Introduction
Da Beer, a company well known for monopolizing diamonds, finally reached the end of its glory day in the year 2000. 20 years later, the market for diamonds is driven by supply and demand, leading to a decrease in the price of diamonds. Da Beer has taken over control of the diamond market since the early 1800s when Cecil Rhodes accumulated as many mining properties as possible. Back then, the diamond industry was relatively small, which allowed Da Beer to monopolize the industry without any difficulty. While having control over global supply, Da Beer kept diamond stock when the market was weak and then released it once demand increases. As the market expanded, Da Beer began to lose its grip over the market of diamonds, since new mining companies began to enter the market such as the Argyle Mine in Australia. We can see that Da Beer’s market share dropped from 90% to 60% by the late 1990s which started to show their decline and loss of power and then they sold major ownership to Anglo American Plc in 2011. Recently, the 2019 financial result published by its parent company (Anglo American) showed that their profit dropped by 50%. We can say that the diamond market has changed from a Monopoly to a perfectly competitive market since the prices are driven by supply and demand. Since the fall of De Beer plays a huge factor in changing the market structure, over mining for the diamond also plays a role in changing the structure. Due to the over mining of diamonds, supply began to increase causing the price to fall and allow other companies to have access to low-quality diamonds which will saturate the market. As of recently, Da Beer has seen an increase in sales but due to the COVID-19 outbreak, it has impacted their sales exponentially. Since Hong Kong is one of the biggest consumers in diamonds, the COVID-19 has caused the consumer to stay indoors, this leads to the decrease in diamond sales which will further hurt the brand
Analysis
Analyzing the event above, we can see the use of economic concepts that are being applied here. But mainly, the shift in market structure is without a doubt an important concept to look at. While monopolies are rare these days, the shift to a perfectly competitive market would eventually happen to all monopolies due to regulations and new firms entering the market. It is interesting to see that even though Da Beer set high barriers for a new company to enter, there were companies who were able to get through and got their hand onto the market. due to the rise of COVID-19, it has impacted the demand for diamonds which if we were to draw it on the graph- it would shift leftwards due to the change of preferences. The sooner we can contain the virus, the better the market’s economic will thus allowing Da Beer to have much more flexibility in their market decisions.
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