Lev Leviev vs De Beers (Page 2)

Abstract

South Africa-based De Beers has enjoyed an unchallenged monopoly in the global diamonds business for close to 100 years. Until a few years ago, De Beers determined who could buy uncut stones, in what quantities and quality. De Beers also decided which cutting centres would be used. But its share of the international rough-diamond market, 80% five years ago, has now reduced to 45%. Meanwhile, Lev Leviev (Leviev), a former De Beers sightholder (one of the few exclusive direct buyers of De Beers rough diamonds) has emerged as the world's largest cutter and polisher of precious gems. Frustrated by De Beers' high-handed treatment of buyers, Leviev has decided to operate on his own. Leviev has begun dealing directly with diamond-producing governments, thus undermining De Beers' all-important relationship with sightholders. Leviev is the diamond industry's first dealer to operate across the value chain - from mining and cutting to polishing and retailing. The case discusses the circumstances leading to Lev Leviev's rise and the consequent decline in De Beers' monopolistic power. The case also explains how De Beers is repositioning itself to regain its lost glory.

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ABOUT DE BEERS contd...

In 1999, this amounted to more than 44% of the world's annual output. In the late 1990s, the CSO also bought diamonds worth $120 million from Canada's Ekati mine and another $1.5 billion from Russia, which together made up an additional 25% of the world's $6.8 billion annual diamond production.

De Beers had no interest in polishing the diamonds. It was primarily interested in selling the sorted rough diamonds. De Beers combined rough diamonds, sorted them into 14,000 categories, and divided them into lots. Every five weeks, De Beers held what it called a "sight" and distributed the lots to its 125 partners, known as "sightholders." De Beers set the price in advance and determined the quality and quantity each sightholder received. The sightholders took the rough diamonds back to their factories, cut and polished them and then sold them to their customers throughout the world....'

        Case Code   ECOA125
   Case Length    13 Pages
              Period    2004
 Organization     De beers, Lev Leviev
        Pub Date     2004
Teaching Note    Not Available
     Countries    South Africa, Global
      Industry    Diamond,

Issues             -

Lev Leviev; De Beers; Diamond industry; Sightholder; South African company; Russia; Angola; Cecil Rhodes; Branding diamonds; Forevermark; Tashkent; Namibia; Vivid Collection; South African mining giant; LVMH (Moet Hennessy-Louis Vuitton).

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.