De Beers Paper Essay Example
1. Specify the nature, structure, types of products or service of your chosen organization, and two (2) key factors in the organization’s external environment that can affect its success. Provide explanation to support the rationale.
De Beers Diamond Company is an industry that currently produces $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 experts for cutting, polishing and jewelry manufacturing (Stein, 2001). The global jewelry market has increased three-fold in the last 25 years and is currently worth $72 billion each year. Jewelry diamonds are unjustifiably expensive given that they are not actually scarce. Upon the discovery of other diamond reserves globally, De Beers set up a subsidiary called the Central Selling Organization (CSO), responsible for buying the production for all mines worldwide then selling the produce to dealers in return for a percentage fee (10 – 20 %) from producers (Stein, 2001). The CSO was able to maintain illusion of scarcity by deciding the quantity of diamonds to be supplied to the world market and in turn, allowing individual producers to produce a certain percentage of that amount (De Beers Group, 2012). The CSO then sold batches of rough diamonds to selected dealers at their exclusive sightings. The CSO were able to dictate inflated prices to dealers, as if dealers tried to negotiate on price, they were not invited the subsequent sightings. From the late 1800’s the CSO controlled the sale of 80% of the world’s diamonds (De Beers Group, 2012). The organization’s external environment in the industry is the exploration and mining of diamond fields in the production stages. These are often carried out by governments, sometimes in joint ventures with companies such as De Beers. Once a reserve of any notable size is discovered it is
De Beers Diamond Company is an industry that currently produces $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 experts for cutting, polishing and jewelry manufacturing (Stein, 2001). The global jewelry market has increased three-fold in the last 25 years and is currently worth $72 billion each year. Jewelry diamonds are unjustifiably expensive given that they are not actually scarce. Upon the discovery of other diamond reserves globally, De Beers set up a subsidiary called the Central Selling Organization (CSO), responsible for buying the production for all mines worldwide then selling the produce to dealers in return for a percentage fee (10 – 20 %) from producers (Stein, 2001). The CSO was able to maintain illusion of scarcity by deciding the quantity of diamonds to be supplied to the world market and in turn, allowing individual producers to produce a certain percentage of that amount (De Beers Group, 2012). The CSO then sold batches of rough diamonds to selected dealers at their exclusive sightings. The CSO were able to dictate inflated prices to dealers, as if dealers tried to negotiate on price, they were not invited the subsequent sightings. From the late 1800’s the CSO controlled the sale of 80% of the world’s diamonds (De Beers Group, 2012). The organization’s external environment in the industry is the exploration and mining of diamond fields in the production stages. These are often carried out by governments, sometimes in joint ventures with companies such as De Beers. Once a reserve of any notable size is discovered it is