De Beers and the Global Diamond Industry

De Beers and the Global Diamond Industry The De Beers case study brings out a company that struggled to fit into the dynamics of the diamond market. The company enjoyed a satisfactory growth because the over sixty years that it made and controlled the supply of diamond. De Beers achieved this by adopting a number of manipulative strategies. These strategies included preventing smuggling of diamond, aligning all producers, and preventing stockpiling of diamonds.

The focus of the company was to quash all the attempts of competition that may arise from all quarters. However, this strategy seemed not to work any longer after the new mining firms started selling their products through the open market and not through de Beers' Central Selling Organization (CSO). The new competitors were attempting to polish and cut diamond outside De Beers' value chain.

Question 2 Describe the key mechanisms De Beers used to manage the value chain in the past? Did De Beers increase profitability for all participants, and did it increase consumer satisfaction above the levels that might have existed without De Beers' leadership? Were De Beers' activities good for everyone? In the past, De Beer Company took on a number of mechanisms to manage the value chain of their diamond.

The mechanisms that were employed in the past were manipulative in nature, for they were directed towards quashing all the efforts that new competitors who tried to enter the market tried to use. The mechanisms were geared to maintain a significant level of monopoly of the company in the global markets, and ensure that the diamonds that the company made were as scarce as possible. This was important for the company in sustaining itself at a time when other competitors were investing in the industry (Guerrera, 2000).

The core mechanisms that were used by the company include manipulating the market, prevent the smuggling of diamond, and prevent the stockpiling and buying of diamond. The mechanisms also ensured that substitutes like synthetic diamond were not in the market whilst quash the attempts of competition. On smuggling of diamond, the company attempted to prevent smuggling of diamonds, which is often accompanied by excess supply of diamond leading to poor prices of the diamond in the market.

While preventing stockpiling of diamond, the company ensured that only the finished diamond was released into the market. This also ensured that diamond prices did not fall beyond a certain profitable level. De Beers increased profitability for all participants from its policy of being the last resort buyer of diamonds. This means that other players in the industry, who were not large players, could sell their diamond to De Beers.

Similarly, all the finished diamonds in the market had room for sale: the company offered competitive prices for the diamond items, an important advantage for other players/participants in the market. While allowing itself to act as the last resort buyer of diamond from other players, it ensured that excesses in the production of diamond were not reported across the market. This made the market conditions favorable for its operations.

The strategy adopted by De Beers in the past worked well by increasing the consumer satisfaction above the levels that were in the market before its entry. De Beers' leadership did its best to avoid excess supply/overstocking of diamond, which could compromise the value of diamonds across the value chain. The company ensured that diamond remained a.