Debeers - Diamond Industry

3527 WordsJun 8, 200915 Pages
This paper will focus on the Diamond Industry and in particular DeBeers’ involvement in shaping the structure of markets and firm conduct within the industry. The paper will examine the influence of DeBeers’ cartel by initially looking at market conditions when DeBeers were operating their cartel, then by way of comparison, examining the evolvement of the market once the DeBeers cartel was ended, effectively opening up the market for the first time. The diamond industry currently produces US$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…show more content…
The CSO offered Russia favourable terms in an effort to ensure production rights which Russia agreed to, soon after Russia broke the terms of these agreements leading to the CSO agreeing even more favourable terms. In the mid 1990’s as Russia’s initial agreement was coming to a close, the Russians kept hinting at their newly discovered reserves and their ability to rival the CSO if they conducted their own sales. Subsequently when the time came to renegotiate, they demanded increased sale prices based on their position of strength. The CSO refused to yield and no new deal was struck, after a period of a years grace, Russia began to sell increasingly large amounts of diamonds destabilising the market. Rumours of their dwindling supply soon led to Russia agreeing to rejoin the CSO on the CSO’s terms, thus avoiding complete destabilisation of the market.2 At the turn of the millennium the cartel the DeBeers had operated came to an end for a number of reasons; 1) Demand for diamonds amongst consumers began dropping due to the stigma attached to “conflict diamonds”. 2) It was no longer viable for DeBeers to do business in, or with, certain war stricken diamond producing African countries. 3) An increasing number of countries (Russia, Canada and Australia) began distributing all or some of their diamonds independently and 4) “De Beers was unable to conduct business in several jurisdictions where it had interests or a corporate presence
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