Has The De Beer Diamond Lost I :: essays research papers

"And eyepatch the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the natural selection of the fittest in every department."-Andrew Carnegie Since the 1930s when Sir Ernest Oppenheimer established the Central sell Organisation, De Beers merge Mines have inhibitled the selling and marketing of approximately 80% of the worlds rough rhomb production (Capon, 1998). However, in 1996, Australian company, argyle, stunned the world by announcing that they would no longer market diamonds through De Beers C.S.O. Many economists predicted that Argyle wouldnt be able to compete against the mammoth De Beers. Yet in the year to December 31, Argyle recorded a profit of $142.5 million, an gain of 76% (Treadgold, 1999). De Beers is currently looking like losing the monopoly it has had on the diamond manufacturing for almost seventy years.A monopoly is an manufacturing in which there is exactly one organisation that supplies a particular good, service or option which has no another(prenominal) similar alternatives. Monopolies are created by barriers which restrict the entranceway of new organisations (McTaggart et al, 1999). In a perfect monopoly, the seller has total control over the quantity of goods or services available for sale and the monetary value at which the items are sold (Butterworths Business .. Dictionary, 1997). De Beers Consolidated Mines Central Selling Organisation has had a monopoly on the selling of rough diamonds since the 1930s.A monopoly industry is characterised by having no close substitutes. Although there are substitutes for diamonds such as rubies, emeralds and cubic zirconias, many believe that there are no other gems that exhibit the same beauty of the diamond. Perhaps this belief was created out of De Beers advert campaign, A Diamond is Forever (Capon, 1998, pg 6) which began in 1947. Whatever the reason that consumers essential diamonds, and diamonds only, doesnt mat ter. Consumers demand the real thing and will pay for the luxury.The bet on factor which creates a monopoly market are barriers to enter the market. Common barriers to ingress include licenses, patents, entry lags, economics of scale and control of inputs (Browning & Browning, 1989). run of inputs is the factor that constricts entry into the diamond industry. De Beers Consolidated Mines of South Africa, through its self-control of mines and its central sales organisation, controls 85 percent of the worlds diamond output (Browning & Browning, 1989, pg 330).