Diamond Trading Company Essay Example

Diamond Trading Company Essay Example Diamond Trading Company Essay Diamond Trading Company Essay The biggest slice of the cake A giants first steps Founded in 1888 in South Africa by Cecil Rhodes, De Beers quickly obtained a dominant position in the world diamond market. L In just a few years, Dabbers became the leading many of an international cartel, mostly thanks to Ernest Oppenheim and its heirs. Common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production E. Oppenheim The Diamond Trilogy for success There are 3 main pillars for the maintenance of Deeper dominant position over time: Control of supply through diamond stockpiles Dabbers sales and distribution arm: CSS/ETC L] Marketing and advertisement The Lion and the Gazelle C] In the ass Zaire (DROP) counted for 3% of oral production of industrial diamonds and was member of the De Beers cartel C] The country asked for a lower a handling fee, requests were refused and in 1981 Zaire left the CSS C] Two months later the market was flooded by diamonds and the price fell dramatically. C] Hit by the shortage of foreign currency Zaire asked to be admitted again in the cartel. C] Of course De Beers imposed worse conditions C] There is no formal proof that it was De Beers, but only De Beers had the power to act in this Way. Financial Hurricane from Israel Alan asses, Hyperinflation in Israel and Merchants wanted to hoard up diamonds for selling them later. Vivid < PDViD C]To stop dealers from breaking away from its cartel, DeBeers: - Created temporary surcharge. - Cut Israeli dealers' quota by 20%. - Dismissed them from the CSO CIAs a result, Israeli dealers again conceded to DeBeers contract and paid a defection fine. C]Thus the DeBeers cartel was strengthened. From Russia with love (... and return) Why is Russia so important? Large quantities of diamonds discovered in Russia in 1957: it became the most powerful single producer utside the cartel (20-30% of world's production) Therefore DeBeers was seriously under threat L] Quickly negotiated an agreement (Mirny Diamond Mine, discovered in the late 50s) Act l: The Secret Agreement The estimated terms of the contract were: Cl DeBeers committed to purchase 95% of Russian output and trade it with CSO C] Soviet Diamond Industry was allowed to cut, polish and sell the remaining 5% autonomously. C] Russian diamonds were paid a price 10% higher than general cartel price.