De Beers

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Q1. What does exhibit 1 tells us?
First of all, it tells us that the inventory strategy is consistent regardless of how CSO sales and overall profit from operations perform. This strategy was launched so that the De Beers could control demand and prices. Evidently it also shows that the 1980’s bust is a low peaking point for De Beers, as inventory levels for the first time is significantly higher than OP and CSO SALES.
Q2. Please briefly talk about the recent boom-and-bust
The 1970s were a turbulent time for the diamond market, which saw the growth of inflation that led to speculation and hoarding in the rough diamond market. Eventually, the drastic increase in interest rates to the diamond trade coupled with falling retail demand burst the diamond bubble, which led many industry players to go bankrupt. As a result, several producer countries were reconsidered their relationship with De Beers’ CSO, also leading to the expansion of the economic pie of the diamond market.
Q3. Please briefly talk about De Beers and the problems to be solved.
For most of the 20th century, maintaining control of world rough diamond output was possible through political or coercive means, or through their raw buying power. However, the CSO eventually started losing control of supplier nations, for example Zaïre, who in 1981 decided not to renew its contract with De Beers. Since 1980, competition also increased due to the growing number of diamond suppliers on the market. The appearance of these powerful actors, including BHB Billiton, Alrosa and Rio Tinto eventually called into question the continued feasibility of DeBeers’ monopoly strategy. In general their biggest problem is the enormous amount of control that they have to assert in order to keep their current strategy. By aiming to, constantly satisfyieing all stakeholders or controversially begin to vertical integrate new processes into the De Beers.
Q4. What does Exhibit 4 tell us? Is De Beers a quasy-monopsony (single

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