Lev Leviev vs De Beers

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Case Details:

Case Code : ECOA125
Case Length : 13 Pages
Period : 2004
Organization : De beers, Lev Leviev
Pub Date : 2004
Teaching Note :Not Available
Countries : South Africa, Global
Industry : Diamond

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

For about 100 years De Beers, the South African company had been the unchallenged monopoly in the diamonds business. Until a few years back, De Beers could determine who could buy uncut stones, in what quantities and quality and decide which cutting centers would be used.

But its share of the rough-diamond market, 80% five years ago, had reduced to 45% by mid-2004¹.

Meanwhile Lev Leviev (Leviev), a former De Beers sightholder (one of the few exclusive direct buyers of De Beers rough diamonds), had emerged as the world's largest cutter and polisher of precious gems.

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Leviev also provided rough stones to other cutters, polishers and jewelry makers around the globe. Leviev was the diamond industry's first dealer to operate across the value chain from mining and cutting to polishing and retailing.

Frustrated by De Beers' high-handed treatment of buyers, who were offered rough diamonds at take-it-or-leave-it prices and risked being permanently cut off if they resisted, Leviev had decided to operate on his own. Leviev had begun dealing directly with diamond-producing governments. This undermined De Beers' all-important relationship with sight holders...

Excerpts >>

1] "The cartel isn't for ever," The Economist, 17th July 2004, Vol. 372, Issue 8384, pp. 61-63.

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