De Beers and the Global Diamond Industry

 DE BEERS AND THE GLOBAL DIAMOND INDUSTRY

I. Introduction

DeBeers used to be the world’s largest diamond mining and trading company. Before year 2000, for decades it controlled more than 45% of the world’s production and distributed over 80% of all diamonds. DeBeers used a type of monopolistic practices with their massive size and direct control of the market. The smaller miners and retailers had to undergo financial crunch if they deviate from the DeBeers rules. DeBeers purchased over 80% of all mined diamonds, and directly or indirectly controlled most of the diamond cutting and polishing industry. It could virtually control the diamond supply and prices by direct manipulation of the amount of diamonds in the market for given period of time. Though, DeBeers enjoyed the monopoly for decades, the market changing innovations and younger customer’s desires changed the map of this industry, to push DeBeers to accept new equilibrium.

II. Natural Diamond Value Chain, Raw-material-to-consumer

As illustrated in figure, roughly eight stages are part of the diamond industry value chain. Exploration: for diamond resources and evaluation of field for economic feasibility followed by development and constructions

Production: Production of Diamond from mines and processing.

Raw Diamond: Sorting and sub categorizing of raw diamonds. Sale of rough diamonds and trading.

Cutting and polishing : of rough diamonds to produce polished diamonds.

Sales of Polished diamonds: Sales to goods makers partly to retailer.

Goods Manufacturer: Jewelry (& fashion goods) design and manufacturing, sales 2

Retailer: Sales to customer

Consumers : Who consume(or give gift) the end product

III. DeBeers monopoly of the value chain, its benefits and how

DeBeers could control the value chain with their financial strength, access to the high quality diamonds, with this they could able to create a cartel, and prosecute the rule breakers severely. They could control the amount of diamond in the market, with purchasing or controlling all the available alternative channels, this could create elasticity in the diamond goods, and DeBeers could minimize customer as they needed.