DIVERSIFICATION STRATEGY OF ADITYA BIRLA GROUP

1. Company brief profile       Birla group was started in 1857 as a cotton trading company at Pilani, Rajasthan. Today, the group is a US$29 billion corporation and is in the league of fortune 500 companies. It has 1.3 Lac employees belonging to 40 different nationalities. Over 60% of the group’s revenues flow from overseas operations. It has presence in 26 countries. Sectors in: Non-ferrous metals, cement, textiles, chemicals, agri business, carbo black, mining, ferro chem, wind power, insulators, telecom, financial services, it-ites, retail, trading solutions.  Group companies: Grasim Industries Ltd, Hindalco Industries Ltd, Aditya Birla Nuvo Ltd, UltraTech Cement Ltd.

2. Introduction Aditya Birla group of company was formed in the year 1870, when Seth Shiv Narayan Birla launched a trading business of cotton & Jute in Pilani, in the state of Rajasthan. His son, Baldeo Das Birla, had moved to Calcutta which was the hub of business activity and over there Baldeo Das Birla’s son Ghanshyamdas Birla started up a jute mill. Thus in 1919 the family's industrial holdings were established. Then just after India’s independence, in the year 1947, Grasim weaving plant was started. Although Grasim was started as a textile manufacturing company it has diversified itself into various other industries like Viscose Staple Fiber (VSF), cement, chemicals and sponge iron. Now, Grasim Industries Ltd has become one of the Indian companies to make to the list of Forbes Asia's Fabulous 50 award winners. In 1958 rayon was added to the list of Grasim production list which had cotton and jute fiber. Rayon being a cellulose fiber has a high luster quality and was an emerging trend. It helped Grasim industries to increase its customer base as rayon fibers can be engineered to have a range of properties so that different demands of a wide variety of end customers can be met.

As stated by the management team. “We leverage our strengths further when it comes to downstream strategy. The aluminium operation extends from mining of bauxite to the production of not only primary aluminium but also the value added downstream products such as flat rolled products (FRP). Birla Copper and the Nifty and Mt. were done.Fig 2: Aditya Birla group growth (1999-2005) 3. In 2007. Diversification strategy of aditya birla group Up till now Birla group had diversified and expanded in the textile industry. This was the strategy of “Growth diversification”. This strengthened the position of Hindalco in Aluminium and Cooper industry.An aluminium facility at Renukoot in eastern Uttar Pradesh. The recent acquisition of downstream producer Novelis gives us a welldiversified geographical market base and enhances our stature in the area of downstream production. Gordon copper mines in Australia. Noveilis Inc. extrusions and also customized consumer products such as foils. was acquired which made Hindalco fifth largest aluminium producer in the world. Birla group diversifierd to spread risk and thereby reduce it by establishing Hindalco . In 1958. with Indal.” (Refer the fig 3a) Hindalco group has a consolidated turnover of USD 15.85 billion and hence has placed itself in the fortune 500 list. . acquisitions and mergers. To add value.

Belgium. Bangladesh. Germany. Carbon black. Greece. Kumar Mangalam Birla did a restructuring and streamlining of the whole group. production was launched in Thailand. The Sulphuric acid produced in the smelters of Hindalco group was used along with rock phosphate and ammonia to form Di-ammonium phosphate fertilizers as shown below (Refer fig 3b). Indo Thai supplies raw material to the world's leading fabric manufacturers. used as a pigment and reinforcing phase in automobile tires. Hongkong and Taiwan. Italy. Argentina. South Korea. Indian market was very attractive for cell phone industry. Kumar Mangalam Birla. Brazil. Telecom services were recognized as an important tool for the socio-economic development of a country. Kumar Mangalam Birla formed a joint venture with AT&T group to form idea cellular. France. Spain. The diversification strategy of Birla group was not only vertical or horizontal but it also did a forward integration by forming Indo Gulf for the production of fertilizer. in 1988. This helped Birla group to spread the risk further into diversified business. his son. Chile. Indo Thai Synthetics was formed in Thailand. These fertilizers are marketed under the known brand name “Birla Balwan”. was made the Chairman of Birla group.To make its presence felt in international market. Turkey. Fig 3a: Diversification Synergies Due to the death of Aditya Birla in 1995. Israel. Telecom . 70% of its product is exported to more than 30 countries including USA. in 1969. Portugal. In 1978. Canada. Farmers prefer this brand in Di-ammonium phosphate fertilizers category. Then.

