Monopoly is a market structure where there is only a single
provider of a product or a service, which has no close substitute
in the market.
•A monopolist can sell a greater
quantity only by cutting its price or
control the quantity sold to change
• It is restricted to a combination of
price and output that lies on the
•marginal revenue(MR) & the price
decided in the industry
•Average revenue(AR) is per unit
revenue received by sale of products
Types of Monopoly
Kraft foods &
Types of Monopoly
Due to natural
• In a monopoly, profits can
be enjoyed both by seller
and customer in the form
of low prices.
• Monopoly holder can
make use of price
discrimination to make
profit or for the benefit of
• The profits earned are
invested in R&D for better
products and services.
• Less/no risk of product
• No benefit of choice for
• Prices of products/services
can be unreasonably high
• Barrier for new entrants.
History of De Beers
•Cecil Rhodes, the founder of de beers, rented water
pumps to miners in 1871, when an 83.5carat diamond
was found on Colesburg Kopje (present
day Kimberley), South Africa.
•He invested the profits of this operation into buying
up claims of small mining operators, with his operations
soon expanding into a separate mining company.
•The name derived from the De Beers
brothers, Diederik Arnoldus and Johannes Nicolaas de
Beers, Boers whose farm had become the site for
The growth of De Beers
• De Beers Consolidated Mines was formed in 1888 by the
merger of the companies of Barney Barnato and Cecil Rhodes
• In 1889-90, Rhodes negotiated a strategic agreement with the
Ten merchants forming the London Diamond Syndicate, that
agreed to buy De Beers' entire production.
• Rhodes died in 1902 when, De Beers controlled 90% of the
world's diamond production.
• The Cullinan mine started selling to a pair of independent
dealers named Bernhard and Ernest Oppenheimer, thereby
weakening the De Beers cartel.
•In 1926, Ernest Oppenheimer becomes a major De Beers
shareholder, hence became chairman.
• In 1929, De Beers’s first African diamond cutting factory
opened in Kimberley.
•In 1947, Frances Gerety creates the timeless slogan,
“A diamond is forever”
• In 1966, De beers discovered Kimberlite, in Northern
• In 1967, A year after Botswana gains its independence from
Britain, the Orapa kimberlite pipe is discovered. The second
largest pipe in the world, it covers 262 acres at the surface.
•In 1972, De Beers’ geologists discover the Jwaneng pipe, the world’s
richest diamond mine, producing an average of 11 million carats per
•In 1992, Venetia Mine opens in South Africa. It will become South
Africa’s largest diamond mine
•In 1994, De Beers joins with the newly independent Republic of
Namibia to form Namdeb - a 50/50 joint venture partnership to mine
the country’s diamonds.
•In 1998, Nicky Oppenheimer son of Harry, becomes chairman of De
•In 2001, partners with group LVMH Moët Hennessy Louis Vuitton in a
new company, De Beers Diamond Jewellers, to provide world’s most
•In 2003, The Kimberley Process Certification Scheme is
established to stem the flow of conflict diamonds. 100% of De
Beers’ diamonds are certified conflict free.
•In 2006, With the Government of Botswana De Beers establish
DTC (Diamond Trading Company) Botswana, a company to sort
and value all Debswana production and support local diamond
•In 2011, Anglo American, shareholders in De Beers since 1926,
and the Oppenheimer family announce an agreement for Anglo
American to acquire the family’s share in De Beers.
•In 2012, De Beers becomes a member of the Anglo American plc
Exploration of mines throughout Africa , Russia and extract diamonds from
Joint Ventures with Governments (Debswana, Namdeb and Williamson
Diamonds Limited), and purchasing from Alrosa
Marketed through Central Selling Organization (CSO)/DTC
distributes 45% of the worlds diamond supply sales to 93 client
Rough diamonds obtained and sorted based on shape, size, colour and
Wholesalers and retailers manufacturing diamond jewelry signed contract
to follow De Beers manufacturing regulations
Initially hesitated to promote and advertise- afraid that it would cheapen
1947: “A Diamond is Forever”, creating illusion that diamonds are rare
started ‘diamond engagement ring’ creation
Reinforcing diamonds and love creation:
1. romantic scenes in movies
2. placing stories and photos in magazines
3. gifting diamonds to movie stars as a token of love
1963: divided market into two kinds of purchases
1. Occasion Purchase-targeted only men-engagement ring
2. Celebrating women- focused on women-right-hand ring
1930: the year of change
E Oppenheimer becomes the chairman
Central Selling Organisation (CSO) was formulated by buying out
London Diamond Syndicate
The only way to increase the value of diamond is to make them
Controlled 90% of the global commodity
1930-33 Depression reduced the production further thereby closing
down African Mines
1937- De beers held a stock of 40 Mn carats diamond - stock for next
De Beers Way- getting into monopoly
Supplier of Choice (SoC) strategy- inviting selected sightholders for
sight visits in every 5 weeks
Box worth $1-25 Mn containing 200 pieces given to sight holders
Price makers- no haggling over prices
Strategy - Take the entire box or none
Clients can not resell the diamonds in their box in the uncut form
Clients will not provide any information to evaluate the diamond
The Start of the End
• In the second half of the 20th century, as new worldclass mines were discovered in Russia, Australia and
Canada, it became increasingly difficult for De Beers to
control global supply.
• The biggest risk to the survival of the De Beers cartel
was when these new world-class mines to begin selling
directly to the market, bypassing De Beers.
• In 1963, Anti-Apartheid legislation restrained the
Soviet Union from dealing with a South African
• The Soviet Union collapse in the 1990’s separated
Russia’s production from De Beers
• The Argyle Mine in Australia (at the time the largest
diamond producing mine in the world by volume) broke
away from De Beers because of the cartels inflexibility.
• Other mines followed suit, as new world-class mines in
Canada chose to sell their supply independent of De Beers.
• Rising awareness of blood diamonds that forced De Beers
to "avoid the risk of bad publicity" by limiting sales to its
own mined products.
• In 2001, several law suits were filed in U.S. courts alleging
that De Beers had unlawfully monopolized the supply of
diamonds and conspired to fix, raise, and control diamond
prices and issued false and misleading advertising.
• In 2012, a settlement of $295 Million with an agreement to
“refrain from engaging in unlawful behavior.
Switching the marketing strategy from “Managing Supply” to
Ratification of Kimberley Process Certification
Transformed itself into firm selling premium diamonds and
other luxury goods.
Started focusing on joint ventures
Started limiting the supply of low cost gems (emeralds, rubies,
sapphires) in order to maintain the customer base.
Attempted to brand gems calling it a “De Beers Diamond”
rather than a regular diamond
Introduced “Added Value Services” through which guaranteed
steady supply of diamonds and supported marketing activities.
Sharing Partial profits with countries from where resources are
being extracted by means of CSR
Venture into retail outlets ( Joint Venture with LVMH)
Price fixing and shady agreements- to bind the loyal
sightholders to the company
Create and then meet emerging demands in emerging market
• The De Beers Group of Companies employs
approximately 23,000 people in operations that span
the entire diamond pipeline, from mine to finger.
• It generates revenues of 6 billion dollars.
• The rough diamond sales and distribution arm of the
De Beers Group sorts, values and sells approximately
40% of the world's rough diamonds by value.
• The company has 20 mines distributed among South
Africa, Namibia, Botswana, and Tanzania, and engages
in production joint ventures with local governments
and other companies, such as Louis Vuitton.