DeBeers Case Study
The issue of synthetic diamonds is a valid concern for DeBeers since with increasing technological refinement; ‘lab-grown’ synthetics have become harder to differentiate from mined diamonds (Grynberg et al. 251). This makes it easier for the synthetic gems to get into the natural diamond’s market and sold as the original. The best quality synthetics are created through a laboratory process known as Chemical Vapor Deposition (CVD). These synthetics are harder to identify and can only be recognized through the utilization of advanced spectroscopic techniques. As a consequence, diamond dealers are faced with a verification problem that makes them more careful in their dealings with the entities they source their diamonds. The concern for DeBeers is driven by the fear that the synthetics from unethical producers or dealers can be marketed in sufficient quantities to affect their sales.
Another concern for DeBeers arises from the increasing perception that the mined diamonds are mined using inhumane, and unethical practices. ‘Blood diamonds’ mined from conflict areas, can in many cases be the cause of untold suffering and death for the communities near the areas they are mined (Schlosser 161). Environmental degradation is also a common consequence of diamond mining. Human rights bodies and environmentalists opposed to unethical mining practices used to source natural diamonds, highlight these shortcomings. These concerns drive the customer appeal for natural diamonds among the conscious potential buyers down affecting their appeal in the market. At the same time, the synthetic substitutes get marketed as better alternatives devoid of human, environmental, and political costs. The fact that the synthetics are almost identical to the mined diamonds becomes a serious consideration for customers wishing to purchase diamonds (Schlosser 162).
To counter these concerns, DeBeers and the natural diamonds industry in totality need to observe better ethical practices. ‘Proof of origin’ certificates, to ascertain that products sold are from reputable mines and are conflict free should be issued, as a standard. At the same time, DeBeers and the diamond mining industry has failed to adequately publicize the positive impact the diamond mining industry has on people and economies of producing countries. Publicizing the positive impact of diamond mining on countries like Botswana that have a significant portion of their GDP funded by diamond mining, would help to improve the diamond mining industry’s image (Grynberg et al. 254).
The market demand for status goods such as diamonds is driven by perception (Schlosser 163). Consumers of these commodities empower these goods through a subconscious process where they assign commodities like diamonds with a symbolic value that is subsequently projected onto the ownership of such commodities. The value assigned to diamonds is mostly proportional to their rarity and perceived value (Schlosser 163). This means that naturally formed diamond will always be perceived to hold more value to the customers compared to the synthetic substitute. This gives DeBeers a marketing advantage since the ethical producers of synthetic diamonds have to declare their products as being ‘lab-grown.’
DeBeers can rely on having their products retaining a perceived higher value compared to the lab-grown diamonds and should ensure this is reflected in the marketing of their products (Richman). The strategic marketing of lab-grown diamonds has ensured their products are seen as being produced in an environment free of negative political, human, and environmental costs. This strategic marketing has managed to grow their market while creating an implied negative image for mined diamonds that effectively reduces customer preference for mined diamonds (Grynberg et al. 253).
The production of synthetic/lab-grown diamonds is however not as cheap as their labeling implies. The ‘synthetic’ label will always serve as a qualification that distinguishes these diamonds as ‘inferior’ to the natural diamond. That is a challenge for the synthetic producers since the ‘synthetic’ connotation creates an expectation for much lower prices than is the reality. Market pricing comparisons indicate that the price variation between the synthetic and natural diamonds in the market has never gone beyond 15% (Richman). The implementation of more transparency in the operations of DeBeers would help to demonstrate to the public that their products are produced ethically. This strategy would help to convince the market that the industry is not as ‘evil’ and unethical as it is commonly held to be. DeBeers is one of the largest players in the diamond mining industry and as such cleaning up its public image would translate to an improved image for the whole industry. A continued association of the industry with unethical conduct could irreparably harm the marketability of mined diamonds, as it happened to the once valuable mink fur industry.
Grynberg, Roman, Margaret Sengwaketse, and Masedi Motswapong. "Synthetic Gem Quality Diamonds and their Potential Impact on the Botswana Economy." The Global Diamond Industry. Palgrave Macmillan UK, 2014. 251-290.
Richman, Barak D. "An Autopsy of Cooperation: Diamond Dealers and the Limits of Trust-Based Exchange." Available at SSRN 2764470 (2016).
Schlosser, Kolson. "Regimes of ethical value? Landscape, race and representation in the Canadian diamond industry." Antipode 45.1 (2013): 161-179.
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