To what extent is de beers diamond company responsible for the pricing of diamonds today

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To What Extent Is De Beers Diamond Company Responsible For the Pricing of Diamonds Today.
Diamonds have been one of the most precious stones for centuries. One of the factors that make diamonds exclusive from other types of gem colored gem stones is its price. For years, diamonds have retained their reputation for constant unimaginably high prices in the market. There are many reasons that have been given to explain this extra ordinary value of these stones in different contexts.
Most people claim that the diamonds have retained their value not just because of their magnificence but because of their rarity in existence. Is it true that these stones are rarely found even in its most recognized mines? It is evident from many experiences that whenever there is something of such big value, there are always a certain group of people who have the highest claim and control over the commodity. The de Beers diamond company is one of the companies that have controlled the diamond business and market for a long time.
The de Beers company was formed back in the 19th century by Cecil Rhodes who managed it and gained much control of the South Africa’s diamond mining and trade market. The company was taken over in the 20th century by Oppenheimer after Rhodes’ death. The de Beers company has used different methods over the years to ensure that they retain the ultimate control over the diamond market in bother perspectives of mining and supply. Although many other companies have erupted to give de beers competition, it still controls the market prices for most types of diamonds.

How De Beers Controls the Market Prices for Global Diamonds
It is clear that the value of diamonds has been retained at an absolute high since the first impression of the magnificent stones in the market. This shows that the prices and the value of the diamonds are still being controlled by the same force that controlled it in the earlier centuries, which is the de Beers company. The company has managed to use the following methods to ensure that it retains the high prices for the commodity and hence high profits.
Operating as a Market Monopoly. Monopolies are mostly the stakeholders who control the whole market or almost the whole market for a commodity. In most market environments, it is usually easier for the monopolies to control the prices of the commodities since they almost make sole crucial decisions about the supply of the product. The de Beers diamond company has managed to establish a monopoly in the market since it was created. The company has merged other smaller and rival company under its wing to prevent any major market rivalry in the industry. As a result, it has always remained as the world’s strongest layer in the industry since it controls and supplies over 50% of global diamonds. With this large share of the market, the company has had the privilege to make determining decisions regarding the value of the commodity for centuries. Although other rival companies are still coming up, the domination of the de beers in the industry has forced them to operate under the already existing market principles set by the de beers (Carbaugh 114 – 115).
Maintaining Shortage in Supply of the Commodity in the Market. The supply of any commodity in the market is one of the essential factors that determine its price and value. As explained earlier, it is clear that the high value of a diamond is mostly associated with its shortage in supply across the globe. However, according to research, it is clear that diamond is in fact among the most available stone among all the other types of colored gem stones. The question always remains to be the cause of the tremendous shortage of the commodity in the market. The de Beers are the ones who are responsible for the shortage in supply of the diamonds across the world. De Beers desire to control the supply of diamonds to ensure higher profits has not started recently. One of the core reasons for the establishment of the de Beers company was to ensure that all the huge quantities of diamonds produced did not fall in the market from the local producers. That is why the company formed an agreement with the local producers so that it can control its supply. The company also evidently exhibits its desire to reduce the supply of diamonds and increase the prices during the great recession period. The company shut down two of its major mining fields to reduce the influx of the commodity into the market and increase the prices (Liebroder et al. 132 – 135).
Aggressive Marketing. Marketing is one of the strongest tools for the development of any product in the market. Marketing helps to create the desired impression of the supplier to the consumers to achieve various objectives. Due to the monopolistic characteristics of the de Beers company in the diamond industry, it has also played the largest part in the advertisement of the product across the high quality and rarity to ensure that the consumers agree with the high price concept. To create a high valued market for the commodity, the company enhances the production of diamond products that are mostly meant for the rich such as expensive engagement rings and Royal Jewellery. The company’s immense power of advertisement has helped to maintain a high standard social class for diamond products and its consumers ensuring that the diamond prices remain high (McAdams & Reavis 2 – 15).
Conclusion
The long history that the de beers company has in the diamond industry makes it difficult for any other rival companies to overtake its influence. This shows that the company will continue to control the diamond prices for the coming decades even centuries. However, it is clear that the high prices of the diamond and its products are not as a result of rarity, it is rather caused by the solid strategy instilled by the de Beers company to ensure a shortage of supply and maintain the high value of the product. It is, however, the responsibility of the whole global trade society to initiate monopoly principles that would prevent sole monopolies such as the de beers from controlling essential aspects of the commodities such as the prices without the decisive intervention of the other companies. This can be achieved by ensuring that the merged companies under the de beers company are independent players in the market to provide adequate competition. Supply quotas can also be issued to all the major producers of the commodity to ensure that no single player has a majority say in the supply of the commodity.
Works Cited
Carbaugh, R. Contemporary Economics: An Applications Approach. New York: Routledge. 2016, Print.
Liebroder, D.A. E.S.P.: Extraordinary Selling Principles. New York: Authorhouse. 2012, Print.
McAdams, D & Reavis, C. DeBeers’s Diamond Dilemma. MIT Sloan Management Article. 2008,Print.