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How Did De Beers Do it?
De Beers was phenomenally successfully in crushing its competitors with
the strengths it built over 100 years through financial and relationship
powers and the business acumen that came from dealing with different
peoples, different governments and different situations in this long
period of time. De Beers was seasoned with the experiences it went
through over 5 generations in the same business around the globe. Here
are some of the barriers De Beers put of against its competitors:
Access to Physical Resources
De Beers currently owns 80% of world's present resources of
diamonds. It owns mines in friendly as well as hostile countries and
it has maintained its position by using every trick in the trade. It
is hard to own a mine in a country where De Beers already owns one.
High Capital Investments
No many businesses can think of making a huge capital outlay in a
business where market is artificially created and controlled by one
company and is subject to volatility. De Beers made a payment of
over 1.5 million GBP in 1885.
Channels of Distribution
From Africa to London and from South America to Russia, De Beers
currently controls the channels of distribution. Any new threats
will have to fight De Beers' hold on them.
High Value Product in the Economy
Any country that discovers a new mine has to carefully monitor the
practice of new mine holder since diamond business in every country
has stakes in its inventories. It's high value can drive jewelry
businesses into bankruptcies and that related businesses as well.
Government Support
As of 2000, De Beers had cash reserves over $2 Billion for buying
diamonds. It could force manufacturers to buy diamonds and it could
cut off supply from any cutting factory that failed to subscribe to
its policy. With its hold over the diamond distribution, it forced
governments worldwide to an extent by threatening to play havoc on
its economies (as it did in the case of Portugal in 1976. De Beers
has consistently used the British government and its embassies to
threaten and force other governments and curb its competitors and at
times made irresistible offers to its competitors to stop their
activities.
In South Africa and the Belgium Congo, De Beers pressed the
governments into passing laws that forced independent prospectors
and diggers to sell their diamonds only to government-licensed
diamond buyers, who in turn contracted to sell their diamonds to De
Beers subsidiary - the Diamond Trading Company (DTC).
Throughout its history, the company has been committed to keeping
diamond prices as stratospheric levels. More than anything, it feared
that if prices began to fall, diamond owners around the world would
start unloading tons of gems and the market would not be able t bear the
price fall and would collapse. So De Beers made sure that gems remained
secure. It could do this because of the tremendous leverage it had over
the world's diamond miners, who had a very few other outlets. As Ernest
Oppenheimer established it, one of the cardinal principles behind the
diamond inventories was that the demand for diamonds was fixed each year
and waived only with the number of engagements (Read
- Can De Beers its Hammerlock? by Richard A. Mechler and Deborah Stead,
Business Week, September 21, 1992). Any sudden increases in the
production of diamonds would therefore be added to De Beers stockpile
rather than its profit
Creating Artificial Scarcity
It is ironic that during the lifetime of Sir Ernest
Oppenheimer, De Beers never discovered a diamond mine itself. Oppenheimers saw
little point to investing profits in exploring for diamonds...
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De Beers' Competition
De Beers has left no avenues to control, stop, take over, make friends with or
bulldoze its competitors when necessary. In 1971, it crushed Sammy Collin's
Marine Diamond....
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A Diamond is Forever
De Beers launched a multi-million dollar "A Diamond is For Ever" advertising
campaign to rekindle the demand. With N.W. Iyer, its U.S. advertising agency, it
had developed aggressive campaign to promote sales of diamond anniversary rings
and jewelry for men... ...
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Smuggling from other African Mines
The smuggling routes lead from the diamond mines and diggings in
Southern and Western Africa to entry spots such as Monroevia,
Brazzaville, Burundi and Beirut. The Belgian and other European markets
are often flooded with smuggled diamonds. The native sorters at....
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What is Sight Holders?
In its distribution process, De Beers have commanded
absolute authority. 10 times a year, De Beers sells
boxes of rough diamonds to 160 select international
dealers and manufacturers in market rituals as sights in
London, although smaller sights are simultaneously held
in...
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The Name of the Game
For major diamond dealers, the objective is to
increase allocation of diamonds that they receive in their shoebox at each night
(Read - The Rise and Fall of Diamonds, The Shuttering of a
Brilliant Illusion by Edward Jay Epstein). It is , as one dealer put it -
"the Name of the Game"...
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Maintaining the Value of Diamonds
The multi-billion dollar business of diamonds revolves
around the attractive pebble that has a less intrinsic
value per carat. The higher value is an artificial one
and is attributable to the strong hand of De Beers. The
sights in London are not merely occasions for major
gem...
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Tell me about the Name De Beers
De Beers Consolidated Mines Ltd. is a business organization that has been
controlling the diamond trade world wide for the last century. Many
people tried to compete such Harry Winston for New York and the Argyle
Diamond Company of Australia ...
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The Birth of De Beers Company
in Early
1871, a diamond was found on a small hill, a mile away
from the farm house owned by De Beer brothers (whose
names were immortalized in the misspelled form of De
Beer) in the town of Vooruizicht in South Africa and
soon another was found on the farm. A throng of...
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The Oppenheimers Arrive..
Sir Ernest Oppenheimer, who came from a prosperous cigar business family
in Germany, moved as a child to South Africa to join his brothers on a
diamond farm in 1902. He started his career as a diamond sorter and grew
rapidly to own and operate the world's most powerful...
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The Long Arm of De Beers
De Beers mainly mines gem quality and industrial
diamonds, markets diamonds produced by itself and also others, makes and
sells synthetic diamond and related international investments in mining,
industrial and finance companies. In its worldwide operations, it has
assumed many....
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Monopoly Through Financial Strength and Government
Support
De Beers could teach OPEC a thing or two about how to
maintain a cartel. It controls 80% of the world's diamond supply
through only 20% of De Beers gems come from its own mines. It
controls the world's diamond trade through indirect levers. Some
nations, such as Botswana...
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Read about Diamond History,
Diamond Trade, Buying Tips and more...
The Romans believed that diamonds brought
courage and bravery during battle. Jewish high priests used diamonds to
decide the innocence or guilt of the accused: A stone held before a
guilty person dulled and darkened; a stone held before an innocent
person glowed with increased brilliance. The Hindus believed that this
brilliant gem was created when....
Learn about Diamonds....
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De Beers' Tactics for Successful Monopoly
