De Beers Consolidated Mine Ltd. Essay

997 Words Oct 1st, 2012 4 Pages
1. What functions does the CSO perform as a global intermediary? How does these functions help expand the economic pie in the diamond industry?
Around 1930s De Beers bought up their bankrupted “single” consumer, London syndicate, and named it De Beers central selling organization (CSO), which was helping out De Beers as its:
• Wholly-owned distributor. CSO controlling around 80% of the world’s diamond supply. This strategy controlled De Beers’ vast supply and enabled to maintain its prices high. Such as, if a competitor offered diamonds on the market outside CSO, De Beers would be flooded the market with its diamond inventory. As De Beers’ main distribution arm, CSO continued to influence market’s supply and demand, and to purchase
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3. Should De Beers pull the plug on the CSO’s stockpiling strategy? Depending on your answer what specific actions would you recommend? 1. Stay the course, why? 2. Cut offtake, why? 3. Cut price, why?
Our group suggested the CSO should pull away their stockpiling strategy, mainly because of the volatility of the diamonds industry and slumpy retail demand condition. Also, sooner or later this centralization strategy could be harmed and weaken De Beers when other threats unexpectedly happened, such as when new mining cartel was discovered thus changed the demand-supply system again, or when there was a nation’s internal problem (such as war, government law) that could weaken the partnership between both parties, and so on. Market demand constantly unpredictable, due to the dynamically changed of consumer’s need and environmental changes; demand for diamonds would be dropping at a time when demand for other luxury goods was increasing and shifting, such as gold, jade gems or cars. These events and situations would be abruptly changed the market share of De Beers and its control in diamond’s demand and supply.

De Beers had to keep innovate their strategy to continuously respond the external environment, such as vertical integration on their business line. As we knew that CSO was only selling

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