that drives this interest till now.

In contrast to gold and silver, not all jewels can be utilized as a venture instrument. The standard
precious stones which clients purchase as gems are not of venture grade and has extremely less
resale esteem. This is on the grounds that the discount and retail estimation of precious stones
has tremendous contrasts and the retailers want to get them at discount costs. Consequently,
jewels are simply quite (costly) stones with very little worth.

In any case, during the 1970s a noteworthy change in the dispersion of precious stones occurred
when numerous makers and vendors began selling harsh jewels through elective channels as
opposed to selling through the bound together deals channel of De Beers' Central Selling
Organization.

During the 1990s more makers split away from CSO and began selling freely in the worldwide
market. This expanded the quantity of harsh jewels in the market and furthermore made
challenge for De Beers. De Beers currently doesn't have the sole obligation of promoting
precious stones, it concentrates more on its image – Forevermark. Business Ethics models were
liberated to ensure the market survives from variances.