De Beers And The Diamond Industry

For centuries, diamonds have been regarded as one of the most valuable commodities in the world and the industry has evolved into billions of dollars. At the top, De Beers dominated the entire industry worldwide, from exploration to retail selling. However, it has a reputation of a monopolist, where it influences supply and demand. The two critical factors that De Beers carefully maintained throughout the century to remain in monopoly was to create the illusion of the scarcity of the diamonds and to keep the prices high. Realizing the benefits of the cooperation and the dangers of the oversupply, most

While companies that make up an oligopoly are competitors, they are acutely aware of the processes, systems, and actions of the other companies; therefore, the decisions and actions of one company usually influence and are influenced by the actions and decisions of other companies. These decisions and actions tend to restrict and limit the goods and services that are offered and can also lead to higher prices for

De Beers advertising slogan "A Diamond Is Forever" has been the center of its effort to establish the stone as the only appropriate gem to symbolize lifetime love and commitment. The more ad money spent, the more diamonds people buy. And when people buy diamonds, De Beers profits. It is the reason the company spends $180 million a year worldwide to advertise cut diamonds--a product it doesn 't even sell.

There are different types of businesses, for example, some use monopolies, trust and pools, while other eliminate competition for higher prices. As stated in “Progressive reformers regarded regulation as a cure for all sorts of socioeconomic and political problems” , “The Sherman Act of 1890 attempted to outlaw the restriction of competition by large companies that co-operated with rivals to fix outputs, prices, and market shares, initially through pools and later through trusts” , meaning, competition is the

Cartel - firms ,especially dominant players, gather together to set up a price according to the profit maximisation in the whole market. In this case, firms act like a monopoly. The price of products of each firms is fixed, thus reduction of price competition will be achieved. Instead of pricing strategy, firms will compete each other over non-price competition, for example, advertising. Like monopoly, customers’ interest might be sacrificed because price is constructed according to the market’s profit maximisation point, whole industry can gain abnormal profit, which means customers pay more than they actually need to. According to the figure 1, price of products under cartel is set up at P because of profit maximisation E (MC=MR), and abnormal profit is PP2FG. However, cartel is illegal in many countries, including UK.

2. Oligopoly occurs when a small number of suppliers control a significant share of supplies. In this case, each of the suppliers to take into account the reactions of other suppliers to changes in market activity. Products manufactured oligopoly may be homogeneous, e.g., aluminium or differential such as cigarettes and automobiles. For example, due to the fact that it requires a huge financial cost, very few companies can afford to enter the market of oil refining or production of steel. In some industries, requires a certain level of technical and marketing skills, which is an insurmountable barrier for many potential competitors. Companies on the oligopolistic market try to avoid price wars due to the fact that this approach is costly to all involved in the war.

‘For any firm changing its price, it is vital to know the likely effect on the quantity demanded’ Sloman and Hinde (2007). Tate and Lyle was thinking of increasing its prices after a decline in profitability due to the rising cost of oil which plays a big part in its energy costs. Tate and Lyle are in a market with very low price elasticity. Sugar is not a very expensive commodity and people will still buy it even if the price goes up slightly. Another aspect is that people become accustomed to sugar in their tea or coffee for instance, so even if prices rose significantly, consumers would not give up their sugar consumption straight away. (Bized, 2005)

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

This elucidates the idea that black market trading rarely benefits the economic status but different corrupt organizations. Businesses should find a way to properly trade legal diamonds, while benefiting the country’s economic system. Although the natural resources in some parts of Africa are rich, the people are extremely poor. In other words, Richman also states, "The great irony of this, and what concerns the industry most, is that the item is being sold as a part of a romantic, everlasting, and pure relationship, but there are a lot of ugly shadows that have contributed to the industry 's success." Industries must end their contribution to the blood diamonds that fuel this nation’s civil wars.

The story of these infamous diamonds all started with a fifteen year old who found a diamond in his father 's arm. The diamond business started in 1935 when “De Beers” took all control over dining prospects in Sierra Leone. De Beers are a group of companies has a main role in the exploration of diamonds, as well as diamond mining, diamond retail, diamond trading, and industrial diamond manufacturing sectors.This group was founded in 1888, and they are responsible for the problems Sierra Leone is facing today. These diamonds can be found in volcanic pipes. Diamonds are a pure form of carbon in a transparent state. Diamonds have always been a sign of wealth. Historically kings and queens were known for wearing these. Over time many people began lusting over them.

government of a country" (Campbell 127). "With this definition of "conflict diamonds", DeBeers has no only proved itself with linguistic maneuverability but trade maneuverability as well. It is no secret that "the industry, after all, is bigger than the company alone and in fact is critical to the economies of at least four nations." (Campbell 127) DeBeers has taken steps to ensure that some of their diamonds were conflict free with the demand for action so apparent. DeBeers first step in the right direction resulted in a devastating blow to earnings, a net loss

The distribution and production of diamonds is largely controlled by a few key players, the main one being Antwerp. Antwerp is where 80 percent of all rough diamonds, 50 percent of all cut diamonds, and 50 percent of all rough, cut and industrial diamonds are controlled. In New York almost 80 percent of the world diamonds are sold. De Beers is the world’s largest diamond miner and holds a governing position in the industry, and has done so since it was founded in 1888. De Beers owns or operates a large portion of the world’s rough diamond production mines and distribution networks. The DTC or Diamond Trading Company is a subsidiary of De Beers and markets diamonds from De Beers run mines. After being mined the diamonds are then sent to be cut and polished. The polishing and cutting of diamonds is a specific skill that is done in a limited number of locations worldwide. Original diamond cutting centers are Amsterdam, Antwerp, Johannesburg, New York, and Tel Aviv. More recently, due to the lower labor cost, diamond cutting centers have opened in China, India, Namibia, and Botswana. Diamonds which have been prepared as gemstones, such as the ones you would see in most engagement rings, are sold on diamond exchanges called bourses. “There are 28 registered diamond bourses in the world” (Linetskaya,Yelena. “Big Apple Secrets”).

When only a few sellers offer a product with little regard to competition it is called an oligopoly. It is different from a monopoly because multiple corporations are involved, but the effects on the consumer are the same - bad. Although competition is usually in the best interest of the consumer, it is not always in the best interest of the corporation. If we examine the two leading soft drink producers, Coca-cola and Pepsi-cola, we see a prime example of an oligopoly (Zachary, 1999). As things are presently, each of these soft drink companies has about half of the soft drink market, and examined from a world-wide perspective that is a pretty large market. Either one of them, Coke or Pespi, could conceivably lower their prices in

The bargaining power of buyers: Buyers have more control over an industry than one might think. They want lower prices, higher quality, and more services and this makes the competitors play against each other. The profitability suffers as each competitor tries to make their product or service better (Dess, p. 54). McDonald’s has a $1.00 menu as does Burger King and Wendy’s. Each time I go into either of them there is a better item added to the $1.00 menu. For instance, McDonald’s has the scrumptious Double Cheeseburger and Wendy’s has the

Color. Clarity. Cut. Carat Weight: These four words are what jewelers in the industry use to determine the monetary value of a diamond. However in 1947 De Beers found a way to not only boost their sales but also make a psychological necessity out of this sparkly stone, and it all began with four vastly different words, “A Diamond Is Forever” (Frances Garety), and accompanied by phrases such as “Isn’t two months’ salary a small price to pay for something that lasts forever (N.W. Ayers)?