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De Beers

De Beers. A Diamond is forever. Introduction – The De Beers Group. 45% by value of the total annual global diamond production is produced by the DB-Group & its partnerships with the governments of Botswana and Namibia. Introduction – The De Beers Group.

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De Beers

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  1. De Beers A Diamond is forever

  2. Introduction – The De Beers Group 45% by value of the total annual global diamond production is produced by the DB-Group & its partnerships with the governments of Botswana and Namibia.

  3. Introduction – The De Beers Group Until 2001 DB concentrated on supplying its diamonds to brand manufacturers, such as Cartier.Core business was the mining and marketing of diamonds.“De Beers” is a very well known Brand Supply and distribution chain: Central-Selling-Organisation 75 % of the world’s diamonds pass through the CSO to cutters and brokers (43 % through own mines and 32 % through other producers)

  4. Regional Share of Retail Market 2003

  5. « A DIAMOND IS FOREVER » • High positioned product • Perpetuate the myth that diamonds are scarce and should command high prices • Maintained hight price stability

  6. The Change in 2001 / forward integration The DB-Group decided to make a Joint Venture together with LVMH Moet Hennesy – Louis Vuitton and created the company “De Beers LV”.“De Beers LV” should be a combination of diamond expertise and style.The first two retail stores opened in London and Tokyo in 2002 to bring their products to the End-Consumer

  7. Case-Study Questions • What could be De Beers` motives for making this “forward integration” into retail and consumer market? • Is it a wise decision? • How should De Beers develop its Internet strategy following this “forward integration”? • Would it be possible for De Beers, with its branded diamonds, to standardise the international marketing strategy across borders?

  8. Q1: Motives for forward integration: • De Beers controls yet the production thanks to its cartel: Central Selling Organization (CSO) • With the joint venture De Beers LV, it can control the retail of its production, and therefore the whole channel.

  9. Q1: Motives for forward integration: • De Beers seeks control of its business of the wholesale and retail levels of the channel. • This vertical marketing system, allows a real channel stability.

  10. Q2: Is it a wise decision? • Advantages > • Direct contact with the end consumer • Control of the whole retail & distribution channel • More revenue through higher Mark-up (from Mine sales to Retail sales the value of 0.5 carat rises from 100 $ to 920 $ • Stores in Countries where the retail share of the DB-Group is only 10 %, makes them more competitive in these areas.

  11. Q2: Is it a wise decision? • Disadvantages > • The CSO could lose Power • Stakeholders have more influence on their business Recommendation Stores only in countries with low share in retail market Because of products nature only a few stores

  12. Q3: Internet Strategy? • Take advantage of their strong brand name • De Beers = credibility consumer confidence online

  13. Q3: Internet Strategy? Six step process: • Integration • Maintain strong image of QUALITY • Cross-promote their online services in print and brochures to encourage online traffic to their site • Create unique design requirements • Easy to use (and design jewellery) = major draw to for users • Attractive design that highlights the beauty of diamonds

  14. Q3: Internet Strategy? Six step process: • Implement techniques for audience creation • Use strategic “linking” from wedding or beauty websites • Advertising on the site • Although DeBeers will want to maintain an “upscale” image, they could benefit from: • Banner advertising: For honeymoon packages, wedding invitations, flower delivery etc.

  15. Q3: Internet Strategy? Six step process: • Use effective promotions that attract attention • Contests: Win a £10,000 wedding ring if you register online etc. (contest could be worldwide) • Audience qualification: • Who are the DeBeers visitors? • How long on they on the website? • What percentage of visitors return? • How many of these become customers?

  16. Q4: Possibility to standardise the marketing strategy Standardization vs. differentiation of the marketing strategy • Standardization is possible: • Prices do less depend on production costs • less competition (as 75 % of the diamond supply market is controlled by CSO) • Positioning does not differ depending on country - the perception of the customers is equal globally • A diamond is a luxury good and therefore a complex product • But: • attention must be paid on the size of the retail outlets, e.g. US focus on large retail outlets, while Japan prefers more but smaller stores

  17. Q4: Possibility to standardise the marketing strategy Standardization vs. differentiation of the marketing strategy • The product is already standardized and the promotion should be too • same target group worldwide – people who are able and willing to spend on high luxury goods Conclusion: by connecting the good names De Beer and Louis Vuitton, which are both well known as high quality products worldwide, it is definitely possible to create a standardized marketing strategy for luxurious De Beers LV products

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