Reliance Industries Limited Case Study
Reliance Industries Limited Case Study
RELIANCE INDUSTRIES LIMITED
……..Where growth is a way of life
Date: 27/6/2008
Ankit Kumar Sawai
The Reliance Group of industries has acquired a leading role in the sphere of Indian industry through the dint of its ability to develop latent demand among the public and maintaining its pre-eminent position in the financial market especially among the small investors. With the new challenges ahead, Reliance needs to modify its strategy and go into diversification in rich new markets opening up while maintaining the operating efficiency and the pride of place among the Indian investors.
Key Issues in the case
Constituents of Success
Diversification Strategy
Management issues in family owned industries
History of Reliance Industries
Dhirubhai Ambani sets up Reliance Commercial Corporation with a total capital of Rs.15000 to export spices to the West Asian market
To take advantage of the heavy demand for rayon fabrics in India, Reliance branches out to trading in fabrics and yarn
Manufacturing operations begin at Naroda, Ahmedabad
Reliance goes public
Attention shifts to the domestic market with focus on building the Vimal brand
1981-92
A series of backward integration initiatives in the fabrics to crude oil vertical chain
With a market cap in excess of Rs. 80 bn., Reliance becomes the only Indian entrant in Business Week’s listing of the 50 largest companies headquartered in developing nations
Pillars of success
A forward looking vision that defied conventional wisdom
Speed in decision making and project execution
Top down approach to management that helped translate the visions into concrete workable goals
Quantification of tasks followed by saturation of resources towards attaining that goal
A management principle that believed in caring for its employees
Management that actively pursued innovations in operations
Financial dexterity – Reliance has always been a “zero tax” company
Political clout of top management
Access to the capital markets in India
Innovative methods adopted for accessing the markets for growth capital
Company credited with numerous records and firsts in the Indian capital market
Among the first company to access the capital markets through Partially Convertible Debentures (PCD)
Dhirubhai hailed as a small investor’s stock market deity
Responsible for creation of share investing culture at retail level in India
One out of every 4 Indian investors is a Reliance shareholder
Porter’s Analysis
Customers
Capacity utilization problems were resolved by pursuing exports as and when required
Reliance actively followed a strategy of market creation by addressing latent demand & financial support to customers
Threat of New Entrants
Reliance built large scale world class facilities that demonstrated cost advantages
Virtually impossible for smaller players to achieve the desired economies of scale and thus compete with the company
Suppliers