What Is The De Beers Cartel-Monopoly or Co-Operative?

DeBeers is the leader in selling diamonds. Natural diamonds are mined from countries like South Africa, Congo, Sierra Leone, Canada, Australia, India, etc.  While we saw Kendall Lee wanted to propose his girlfriend with a diamond ring, he was not entirely convinced a natural diamond is the best choice. In the 1990s a civil war broke out in western and central parts of Africa. The Rebel groups in Angola, Congo, and Sierra Leone were mining rough diamond and selling those directly to merchants or smuggling those to neighboring countries and mixing them up with legitimately mined rough diamonds. This way the rebel groups were funding the war against the government. In 1990s global share of blood diamond was 15%, it fell to 1% by 2010 (Curley, n.d.). Lee was aware of blood diamond, and he was in a dilemma whether he should buy a diamond from DeBeers and help these exploitations.

We are going to Perform a PESTEL analysis on DeBeers. While natural diamonds have its charm, the youngest diamond is 900 million years old. But now different companies are producing artificial diamonds of 1 carat or less than that size. Artificial diamonds also known as synthetic diamonds are cheaper in price and look exactly the same as natural diamonds after processing. While natural diamonds provide for people in Africa, synthetic diamonds help someone from Florida or Boston.

Political – The government of different countries can bring in legislation/ regulations or duties that have impacted the diamond industry. For example, the government of Namibia brought in a law that would practically force the miners to sell the diamonds to local polishers. While this helped local polishers to grow and create local jobs, but that does guarantee the most profitable deal for miners like DeBeers.

Economic – Truth to be told, diamonds are not cheap or even affordable for most on this planet and that is one reason why Diamonds are so special. During 2008-09 recession diamond sales plunged by 20% in the USA. As the recession spread all across the price of diamond dropped 30% (Werdigier, 2009). And we also ready how diamond sales fell after the 911 attack in the USA. So, the economy plays a huge role in generating demands for Diamonds and sales for DeBeers.

Social – as the millennial generation is marrying late (29 for men and 27 for women) it is a challenge for the diamond industry. Millennials have different taste than their parents and grandparents, they are more value-conscious and all these are resulting in lower diamond sales(Daniels,2016). Companies like DeBeers face the challenge because of the bad reputation it got regarding how they mine diamonds and the expensive diamonds are other reasons that might not help them either.

Technological – natural diamonds can be replaced with synthetic diamonds. There are multiple processes to produce like HPHT or high-pressure high temperature and CVD or chemical vapor deposition. The processes have helped produce low-cost diamond mainly for industrial usage. But as quality-wise they are same and for a cheaper price, they are a threat to DeBeers too. But, synthetic diamonds are not available above 1 karat which is an advantage for DeBeers.

Environmental – Mining is not environmentally friendly and it causes loss of forest, loss of animal habitat. DeBeers have already left mines in South Africa of the total size of 20 football fields (Hayley Matthews, n.d.). This kind of environmental destruction will not sit well with environmentally conscious customers. And DeBeers might get impacted by stricter governmental regulations.

Law – Mining involves a lot of people and there is definitely an environmental impact. DeBeers is vulnerable to new laws by the government to protect people working in mines and laws to protect the environment. Since DeBeers are present in many countries, there might be different aws impacting them.

Solution – The youngest natural diamond in 900 million years old. And synthetic diamonds are not available beyond 1 karat of size. DeBeers has to change itself to regain popularity and respect. Starting with reducing the impact of environment and restoring the natural environment where possible. And being international they can bring new technology and knowledge wherever that is not available. And I think DeBeers can try to do what Ford did with Cars. Paying employees enough so they could afford cars. If DeBeers does that their market size will increase. And they can focus on jewelry for more affordable price or financing option in developed and emerging markets to boost sales. 

DeBeers should monitor their effort to restore forest and animal habitats, let a independent organization monitor progress and publish report. DeBeer can use the these reports in PR. Same way, they should pay the employees better, I mean the miners on the ground, not the executives. Provide them healthcare, education. Good progress in those will earn them some good reputation. DeBeers should publicize how they are changing and how those changes are making lives and environment better.

References –

Curley, R, (n.d.). Blood Diamond. Retrieved from https://www.britannica.com/topic/blood-diamond

Daniels, J, (June,2016). Blame millennials: Diamond jewelry business in a rough spot. Retrieved from https://www.cnbc.com/2016/06/16/blame-millennials-diamond-jewelry-business-in-a-rough-spot.html

Werdigier, J, (February, 2009). Diamond Sales, and Prices, Plunge . Retrieved from https://www.nytimes.com/2009/02/21/business/21diamonds.html

Hayley Matthews (n.d.). Retrieved from https://hayleymatthews-diamondmining-southafrica.weebly.com/environmental-impacts.html