Assignment 2 - Evolution of the Diamond Industry Flashcards
What were the first important South African diamond discoveries?
Abundant South African diamond sources appeared in the late 1800s, just as diamond demand broadened. The diamond rush began with the discovery of the Star of South Africa in 1869.
What were the conditions like in the early mining towns?
Early South African diamond fields contained hundreds of small, individually owned and operated claims.
How did Cecil Rhodes gain control and establish De Beers?
Cecile Rhodes wanted to stabilize diamond prices by controlling production. He established De Beers Consolidated Mines Ltd. in 1888.
A direct, centrally controlled marketing route for rough diamonds
Single-channel marketing
An agency designed to purchase, sort, evaluate, and sell rough diamonds
Central Selling Organisation (CSO)
An independent diamond prospector
Digger
A prospector’s term for diamond deposits away from water
Dry diggings
A group of diamond merchants that united in 1890 to buy and sell rough diamonds
London Diamond Syndicate
How did De Beers gain influence over the diamond market?
By working with the London Diamond Syndicate on the demand side and by buying diamond rough from other producers to control supply.
How did De Beers maintain its operations during the Depression and World War II ?
During the Depression De Beers acquired bankrupt mines.
During World War II the demand for industrial diamond rough increased.
How did the concept of single-channel marketing contribute to De Beer’s growth?
CSO controlled the sale of diamond rough, while DIC was responsible for public relation and DPS for promotional activities.
What kind of ownership arrangements did De Beers make with major mines worldwide?
De Beers had full or partial control of many mines, and bought rough from others through purchasing contracts.
What route did diamonds take from the mine to the wholesaler?
The diamonds followed the so called “diamond pipeline”:
- The mines sold the rough to the CS
- The CSO sorted rough into categories based on size, shape, clarity and color
- From there it went to CSO stockpile or to the cutting centers.
How did the CSO’s wholesale system operate?
At a “sight” the CSO presented a customized selection of diamonds to each sightholder for acceptance.
How did political changes affect the modern diamond industry?
The early twenty-first century brought dynamic changes to the global diamond market.
The path diamond followed from the mine to the consumer
Diamond Pipeline
Trading event where selected clients buy rough diamonds.
Sight
A diamond manufacturer or dealer invited by De Beers to buy rough diamonds
Sightholder
A rough diamond over 10.80 cts, sold separately to a sightholder who specialises in larger stones.
Special
What is an upstream segment of the diamond value chain?
Mining & Sales
What led to De Beers’s control of the diamond trade?
What describes large-scale mining companies that lead the industry?
Majors
Where does the physical trade of rough for long-term contracts take place?
Sights
Where were the first diamonds discovered?
India
When was the first diamond rush in South Africa.
1870s after the discovery of the Star of Africa.
Which source countries dominated the early history of the industry
India (Golconda) and Brazil
How did diamond become the number one engagement ring?
By De Beers’ global campaign.
How did the concept of single-channel marketing form?
Through centralized control of rough diamond supply, buying, marketing and sales.
What are the different segments of the global diamond value chain
- Mining
- Sorting & Distribution
- Cutting & Polishing
- Manufacturing & Trading
Who are the major players in each value chain segment?
Mining: ALROSA & De Beers
How do value chain economics work?
Upstream segments (Mining) has the highest risk and rewards –> few players
Downstream: lower risks, more players.
Activity that adds something to a product that increases its value for consumers.
Value-adding process
Diamonds that meet certain criteria to be used as gems in the jewellery market
Gem-quality diamonds
Diamonds designated for industrial use
Industrial diamonds
A form of industrial-grade diamond that usually occurs as very included single crystals in a range of yellows, grays and browns
Bort
A membership-based entity that provides service and venue to facilitate diamond trading
Diamond Exchange
Which markets drive demand for diamond jewelry
US, China
Who are the new consumers of diamond jewelry?
New Generations
What do jewelers need to do in the new era of marketing
Using new channels like Social Media and Internet.
What are the sales channells for diamond jewelry?
Retail & Online
What best describes the diamond value chain?
A. Chain of branded jewelry
B. Series of segments and practices
C. Multiple rough diamond suppliers
D. All involved in the industry
B. Series of segments and practices
Where did the diamond industry first start?
India
What distinguishes the concept of a single-channel marketing strategy?
A. Vertical integration
B. Local management
C. Secondary market
D. Central control
D. Central control
What is the main sales method for rough diamonds?
Long-term contracts
