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DeBeers Diamond Dilemma
DeBeers is facing a significant threat with the entry of synthetic gems. In particular, competition for synthetic diamond has been the most intense. Synthetic diamond appeals to people based on its many qualities such as different colors as well as price. Additionally, compared to a growth of less than 15% for natural diamond, the lab-prepared diamond’s market grows by upwards of 90% annually (McAdams & Reavis, 2008). This competitive trajectory implies that DeBeers needs to re-strategize and become innovative by looking at technologies that can enable it to produce colored diamonds at reasonable prices to maintain the existing clientele.
As the industry stands now, the entry of diamond makers such as Adia Diamonds and Chatham Created Gems has led to the reduction in the market share of the traditional diamond powerhouses such as DeBeers. The industry is also exploring other areas where the diamond product can be used like in substituting heat-sensitive silicon (McAdams & Reavis, 2008). The natural diamond is exorbitantly expensive to be used in such activity; therefore, the synthetic product has an edge. On the other hand, organizations are increasingly adopting eco-friendly and sustainable modes of production. Such methods aim at preserving natural resources. Organizations that have adopted such strategies have an advantage, and DeBeers must consider such moves.
In as much as the current state of the diamond industry does not seem to be a direct and significant threat to the more traditional natural diamond industry, DeBeers and other players need to rethink their approach. DeBeers has been known to focus on the mined gems exclusively, but it has shown a significant degree of versatility to deal with challenges, such as moving from only buying to adding value, marketing, and selling its products. Therefore, the company should consider research and investment in technology to reduce the cost of production and ensure that it can get a share of the market that targets less affluent individuals who want diamond but cannot afford it, which is currently exclusively under the wraps of the synthetic producers.
It will also be essential to diversify so that when the natural diamond industry suffers then the company can have alternatives. Chen et al., (2018) argues that diversification helps in the spreading of risks. As such, DeBeers can stop looking at the synthetic industry with contempt and investment in the synthetic diamond industry considering the organization’s financial muscle. Consequently, it can put money into this business and ensure that it attracts customers from different segments of the market. With the current success in the synthetic diamond industry, the organization can explore this market so that when cultured diamond reaches similar heights as cultured pearls (95% of all pearls sold globally), then the company is not left behind. From a consumer’s point of view, I would still buy the mined diamond because of the value attached to it, especially if I was buying it as a gift for someone. Even though people have environmental and political concerns, individuals feel appreciated if they get expensive gifts.
References
Chen, C. J., Guo, A. R. S., Wang, S., & Lin, Y. H. (2018, July). Power Distance Diversification and Business Group Performance: A S-Shaped Hypothesis. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 10091). Briarcliff Manor, NY 10510: Academy of Management.
McAdams, D., & Reavis, C. (2008). DeBeers’s Diamond Dilemma. MITSloan Management.
Schaltegger, S., & Wagner, M. (2017). Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.
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