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The de Beers Group Analysis - Group3

De Beers has historically controlled over 90% of the global diamond supply through mining and its Central Selling Organization marketing arm. However, it now faces challenges from conflict diamonds and synthetic diamonds. It is exploring opportunities in the diamond reselling business through a pilot project called the International Institute of Diamond Valuation. This could address industry issues around the difficult process of reselling diamonds and doubts about maintaining their value. However, there are questions around potential cannibalization of De Beer's existing business and the size of the reselling market opportunity.

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981 views2 pages

The de Beers Group Analysis - Group3

De Beers has historically controlled over 90% of the global diamond supply through mining and its Central Selling Organization marketing arm. However, it now faces challenges from conflict diamonds and synthetic diamonds. It is exploring opportunities in the diamond reselling business through a pilot project called the International Institute of Diamond Valuation. This could address industry issues around the difficult process of reselling diamonds and doubts about maintaining their value. However, there are questions around potential cannibalization of De Beer's existing business and the size of the reselling market opportunity.

Uploaded by

Anirban
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The De Beers Group: Exploring the Diamond Reselling Opportunity

Case Analysis
SVCM B – Group 3

The De Beers organization, founded in 1888, is undoubtedly the pioneer in the diamond industry,
focusing primarily on all activities revolving around finding and producing “rough diamonds” from
various mining sources across the globe. The firm has gone up to controlling 90% of world diamond
supply. Historically, the organization believed in funneling most of its rough diamonds through its
marketing arm, the Central Selling Organization (CSO). This single channel distribution philosophy was
laid down with an objective to control supply of raw material throughout the industry. Over the years,
De Beers has made attempts to expand their portfolio, this case talking about the prospective diamond
“reselling” business.

 Industry Value Chain: From the mine to the retail consumer, a diamond changes hands up to 8
times, incremental price being added at every stage. There are 3 primary stages in the diamond
industry:
o Upstream: Included finding and producing “rough” diamonds, then selling into different
distribution channels. 80% of diamond supply comes from mines in Russia, Botswana,
Canada, or Angola. This is the most profitable segment, and the core competence of De
Beers currently
o Midstream: Firms responsible for cutting, polishing, and producing “finished” diamonds.
A relatively fragmented and low margin segment.
o Downstream: Constituted of retail outlets such as Tiffany, responsible for the final
customer facing stakeholder in the value chain.
 Industry Challenges: The case lists 2 main challenges that the diamond industry has been facing
off late:
o Conflict Diamonds: This relates to the unethical sourcing of the core diamond itself.
Diamonds were being mined and the money used to finance wars in countries such as
Sierra Leone. As awareness of the same grew, such unethically sourced raw materials
were being restricted from entering the legitimated trade.
o Synthetic diamonds: These are lab grown diamonds, intended for industrial purpose.
However, they were increasingly been sold as gemstones. They are chemically and
visually very similar to diamonds, hence tough to detect without special equipment.
 Marketing aided by Service partners: The firm’s sustained success and legacy can be majorly
attributed to its splendid marketing and advertising campaigns. In partnership with advertising
agency “N.W. Ayer”, De Beers came up with the tagline “A diamond is forever” – etching into
the minds of potential customers the idea of how the gem is an invaluable asset that ceases to
depreciate in value. This was successful in captivating the audience for the next 50 years.
 Service Partners in the form of Joint Ventures: 85% of De Beers was sold to the Anglo American
Corporation in 2012, the government of Botswana owning the remaining 15%. De Beers has
begun sourcing two thirds of its diamonds in the country, helping the latter become one of
Africa’s most prosperous countries.
 The shifting landscape: The diamond industry was plagued by one perennial issue – reselling of
the prized gem. The case talks about a lack of organized mechanisms to get a fair value of the
diamond. This, in turn, creates an image in the minds of the customer wherein he/she doubts
the very idea of purchasing a diamond, fearing the tough process of reselling later. Additionally,
the unfair and low reselling price implies a loss in value of the gem – something that the
company specifically states is not true. The pilot project – The International Institute of Diamond
Valuation (IIDV) of De Beers aims at extending the organization’s presence as an improved
selling experience provider. There arise several questions, regarding possible cannibalization,
the possible size of the reselling business etc. However, to keep up with the changing industry, it
is imperative that changes are incorporated in the organization’s operations, the recycling
industry presenting a $1 billion market in 2014 itself.

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