Lev Leviev vs De Beers
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Case Code: ECOA125 Case Length: 13 Pages Period: 2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.300 Organization : De beers, Lev Leviev Industry : Diamond Countries : South Africa, Global Themes: - |
Abstract Case Intro 1 Excerpts
Excerpts
About De Beers
For most of the 20th century, De Beers sold 85% to 90% of the diamonds mined worldwide. With this monopoly, it could artificially keep diamond prices stable by matching its supply to world demand. The De Beers legacy was more than 100 years old. In 1888, Cecil Rhodes successfully consolidated South Africa's diamond mines, laying the foundation for De Beers. He formed a cartel with the ten largest merchants. Each was guaranteed a certain percentage of the diamonds coming out of De Beers' mines. In return, they provided Rhodes with market data, enabling him to ensure a steady, controlled supply...
About Leviev
Leviev, De Beers' challenger had grown up in the Uzbek capital of Tashkent. Despite the prevailing communist rule, his family was committed to Jewish religion and values. Leviev's father was a successful textile merchant and a collector of rare Persian carpets. The family immigrated to Israel in 1971, having converted their wealth into rough diamonds worth $1 million...
Russia
Leviev's friendship with Putin dated back to 1992, when the president, then a deputy mayor in St. Petersburg, authorized the opening of the first new Jewish school in the city (financed by Leviev) in half a century after the mayor hesitated to do it. Leviev had nurtured the relationship with Putin, brokering meetings for the first time between the new Russian president and prominent Israeli politicians. But he avoided being identified with the "Family," a group of business tycoons who tried to convert their economic influence into political power...
Angola
The world's third-largest producer of rough diamonds, Angola had emerged as a strategic market for Leviev, who had taken advantage of De Beers' problems there. Angola mined diamonds worth $600 - $800 million each year, making it the fourth-largest producer (in value terms), in the world. One-fifth of the production came from the country's only mine, Catoca...
Namibia
Namibia was another country rich in diamond reserves. De Beers had been mining there since Ernest Oppenheimer bought concessions after World War I. But like Russia, Namibia wanted to process its own stones. In 2000, it forced producers to sell a regular supply of rough diamonds to domestic cutters. De Beers resisted, but later relented and built a cutting factory in Namibia-which it supplied with rough diamonds from its London offices...
The Road Ahead
In 2004, Leviev claimed to be the only vertically integrated diamond dealer in the world. But De Beers had been moving vertically, too. Its joint venture with the French luxury goods company LVMH in 2000, (each partner putting up $200 million) had been set up to create an up market brand that would fetch a premium over unbranded diamonds...
Exhibits
Exhibit I: Consolidated Income Statement
Exhibit II: Consolidated Balance Sheet as at December 31
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