Forever: de Beers & Us Anti-Trust Laws
Forever: De Beers & US Anti-Trust Laws
Case Study Presentation
6/29/2011
Group 9 – The Explorers
Executive Summary
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 diamond-producing states signed contracts with the De beers to form the cartel and regulate the diamond market which thereby make them the “Rulers of the Industry”.
However, this business model is in clear violation of the U.S. antitrust laws which therefore prohibited De Beers from selling directly in the U.S. market. However, De Beers wanted to maintain its profitable monopoly position by taking control of the key mines, forging close ties with diamond producing countries and taking control of the entire industry value chain. There are Political, Economic, Social and Technical (PEST) factors that are in favour of and against De Beers’ position as the dominant player. Several factors that threatened the company are US Antitrust laws, constant political turmoil in diamond producing states and the changing stakeholders of companies. On the other hand, some factors that supported the company’s position are the strong brand of De Beers, the surging diamond sales in US market and policy to support reconstruction and development of Africa. If anything is certain, it is change and diamond industry has transformed as De Beers begins to lose its grip on the market in the events such as Russian and Angolan defection, as well as Asian Crisis. As a
Case Study Presentation
6/29/2011
Group 9 – The Explorers
Executive Summary
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 diamond-producing states signed contracts with the De beers to form the cartel and regulate the diamond market which thereby make them the “Rulers of the Industry”.
However, this business model is in clear violation of the U.S. antitrust laws which therefore prohibited De Beers from selling directly in the U.S. market. However, De Beers wanted to maintain its profitable monopoly position by taking control of the key mines, forging close ties with diamond producing countries and taking control of the entire industry value chain. There are Political, Economic, Social and Technical (PEST) factors that are in favour of and against De Beers’ position as the dominant player. Several factors that threatened the company are US Antitrust laws, constant political turmoil in diamond producing states and the changing stakeholders of companies. On the other hand, some factors that supported the company’s position are the strong brand of De Beers, the surging diamond sales in US market and policy to support reconstruction and development of Africa. If anything is certain, it is change and diamond industry has transformed as De Beers begins to lose its grip on the market in the events such as Russian and Angolan defection, as well as Asian Crisis. As a