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

1959 Dhirubhai Ambani sets up Reliance Commercial Corporation with a total capital of Rs.15000 to export spices to the West Asian market

1962 To take advantage of the heavy demand for rayon fabrics in India, Reliance branches out to trading in fabrics and yarn

1966 Manufacturing operations begin at Naroda, Ahmedabad

1977 Reliance goes public

1978 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

1994 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

п‚џ A forward looking vision that defied conventional wisdom

п‚џ Speed in decision making and project execution

п‚џ Top down approach to management that helped translate the visions into concrete workable goals

п‚џ Quantification of tasks followed by saturation of resources towards attaining that goal

п‚џ A management principle that believed in caring for its employees

п‚џ Management that actively pursued innovations in operations

 Financial dexterity – Reliance has always been a “zero tax” company

п‚џ Political clout of top management

Access to the capital markets in India

п‚џ Innovative methods adopted for accessing the markets for growth capital

п‚џ Company credited with numerous records and firsts in the Indian capital market

п‚џ Among the first company to access the capital markets through Partially Convertible Debentures (PCD)

 Dhirubhai hailed as a small investor’s stock market deity

п‚џ Responsible for creation of share investing culture at retail level in India

п‚џ One out of every 4 Indian investors is a Reliance shareholder

Porter’s Analysis

Customers

п‚џ Capacity utilization problems were resolved by pursuing exports as and when required

п‚џ Reliance actively followed a strategy of market creation by addressing latent demand & financial support to customers Threat of New Entrants

п‚џ Reliance built large scale world class facilities that demonstrated cost advantages

п‚џ Virtually impossible for smaller players to achieve the desired economies of scale and thus compete with the company

Suppliers