case - dhirubhai ambani

7/23/2019 Case - Dhirubhai Ambani

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Opening Case

Dhirubhai Ambani28/12/1932 6/07/2002


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Dhirubhai Ambani

Born in Chorwad, a remote village in Gujarat to a poorGujarati family.

Father was a village school teacher.

Even as a school boy, he used to engage himself incommercial activities retailing cooing oil, sellingonion!potato fries at the village maret during village fairs.

Became a student leader at the age of "#. $e

spearheaded and won the movement to merge the%unangadh &awab's territory to the (ndian )nion in "*+.

$is family's poor -nancial condition and his father'sailment made him shelve his business as well as hiseducation.

$e moved to den to tae up a job with a French company . Besse / Co. at a salary of 0s 122!3.

den was one of the busiest trading and oil bunering portin the world, harboring over 4,122 ships and handling over",#22 dhows a year.


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5he company was the largest trans3continental trading -rmeast of the 6ue7 and was a primary trading agent for a largenumber of European, sian, merican and frican

companies dealing with e8ports relating to a wide variety ofproducts.

(t was here that mbani learnt his trading sills and hemade e8clusive contacts in the trading and e8port business.

$e learnt ways of commodity trading, mareting and

distribution as well as currency trading and moneymanagement.

$e wored free with a Gujarati trading -rm in den, with theintention of learning accountancy, documentation ofpurchases and shipping and the ways of dealing with bans

and insurance companies.

$e used his lunch breas for trading commodities in themaret and spent most of his leisure time reading boosand maga7ines to

improve his English and general nowledge.


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9hen 6hell :il 0e-nery was set up in den in "*#+, Besse / Cobecame the primary distributors of 6hell re-nery products.

;hirubhai was promoted to manage the company's -lling station at thenewly built harbor. 5his fuelled his dream to own a re-nery one day.

(n "*#< he returned to =umbai with whatever money he had saved inden. 9hile his ambition was high, his ability to invest was e8tremelylow.

$e started a spice trading company under the name of 0elianceCommercial Corporation >0CC?. $is o@ce was a small room with nofurnishings. $e used to use his neighborAs phone to mae calls.

lthough ;hirubhai's formal education was low, the business educationhe e8tracted was of a much better uality than what is imparted informal bu


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promptly. (n fact he would deliver even before the customersmade the payments. Focus on high uality products at lowmargins, delivered promptly.

6ensing the low margins in spice trade, he shifted focus toyarn trade. (t was a highly pro-table business reuiring heavyinvestments and involved high riss on account of priceDuctuations in the international marets.

$e learnt the trics of the trade from the maret. 5he success

of his operations brought him pro-ts which he readilydistributed to his investors which brought him more investors ,thereby reali7ing his dream to become a big yarn dealer.

5he smartest move made by ;hirubhai was in the yarn tradewhen he recogni7ed the potential of the shiny variety of yarn.

:n test mareting, he reali7ed that he had a winner, especiallyfor women ceremonial dresses. (t sold lie hot caes, bringinghim more and more revenues, establishing him as a leader inthe yarn maret.

(n "*42s, a major concern for G:( was to conserve Foreign

E8ch.


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which led to imports of synthetic -bers only against e8portsof 0ayon fabrics.

9hen te8tile manufacturers complained about the non

viability of the policy on account of the high cost ofmanufacturing rayon fabrics in (ndia, ;hirubhai startedprocuring rayon fabrics from the power looms and e8portingthem to contacts developed during the den days.

5he F:0E thus generated was used for importing nylon

yarns, which could be sold in (ndia at high margins, which notonly compensated for the e8port' losses, but alsocontributed to signi-cant growth in 0CCs revenues.

5he growing popularity of &ylon in (ndia opened anotherwindow of opportunity for ;hirubhai, who reali7ed that he

could mae much more money, if he converted the yarn intofabrics rather than selling it as raw yarn.

ccordingly in 6ept. "*44, he set up a te8tile mill in a plotmeasuring #222 s. yards in the &aroda (ndustrial Estatenear hmedabad, which later got e8panded to a campus of

"# acres.


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$e set up a brand new state of the art mill with machineryimported from European countries, as 0CC then had enoughmoney for such investments.

5he entire wor of setting up the mill was completed in less than 4

months with the help of just 4 people one was an engineeringgraduate, two were matriculates and the rest were middle school>< th pass?. =ost of his top employees in the new mill were hisfriends and associates from the den days.

&eedless the say, the output of the &aroda plant was superb and

was attractively priced, inspite of which there were few taers.. 5he wholesalers refused to buy 0eliance =ill products for fear of

retaliation from the established big te8tile mills.

;hirubai came up with a counter strategy (f we can't beatthem, we can bypass themH, and instructed his people to deliver

goods directly to the retailers, and they did that initially withoutasing for any receipt or advance payments and not evenmentioning any payment conditions or e8pecting any futurepayments.

5he strategy wored and how 0eliance products got entrenched


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in the maret >no advertisements or publicity events?. Evenat the later stage, ;hirubhai never ased for advancepayments, but told the retailers that they could mae thepayments after selling the goods and reali7ing the revenues.

$is appeal was for his resellers to grow with him, whichcreated a new retail structure by eIectively removing thewholesalers from the picture.

=oreover, when the company later branded its fabrics

JimalH >meaning pure?, there were several retailersinterested in dealing only in JimalH, which led to thecreation of the retail franchise system, :nly JimalH.

9ith such dealer and customer friendly policies, it is no

wonder that 0eliance 5e8tiles grew at an ama7ingly fast rate

both in terms of turnover as well as facilities. ;hirubhai and his elder son =uesh, ept on adding more

and more sophisticated machines and facilities to the mill,

such as computeri7ed water jet looms, 6ul7er looms, eKuenttreatment plant and a design center.


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By late "**2s, the mill had about


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5he company now operates in diversi-ed areas liete8tiles, petrochemicals, power!energy,telecommunications, (5, infrastructure services,

retail, capital marets and logistics. 5he company that ;hirubhai had started with 0s

"#,222!3 has now grown into a conglomerate with aturnover of more than )6; " bn. nd is the -rst

(ndian company to appear in the Fortune #22 list. (t iscurrently managed as two groups, one each under;hirubhai's two sons.

$e was named the (ndian Entrepreneur of the 2thcentury by F(CC(. $e was awarded the ;ean's=edalH of 9harton 6chool, )niv. of Nennsylvania.

case - dhirubhai ambani

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