Because of turmoil which the company was facing on all fronts: illegal flow of diamonds from Sierra Leone and Angola, Russias diamond fiefdoms, etc; the formerly closely-held corporation had to undergo some rapid changes. De Beers contemplates an innovative branding strategy and started to emphasize their name in advertisements. This movement has brought great effect to both customers and De Beers. Especially, De Beers got out of its financial problems. If De Beers enters the market it will have to face the American antitrust law and pay fines. If the potential gains from entering the American market are bigger than expenses measured in terms of fines than De Beers should be legally represented on the American market.
1. Briefly explain why some governments are concerned with monopolies. Monopoly, means that a firm is sole seller of a product without any close substitutes, controls over the prices the firms charge.
During the 111 years of its existence, De Beers spent less than 1 of sales revenue on advertising and they did not advertise its own products. This caused the brand name had shied away. De Beers tries to remove substitutes for its product and to make it unique in order to increase its market power. The possible substitutes for diamonds can be emeralds, rubies and sapphires. 4. What are the future challenges for De Beers? How should the company react to those challenges? The time has come for De Beers to make new movements. Although De Beers control of the worlds rough diamond production dropped from 80 to 60, the company continued to follow its traditional business model, which was creaking badly due to stockpile of.
There might be possibilities to extend the business creating a luxury store or high-end fashion accessories. The main challenges for the company now are the flow of diamonds and increase of its production from other countries (for example, Russia, Australia the development of new technology which can increase the quality of diamonds produced by other companies and, therefore, increase competition.