Based on the case study, DeBeers has three alternatives to its problem. One is that it can invest in machinery that can distinguish between natural and synthetic diamonds. Secondly, the company can venture into the synthetic diamond market and expand its aggregate market share. Finally, it can decide to do nothing and assume that the synthetic diamond ideology is a minor market shock that will pass. Irrespective of the selected alternative, there are financial implications to be faced by the diamond manufacturing company. Based on the dilemma facing DeBeers, I would recommend that the company embraces the synthetic diamond option to expand its current market share and the investment on machinery to distinguish the two types of diamond.
According to the case study, synthetic diamonds cost 15% to 40% cheaper than natural diamonds. The low price will increase the company’s profit through product diversification and the creation of more jobs. Notably, synthetic diamonds are in the market to stay because of the wide industrial uses, they offer, which help the company can sell more though at a low price. Similarly, synthetic diamond is an innovation, which is a crucial element of any company striving to increase market share. The company should look for secondary markets to supplement the current ones and increase its investments. Likewise, since De Beers has forty percent market control, it can venture into the synthetic diamond market and control the amount of inventory entering the market. Nonetheless, DeBeers should not do away with natural diamond because its demand in the market will not fade due to the psychographics characteristics of luxury goods consumers. The other alternative of assuming the impact of synthetic diamond is not viable because markets are subject to changes and the affected enterprise should analyze any developments for all possibilities.
McAdams, D., & Reavis, C. (2008). DeBeers’s Diamond Dilemma (1st ed., pp. 1-19). San Francisco: Creative Commons.