As insurance market in Indian had low entry barriers. To continue diversifying into other emerging markets. distribution centers. we can see .Forward Integration Thus we can see that Birla’s diversification strategies include Operational relatedness when they formed Grasim industry. Thus. Diversification into metal business and formation of Hindalco was a good example of growth motive and risk spreading across businesses. Hence..being the main supporting service for rapid growth and modernization of all the sectors of an economy. and formed Birla Sun Life Insurance Company Limited (BSLI). etc. Birla textile & Grasim could share resources like . Hindalco’s diversification in the upstream and downstream was to have synergies due to operational relatedness. the cost of entry was less and hence BSLI did not erode the bottom life of Birla group (Refer Exhibit 3c). Birla group made the right move of applying diversification strategy of growth and entered a very attractive market (Refer Exhibit 3b). its growth in a developing country like India was obvious. one of the leading international financial services organizations from Canada. Diversification into cellular & insurance business gave Birla group entry into markets which were attractive and had low cost of entry.plant. Fig 3b: Diversification . thereby saved cost. in 1999. R&D facilities. Birla group formed joint venture with Sun Life Financial Inc.

(Refer: Exhibit 3d) .strategic relatedness in all the Birla groups business which has made a US $35 billion corporation and in the league of Fortune 500.

000 tpa 122. (Subsidiary) :: Fabric :: Yarn 8832 spindles 146 looms 35. Karnataka :: AV Cell Inc :: AV Nackawic Inc.000 tpa 333.000 tpa 70.Exihibit 3a: Capacities of Grasim Group Capacity Viscose Staple Fibre (VSF) Joint venture :: Birla Jingwei Fibres Company Limited :: Rayon grade pulp :: Harihar.000 tpa 70.000 tpa 258.9 million tpa (including 3. Cement (through its subsidiary UltraTech) :: Grey cement 51.808 spindles .0 million tpa overseas capacity) 9.975 tpa :: Ready-mix concrete :: White cement Chemicals Textiles :: Yarn Grasim Bhiwani Textiles Ltd.500 tpa 189.9 million cubic metres 560.

:: No. the Aditya Birla Group is: :: A metals powerhouse. with the largest single location copper smelter.Exhibit 3b: Growth of Idea Cellular Exhibit 3c: Aditya Birla Group Globally.1 in viscose staple fibre :: The largest producer of carbon black :: The fourth-largest producer of insulators :: The fifth-largest producer of acrylic fibre :: Among the top 10 cement producers . Hindalco-Novelis is the largest aluminium rolling company. among the world’s most cost-efficient aluminium and copper producers. It is one of the three biggest producers of primary aluminium in Asia.

the Aditya Birla Group is:: :: A top fashion (branded apparel) and lifestyle player :: The second-largest producer of viscose filament yarn :: The largest producer in the chlor-alkali sector :: Among the top three mobile telephony companies :: A leading player in life insurance and asset management :: Among the top two supermarket chains in the retail business :: Among the top 10 BPO companies .:: Among the best energy-efficient fertiliser plants In India.

Exhibit 3d: Diversified Aditya Birla Group .

Pvt. Ltd. 2007. Birla Group. viewed 03 July 2012. viewed 03 July 2012. Aditya Birla Group profile.com/about_us/carbon_black_business. Pvt. Pvt.com.birlacarbon. ideacellular. An Idea Can Bring Growth. < http://www.htm> Indo-Thai Synthetics. <http://www.com.htm> Idea Cellular Ltd. About us. Ltd.wordpress.hindalco. viewed 03 July 2012.viewed 03 July 2012.com/the_group/index. Company Profile. viewed 03 July 2012. Pvt. <http://www. <http://www.com/about_us/index. TheOriginOf . Home. Ltd.ideacellular. 2007. Indo-Thai Synthetics Co. 2006.theoriginof. <http://www. businessworld. 2011. viewed 03 July 2012.in.. Ltd.businessworld. viewed 03 July 2012. Aditya Birla Management Corp. Strategy.com/strategy/strategy.wordpress.html> Aditya Birla Hindalco.adityabirla. Aditya Birla Management Corp. <http://www. 2012. Birla family.htm> Aditya Birla Hindalco. Aditya Birla Management Corp.html> Birla Carbon.com. <http://www. 2011.htm> . 2012.com/birla-group. Aditya Birla Management Corp. 2012.com/about_us/overview.com.htm> The Origin Of. About us.grasim.html> Bimtech. 2012. <http://www..in/businessworld/content/Idea-Can-Bring-Growth. <http://www.com/aboutus/cmppro. 2012. Ltd. bimtech.References: Aditya Birla Overview. Cement major and global leader in Viscose Staple Fibre.hindalco.com/founders/birla-family/> Aditya Birla Hindalco. viewed 03 July 2012. Birlacarbon. viewed 03 July 2012.indo-thai. viewed 03 July 2012. <http://bimtech.com/wps/portal> Shrutika Verma.

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