Assignment 3: De Beers and the Global Diamond Industry

Assignment 3: De Beers and the Global Diamond Industry

Due Week 6, Day 7 (120 points)

Analyze the De Beers case study and write a 3-5 page paper in which you respond to one or more of the questions listed below (see “Questions to Consider”) .

Questions to consider:

1. Discuss the potential profitability within each of the stages in the diamond value chain, indicating how recent forces have changed the potential profitability. For each stage in the chain consider the following questions:

• How intense is the competition and what is the industry structure in each stage?
• How substantial are the barriers to entry?
• What is the likelihood of substitutes being developed?
• What is the bargaining power of suppliers?
• What is the bargaining power of buyers?

2. Describe the key mechanisms De Beers used to manage the value chain in the past? Did De Beers increase profitability for all participants, and did it increase consumer satisfaction above the levels that might have existed without De Beers’ leadership? Were De Beers’ activities good for everyone?

3. Analyze the most important new forces that limited De Beers’ ability to control the value chain?

4. Discuss the role of governments in altering the industry structure. Include in your discussion the role of competition policy and antitrust agencies.

5. Evaluate the decision of De Beers to adopt its new strategy. Will the new role be better for De Beers? Will the new role be better for society?

6. Is the diamond industry structure unique in the opportunities it offers for collusion and price maintenance? Compare De Beers’ market leadership with that of the Organization of Petroleum Exporting Countries (OPEC) in the oil sector, or Wal-Mart in the retail sector. Are there lessons that other business sectors can learn from De Beers?

The specific course learning outcomes associated with this assignment are:

• Evaluate internal and external risks an organization might face.
• Understand the role of government in a market economy.
• Use technology and information resources to research issues in managerial economics.
• Write clearly and concisely about managerial economics using proper writing mechanics.

Your assignment must follow these formatting requirements:

• Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required page length.

Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills, using the rubric.