De Beers and the Global Diamond Industry
Analyze the De Beers case study and write paper in which you respond to one or more of the questions listed below (see “Questions to Consider”) .
Questions to consider:
1. Discuss the potential profitability within each of the stages in the diamond value chain, indicating how recent forces have changed the potential profitability. For each stage in the chain consider the following questions:
How intense is the competition and what is the industry structure in each stage?
How substantial are the barriers to entry?
What is the likelihood of substitutes being developed?
What is the bargaining power of suppliers?
What is the bargaining power of buyers?
2. Describe the key mechanisms De Beers used to manage the value chain in the past? Did De Beers increase profitability for all participants, and did it increase consumer satisfaction above the levels that might have existed without De Beers’ leadership? Were De Beers’ activities good for everyone?
3. Analyze the most important new forces that limited De Beers’ ability to control the value chain?
4. Discuss the role of governments in altering the industry structure. Include in your discussion the role of competition policy and antitrust agencies.
5. Evaluate the decision of De Beers to adopt its new strategy. Will the new role be better for De Beers? Will the new role be better for society?
6. Is the diamond industry structure unique in the opportunities it offers for collusion and price maintenance? Compare De Beers’ market leadership with that of the Organization of Petroleum Exporting Countries (OPEC) in the oil sector, or Wal-Mart in the retail sector. Are there lessons that other business sectors can learn from De Beers?
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