De Beers Consolidated Mines has successfully managed the global diamond industry for many decades, propping up prices at all stages of the value chain, reducing price volatility and increasing consumer demand. By the end of the 20th century, however, a series of forces threatened De Beer's role and profitability. New diamond mining firms were selling their production on the open market rather than through De Beers' Central Selling Organization. Can De Beers strategy beat their competitors and what was the competition situation? Find out, more in this presentation.

1. AND THE GLOBAL
DIAMOND INDUSTRY
DEBEERS

2. Contents
The Problems
Analysis
De Beers Story
Conclusion and Recommendation

3. DEBEERS Story
Part ONE

4. Cecil Rhodes founded De Beers in 1880+
Controlled 95% of diamonds world in 1888+
Oppenheimer establish CSO
→ buyer of last resort
+
Production fell gradually.
1980’s was less than 50%
+
Part ONE
DEBEERS Story

5. CSO has some roles:
The one and only marketing branch
Ability to grade and guarantee diamond
CSO game plan:
• Select its buyer
• Non-negotiable price
• Choose whom to sell & what quantity
• Punishment
Stockpilling diamond
Campaign: “Diamond is forever”
Part ONE
DEBEERS Way
+
+
+
+
+

6. DE BEER
CUTTING AND
POLISHING
Part ONE
DEBEERS Business Model
MINES
CUSTOMERS

7. DEBEERS Problem
Part TWO

8. Main Problem
Disruption on DeBeers Value Chain
Economics of stockpiling changed
Declining revenue Liquidity problem
Decreasing profit Diminishing Return on Equity
Dwindling
cash reserve
Business Process Problems
DEBEERS Problem
Part TWO

9. ABER MINING TIFFANY & Co.
DE BEER CUTTING &
POLISHING
LEVIEV
Part ONE
The Competition
CUSTOMERS

10. Analysis
Part THREE

11. + Strong Brand
+ Trust already built with consumers
and partners
+ Historical holdings
+ Expertise
+ Control of output
+ Distribution channel
+ Controls output
+ Owns distribution channel
+ Alliances
+ Relationships with foreign
governments
+ Cash on delivery
+ Only game in town
+ No substitutes for diamonds
+ Customs/tradition
+ War
+ Quality of product
- Luxury item / not necessity
-/+ Economy
+ No substitutes for
diamonds
+ Cultural history
+ Social issues/status
+ High cost of entry
+ High cost of entry
+ Cornered the market
+ Strong Brand
+ Existing mining and political
relationships
+ Access to new mines
+ Owns distribution channel
+ Control of output
BARGAINIG POWER OF SUPPLIER
EXISTING CUSTOMER RIVALRY
THREAT OF NEW ENTRY
BARGAINING POWER OF CUSTOMER
THREAT OF SUBSTITUTES
PORTER’s
5 Forces
Part THREE
Before Disruption

12. + Strong Brand
+ Trust already built with consumers
and partners
+ Historical holdings
+ Expertise
+ Control of output
+ Distribution channel
+ Controls output
+ Owns distribution channel
+ Alliances
+ Controls output
+ Owns distribution channel
+ Alliances
+ Relationships with foreign
governments
- Cash is dwindling
- Zaire does not renew contract
(1980)
- Argyle insists on right to market
25% of near-gem & industrial
- Sightholders decrease from over
250 to 150
+ Only game in town
+ No substitutes for
diamonds
+ Customs/tradition
+ War
+ Quality of product
- Luxury item / not necessity
- Decreasing retail demand
+ No substitutes for diamonds
+ Cultural history
+ Social issues/status
+ High cost of entry
+ High cost of entry
+ Cornered the market
+ Strong Brand
+ Existing mining and political
relationships
+ Access to new mines
+ Owns distribution channel
- Zaire sells on open market
- Argyle markets its output
BARGAINING POWER OF
SUPPLIER
EXISTING CUSTOMER RIVALRY
THREAT OF NEW ENTRY
BARGAINING POWER OF
CUSTOMER
THREAT OF SUBSTITUTES
Part THREEPORTER’s
5 Forces
After Disruption

13. “Reverse innovation is innovating in poor countries and
selling those products in rich countries”
VIJAY GOVINDARAJAN
Once products are developed for
these markets, they are then sold
elsewhere - even in the West - at
low prices which creates new
markets and uses for these
innovations.
Focusing on needs and
requirements for low-
cost products in
countries like India and
China.
Part THREE
Reverse Innovation

14. Creating Local-Based Cutting
and Polishing Workshop
Synthetic Diamond
• Establishing cutting and polishing
workshop in which the diamonds are
extracted
• The goal is to minimize cutting and
polishing costs which in turn could
increase profit margin for De Beers
• De Beers develops technology to create
synthetic diamond.
• The selling point of De Beer’s synthetic
diamond is the ability for customers to
customize the diamond based on
characteristics, color, and its roughness
• Synthetic diamond is best utilized for
industry
Part THREE
Reverse Innovation
Our Proposal

15. ABER MINING TIFFANY & Co.
DE BEER CUTTING &
POLISHING
LEVIEV
Part FOUR
Business Model
CUSTOMERS
LVMH/
WALMART

16. Conclusion & Recommendation
Part FOUR

17. De Beers was runs a monopoly role+
De Beers had some problems, especially
with the entry of new players (Leviev)
+
De Beers new strategy : stop stockpilling
activity, improve customer relationship,
focus on retailing and marketing
+
Conclusion
Part FOUR

18. Positive Impact of new strategy+
De Beers has more similarities with OPEC
in terms of price maintenance
+
Conclusion
Part FOUR

19. Controling supply chain Vertical Monopoly
Creating a chain of retail stores
include joint venture with LVMH
Transformed its customer relationships
Creating cutting and polishing plan on
local place (create more local jobs)
Focus on retailing and marketing to present
De Beers’ diamonds as a branded luxury item
Recommendation

20. Through CSR (Conflict Diamonds,
Hiv/Aids, Black Empowerement)
Going Private
Patent new technology for manufacturing
low-cost synthetic diamonds
Recommendation