CASE STuDy 16.1 De Beers: forward integration into the diamond industry value chain

De Beers is a private holding company engaged in the exploration, mining and marketing of diamonds. The company primarily operates in Africa andmarkets its products across the globe. It is headquartered in Johannesburg, South Africa, and employs nearly 13,500 people. In the 2010 financial year, the company recorded revenues of uS$5,877 million and operating profits of uS$478 million. Since the late 1800s, the South African multinational De Beers (www.debeersgroup.com) has regulated both the industrial and gemstone-diamond markets and effectively maintained an illusion of diamond scarcity. It has developed and nurtured the belief that diamonds are precious, invaluable symbols of romance. Every attitude consumers hold today about diamonds exists - at least in part - because of the persistent efforts of De Beers. Moreover, by monitoring the supply and distribution of diamonds throughout the world, De Beers has introduced and maintained an unprecedented degree of price stability for a surprisingly common mineral: compressed carbon. Such unique price stability lies within the cartel's tight control over the distribution of diamonds. De Beers' operating strategy has been pure and simple: to restrict the number of diamonds released into the market in any given year and to perpetuate the myth that they are scarce and, therefore, should command high prices. ETC

QUESTION

1. What could be De Beers' motives for making this 'forward integration' into the retail and consumer market?

2. Is it a wise decision?

3. How should De Beers develop its internet strategy following this 'forward integration' strategy?

4. Would it be possible for De Beers, with its branded diamonds, to standardize the international marketing strategy across borders