The Management of Global Trade Distribution - De Beers Essay

The Management of Global Trade Distribution - De Beers - Essay Example It was able to exert monopolistic influence among suppliers in the diamond industry to sell their rough diamonds to De Beers’ channel which was then the Central Selling Organisation or CSO which then enabled De Beers to control the global supply of diamonds even if the diamonds did not came from De Beer’s mines (Ziminisky2013). II. De Beers distribution system: Monopoly De Beers is one of the few companies that exerted monopoly in its supply and distribution that it creative a competitive advantage for the company. During its height in 1902, it was able to control an overwhelmingly 90 percent of the diamond industry that it can dictate the price and availability of diamonds (Sehgal 2011). Monopoly exists when a only a single company exists to dominate a certain industry in the provision of goods or services (Milton 2002). Its high price today and its perception of being a valued commodity can be attributed to De Beers’ strategy to justify the increase of the pric e of diamonds because diamonds perse have no practical use and its high price does not reflect its scarcity because its price remains high even if it is in abundance (Yu nd). III. Forms of distribution of De Beers: CSO and DTC De Beers is probably the most successful and biggest monopoly company in the world that virtually operated in almost absolute cartel from its beginning in 1800s until 2001. It was able to establish its cartel like monopoly in the diamond industry when Ernest Oppenheimer achieved a controlling stake in De Beers in the mid 1920s when it expanded into various operations of the diamond industry with the goal of monopolizing its distribution. It did so by influencing suppliers in a multitude of ways to sell its produce of rough diamonds to De Beers’ channel which was then the Central Selling Organisation or CSO which then enabled De Beers to control the global supply of diamonds even if the diamonds did not came from De Beer’s mines (Bergenstock et al 2006). De Beer’s cartel like distribution channel which is the Central Selling Organisation or CSO and later evolved to become Diamond Trading Centers or DTC is probably the most successful monopolistic distribution system in the world. It can basically dictate the entire diamond industry because it can determine what should be sold, when, where and how much. Since it controlled majority of the supply (85% to 90% of the market) through its CSO or DTC, buyers have no choice but to avail diamonds through De Beers’ distribution system of CSO or DTC. To be able to buy diamonds from De Beers’ distribution system, it has to become a member or â€Å"Sightholder† because De Beers only sell diamonds to qualified â€Å"Sightholders† until today. According to De Beer, this event of selling diamonds are known as â€Å"Sights† because, â€Å"during the sales period, [their] customers are able to physically inspect the stones we are offering them before deciding whether to purchase† (De Beer 2012). These customers are selected according the â€Å"Supplier of Choice contract  criteria† (De Beers 2012). In essence, however, these â€Å"Sightholders† are powerless during â€Å"sights† because they have to accept the terms set forth by De Beers where they are not allowed to negotiate and can only accept