De Beers' as a Monopoly

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  • De Beers' as a Monopoly

    1. 1. LEV LEVIEV VS. DEBEERSNikhil Agarwal | Navneet Kumar | Saurabh Kumar |Sachin Pal
    2. 2. Introduction – De Beers Who is de beers? Not retailer Not manufacturer They are miner and buyer of 70% of the world’s rough diamonds. De beers is a South African company and was founded by Cecil Rhodes in 1888 by forming a cartel with the ten largest merchants in South Africa. By 1890, de beer controlled 95% of the world diamond production. The company spends $180million a year world wide to advertise cut diamonds.
    3. 3. De Beers as a Monopoly De beer was almost the sole seller of diamond. Sells a commodity with no close substitute. De Beers took control of all aspects of the world diamond trade in 1989. The main principle of de beer’s business model was to match the supply of diamonds with demand. They could determine who could buy uncut stones, in what quantities and quality and decide which cutting centers to be used.
    4. 4. Decline of Monopoly In 1991, the Soviet Union (the worlds second- largest diamond producer by value) collapsed. Involvement in a 1994 price fixing case. In 1996, Australias Argyle mine became the first major producer to terminate its contract with De Beers. Several rich diamond deposits were discovered in the Northwest Territories of Canada. Diamonds became tainted by the term “blood diamonds”.
    5. 5. Continued… High-handed treatment towards buyers. Alternative distributors came into prominence. Weakness in the economies of consuming regions. The results: De Beers controlled a shrinking share of output in a shrinking market. The resulting problems for De Beers helped to demonstrate the inherent instability of a cartel.
    6. 6. Role of Lev Leviev  Converted De Beers Monopoly into duopoly.  Opened his own cutting factory in 1977.  Former sight-holder of De Beers.  1st dealer to operate across the value chain – from mining to polishing & retailing.
    7. 7. Continued… Russia Angola Namibia• Close to Vladimir • World’s 3rd • Paid $30 million to Putin. largest acquire 37% of producer of rough Namibian Minerals• Brokered meetings diamonds. Corp.(diamond between Russian mining President & Israeli • Invested $60 million outfit). Politicians. in exchange for 16% • Opened a polishing• Formed a joint of factory on Namibianventure Angola’s largest coast. with Russia’s state- diamond mines.run diamond mining & • Gave 51% share of selling group : RUIS. Ascorp. To Angolan govt.• By 2003, Leviev
    8. 8. Reorientation Strategies Trying to sell its existing products through marketing and branding. De Beers unveiled two branding initiatives – Forevermark and De Beers name itself. It employed the "Supplier of Choice" strategy putting them in direct competition with its sigh- holders. Started joint initiatives with its sight-holders. Buying other mining firms.
    9. 9. ConclusionArea of improvements: To maintain artificial high prices and encourage sustainability of the diamond business. Convincing end customers they want a De Beers diamond (“blood-free”, premium image , quality assurance, proprietary designs). Advertise more in premium fashion magazines like People and Vanity Fair.
    10. 10. THANK YOU

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