Overview of the Global Diamond Industry
The diamond industry is reasonably lucrative, with a global supply of 1.2 billion carats (Garside, 2022). Nevertheless, despite the excellent mining potential of different countries, De Beers is the largest company for extracting, processing, and selling natural diamonds. The company is the center of the cartel, setting the price policy for diamonds and controlling their production in different countries.
De Beers’ Formation of a Diamond Monopoly
Since the 19th century, De Beers has maintained a monopoly in the diamond industry, and the company has done so in various ways. The company discourages competition by preventing new manufacturers from entering the market. In addition, De Beers artificially created a scarcity of rough diamonds by withholding diamond sales in certain countries to control the cartel’s stability. It also helped secure the monopoly and company profits in the event of political or economic changes in other countries.
The company interacted with the governments of countries where diamonds are mined and with other companies, including De Beers and Beyond: The History of the International Diamond Cartel (n.d.). These actions helped maintain the company’s monopoly and increase its profits. In addition, the creation of the Central Selling Organization (CSO) helped keep prices for the sale of diamonds in the cartel.
Challenges from Synthetic Diamonds and Changing Consumer Values
However, to date, De Beers’ market share has declined significantly. One reason for this is the increasing popularity of synthetic diamonds. The reason for this phenomenon was the increase in the price of natural diamonds due to the need to find new mining sites (Diamonds timeline, n.d.).
In addition, consumers’ environmental and social awareness has increased, which is related to the environmental impact of production, low wages, and the impact on the infrastructure of the area where diamonds are mined. In addition, synthetic diamonds are priced lower, making them more attractive to buyers (Insider Business, 2021). That threatened De Beers’ profits, so changes in the company’s operations are needed to maintain its status.
Strategic Adaptation and Future Directions for De Beers
One option is for the company to change its policy regarding pricing and interaction with other companies. The curbing of competition in the market led to a price increase for polished diamonds. Therefore, the company can relax the conditions for new manufacturers to enter, creating a competitive advantage and attracting customers. Additionally, a crucial factor in De Beers’ stability is the diversification and production of synthetic diamonds to meet the needs of consumers from diverse socio-economic groups. By balancing supply and demand, the company will maintain its leadership position in the industry and cover the cost of mining natural diamonds by attracting new buyers.
References
De Beers and Beyond: The History of the International Diamond Cartel. (n.d.).
Diamonds timeline. (n.d.). Galeries Du Diamant.
Garside, M. (2022). Diamond industry – statistics & facts. Statista.
Insider Business. (2021). Can Diamonds Made InA Lab Replace Natural Ones? | Rise And Fall. YouTube.