De Beers-Monopoly Power
De Beers is a diamond company with the diamond mines based in Africa. They were founded in1888 by Cecil Rhodes. De Beers has enoug
h power in its market to be a price maker. They own 80% of the world’s population of diamonds. Diamonds the most valuable stone and have close substitutes in emeralds, bubies and sapphires. However, diamonds are still in the class above these.
Raising the price of diamonds would not affect the demand too much as they are seen to be a luxury good. This is helped by De Beers large advertising campaign ‘a diamond is forever’. Differentiating diamonds from other gems
Diamonds are cheep to produce but because De Beers operate a cartel they are high in price.
De Beers and associates buy rough diamonds and sell them to sight holders
De Beers antidote against new entrants into the market is to release their stockpiled diamonds on to the market, lowering the price of diamonds to a level at which the new entrant doesn’t find profitable; this is a barrier to entry.
They also benefit from economies of scale,; the large amount of mines they own allow them to mine large amount of diamonds and the transport costs per diamond decreases.
De Beers is a diamond company with the diamond mines based in Africa. They were founded in1888 by Cecil Rhodes. De Beers has enoug
h power in its market to be a price maker. They own 80% of the world’s population of diamonds. Diamonds the most valuable stone and have close substitutes in emeralds, bubies and sapphires. However, diamonds are still in the class above these.Raising the price of diamonds would not affect the demand too much as they are seen to be a luxury good. This is helped by De Beers large advertising campaign ‘a diamond is forever’. Differentiating diamonds from other gems
Diamonds are cheep to produce but because De Beers operate a cartel they are high in price.
De Beers and associates buy rough diamonds and sell them to sight holders
De Beers antidote against new entrants into the market is to release their stockpiled diamonds on to the market, lowering the price of diamonds to a level at which the new entrant doesn’t find profitable; this is a barrier to entry.
They also benefit from economies of scale,; the large amount of mines they own allow them to mine large amount of diamonds and the transport costs per diamond decreases.
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