Answer to Question #306847 in Management for Kim

Question

Explain the changes in Macro and Market environment that forced De Beers to reconsider its business model(50 marks)

Answer 1

◦ Business Model-a design for the successful operation of a business, identifying revenue sources, customer base, products, and details of financing.

◦ Inflationary- of, characterized by, or tending to cause monetary inflation.

◦ Pricing Pressure- the change in price when large quantities of a security are traded

◦ One of the most dramatic change that forced De Beers to reconsider their business model is the rise of competitors in the 1900's who challenged De Beers' prominence, as De Beers' no longer produced 90% of the worlds diamonds. Thus is was no longer able to control the production and supply of diamonds

◦ Another reason that may have influenced De Beers' reconsideration of their business model is that diamond industry experienced dramatic swings in the supply of diamonds, the world economy moved onto a low inflationary path and the diamond industry experienced a period of pricing pressure.