Wednesday, January 28, 2009

Even cartels need a strategy

DeBeers strategy of supply control is no longer working.
By the end of the 1990s, the business model of controlling supply and managing how much of its inventory went to market at any time was no longer effective: New sources of diamonds were discovered in sufficient quantity that they could be sold competitively outside of De Beers' central selling organization. Demand for diamonds was dropping at a time when demand for other luxury goods was increasing. Brand-conscious consumers viewed the stones as anonymous commodities, and the precious stones, long marketed as an emblem of eternal love, became tainted by the phrase "blood diamonds" and came to symbolize the ill-gotten gains of rogue governments.
So they are trying to stimulate demand:
Under its "Supplier of Choice" program, De Beers had the goals of stimulating diamond demand by 5% per year; improving the efficiency and margins of all De Beers operations, from mining to sales; and leveraging the De Beers brand by offering De Beers-branded jewelry directly to consumers.

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