ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Analysis of the Diamond Industry Using Porter's Five Forces

Updated on March 3, 2015

Diamonds are one of the worlds and particularly Africa’s major natural resources. Each year, the industry produces an approximation of US$13 billion worth of diamonds where US$8.5 billion are derived from Africa. The industry employs more than ten million people worldwide both directly and indirectly. The spectrum of roles in this industry ranges from mining to retailing. Global sales of the diamond products have continued to grow on a consistent basis. This growth has increased almost by threefold: for the past three decades. Currently, the industry is worth in excess of US$72 billion. The price of diamonds is not a reflection of the actual scarcity of lack of it in the market. Rather price for diamond products is constant.

Diamonds are used for two main purposes. The first is in jewellery because of its appealing nature and rarity and the second is in the industry owing to its molecular elements. Approximately 30% of diamonds harbor gem quality. These kinds of diamonds can be distributed to experts for cutting, jewelry manufacture, and polishing. Those that do not have gem quality are sold to industrial applications such as polishing, drilling, cutting and grinding. Diamonds are also used as a symbol to express love, emotions, commitment and affection. Moreover, they are mostly used in celebrating unique occasions such births, weddings and anniversaries. They are also considered as the ultimate jewel by many cultures.

2. Identify the participants and segment them into groups, if appropriate

De Beers

Among the Key participant in this industry is De Beers, which historically owns more than 85% of the world market share. This company which is also owns the main world distribution system and mines is recognized for influencing demand and supply as a means of controlling global prices and market. Another participant in this sector is France’s LVMH which produces and sells luxury goods made of diamond. However, this company has formed a joint partnership with De Beers in distributing branded jewelry. De Beers have also many companies that are affliated with it. These include Central Holding Group, Anglo American Groups, Diamond Trading Group (UK), Namdeb (Namibia), Debswana, and Williamson. These affiliates can also be grouped as De Beers’s shareholders.

In retaining its global monopoly, De Beers employs a unique strategy that ensures the success of this global monopoly. De Beers buys most of the Diamonds generated from mines. Buying officers from external sources are sold to De Beers. External buying offices compete with buyers from outside. De Beers is also a single entity, which determines the quantity of diamonds and the price they could be sold.

Porter's Five Forces Strategy Analysis as it applies to the Diamond Industry

Porters Five Forces Strategy is a model used in analyzing marketing opportunities for an organization. The forces identified under this model are Threats of New Entrants, Rivalry among existing firms, Threats of substitute’s products or services, bargaining power of Buyers, and the Bargaining Power of Suppliers. According to Porter (1979), these five forces work in tandem in determining the nature of competition in a particular industry. The chart below illustrates this model.

Figure 1.1 Porter’s Five Forces Strategy

Source: Chau, Lusanaxay, Malik, Saelee and Saepharn, (2012)

Threat of New Entrants

The Diamond Industry is currently being controlled by a single Monopoly. This entity owns more than 85% share of the world diamond market. In an attempt to control diamond supply in the market the company takes a number of strategies. These include buying all the diamonds from various mines. New Entrants would therefore find it hard to penetrate the market. However, the major threat will come from retailers who are bypassing De Beers and penetrating the market.

Bargaining Power of Suppliers

From De Beers case study, it is apparent that the diamond industry is becoming more vertical. This implies that diamond companies that were previously performing separate activities such as polishing, mining and cutting jewelry stores such as Tiffany have been changed by organizations such as Tiffany’s buying mines. These include Aber, which performs separate activities such as polishing, mining. Moreover, cutting jewelry stores such as Tiffany has been changed by organizations such Aber, which buys its stakes from retailers such as Harry Winston. Consequently, the are many mines today which can reach businesses directly without having to pass De Beers and can negotiate better prices.

Competitive Rivalry

Competitive rivalry has not very much affected De Beers. This is because this entity has been able to control the global diamond supply by 85% of all the diamonds that are produced. However, pressure from governments and those of retailers and producers who wish to disband De Beers grip on the diamond market is posing a stiff competition in the market. It therefore, necessitates De Beers to rebrand itself in a different way by providing unique and quality products to its customers instead of making customers to buy anything produced by Dee Beers. In the current perspective, this company has been forced to price its products according to the market rather having to dictates its own pricing. Further, it is important that the company find other markets and customers in order to sustain itself.

Customer Segmentation

Being both a diamond retailer and producer, DeBeers has two kinds of customers, one is that pertaining to the jewelry chain such as Tiffany that buy diamonds from Dee Beers. The second category of DeeBeers customers are those that buy diamond from Dee Beer’s outlets. However, the company has puts much concentration of customers who buy products from De Beers products since the final target happens to be the end user. Most of the people who buy expensive jewelry and diamonds on specific occasions are the one who determines the demand and supply equilibrium.

Bargaining Power of Suppliers

Since most of the products made by Dee Beers is produced by the company, the companies supplies have no much bargaining power.


    0 of 8192 characters used
    Post Comment
    • Nyamweya profile imageAUTHOR

      Silas Nyamweya 

      10 months ago from Nairobi, Kenya

      If you need this and other case studies, contact me via


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)