Program & Batch: PGDM 2017-19, IMT Ghaziabad

Term: Term V

Course Name: Market Oriented Strategic Planning (MOSP)

Name of the faculty: Dr. Prantosh Banerjee

Topic/ Title : Reliance Industries Ltd.

Original or Revised Write-up: Original

Group Number: 10

Group Members: Sl. Roll No. Name

1 170101041 Kanishk Rao

2 170101026 Dirgha Prasad

3 170101126 Achyut Murarka

4 170101096 Swati Pandey

5 170101047 Meenakshi Goel

6 170103004 Aashna Srivastava

Reliance Industries Ltd. (RIL)

Reliance Industries ltd. is India’s largest private sector conglomerate with diverse set of
business ranges from oil exploration, petrochemicals, textiles, retail and telecom. RIL has the
following business verticals:

 Refining & Marketing

 Petrochemicals
 Oil & Gas
 Retail
 Digital Services
 Media & Entertainment

For the successful completion of the project, we classified the business group as following:
Business Group: Reliance Industries Ltd.
Corporate Entity within the Group: Reliance Retail
Four SBUs:

Vision & Mission Framework

Business Group: Reliance Industries Ltd.

CORE IDEOLOGY

Core Values:

Upholding highest standards of Corporate Citizenship and adhere to highest standards of

Safety & Excellence. Ensuring highest standards of Integrity, Honesty and Mutual Respect in
all Business Practices while fostering Entrepreneurship & Innovation as key drivers for
Growth

Core Purpose:

Contribute towards Nation Building through Sustainable Growth. Create Superior customer
value through our products to enhance stakeholder value
ENVISIONED FUTURE

Audacious Goal (BHAG):

Lead the Digital Revolution by setting up the largest Digital Industrial Area over the course
of 10 years and acquire market Leadership in Retail and Telecom with over 50% Market
Share. Improve Energy Efficiency across all manufacturing Units and acquire No. 1 position
worldwide

Vivid Description:

Jio has more than 150 million subscribers in less than 2 years and the widest 4G network in
the India.

Corporate Entity: Reliance Retail

CORE IDEOLOGY

Core Values:

Focus on Inclusive Growth of all partners while adhering to highest standards of Safety &
Excellence. Ensuring highest standards of Integrity, Honesty and Mutual Respect in all
Business Practices.

Core Purpose:

Deliver Superior Value for Customers across the Socio-Economic Spectrum and create value
of stakeholders, partners, suppliers and farmers through inclusive growth.
Provide a world class customer shopping experience across all categories with state of the art
technology

ENVISIONED FUTURE

Audacious Goal (BHAG):

Achieving geographical expansion by opening stores in Tier -2 and Tier-3 Towns and drive
expansion of Concept stores to provide customers with streamlined omnichannel experience.
Expand Partnerships with International Brands to provide consumers with the largest variety
of goods across categories.
Vivid Description:
India’s largest retail chain across categories and the only retail chain to gross more than $10
billion in Revenue.

Reliance Retail: Strategy

Consumer Focused Ecosystem

Reliance Retail has created an ecosystem consisting of manufacturers, farmers, supply chain,
suppliers and logistics partners with an integrated network of infrastructure. As a result, they
are able to provide unlimited choices, quality, and superior experience across all retail stores.

Partner of Choice

Reliance retail has established exclusive partnerships with many revered international brands
such as Armani Exchange, Cherokee, Coach, DC, Kate Spade, Jimmy Choo and many more
top international brands making them the largest portfolio of international retail brands in
India. On the contrary, they also procure directly from farmers and mandis in a farm-to-fork
model across the country for Reliance Fresh.

Multi-channel strategy

Reliance retail has adopted multi-channel strategy and integrated offline-online models. This
omni-channel strategy has helped them to meet every demand of the consumer and created a
differentiated consumer experience. They have built an online sales channel for grocery
needs by leveraging the fulfilment through existing wide network of Reliance store and
supply chain infrastructure.

Diversified portfolio of stores across various consumption baskets

Reliance Retail has developed and strategically positioned wide array of stores. They have a
presence across consumption baskets such as grocery, consumer electronics, fashion and
lifestyle and Petro (Reliance Petroleum Retail). They have been able to serve customers
across all income segments through fashion and lifestyle right from value apparels (Reliance
Market) to luxury apparels partnered with international brands.

Serving the underserved markets

Reliance Retail has been aggressively expanding with more than 1 store every day for the last
5 years. With 371 additional store in 2017 achieving 60% growth over the previous year.
Reliance Digital topping the performance with 21% expansion. The leadership has been
focusing on 30% year on year growth for the next decade. The current focus has been on
expansion tier 2 and tier 3 cities across India.

GE MCKINSEY MULTIFACTOR PORTFOLIO MODEL ALLOCATING 2000 CRORE

It is a framework that evaluates business portfolio, provides further strategic implications and
helps to prioritize the investment needed for each business unit. The nine-box matrix plots the
business units on its 9 cells that indicate whether the company should invest in a product,
harvest/divest it or do a further research on the product and invest in it if there are still some
resources left. The business units are evaluated on two axes: industry attractiveness and a
competitive strength of a unit. The four SBUs were Reliance Fresh, Reliance Digital,
Reliance Footprint and Ajio.

The 1st SBU Reliance fresh has over 513 smart stores and over Rs.69,198 crore as revenue
has a high penetration in the market and lies within average competitive positioning so it
should be allocated 500 crore as this sector has opportunities to grow focusing on its strong
segments like distribution network, has strong brand equity and delivers superior value to its
customers and over past 5 years is growing at 35% annually and has wide market size in
comparison to its competitors.

The 2nd SBU, Reliance Digital Services has a deep penetration in the market as compared to
Airtel, Vodafone. It lies in the strong competitive positioning as it has huge market share with
revenue of 23,916 crore. It should be allocated 750 crores as it has strong investments and tie
up with other organizations and continue. The investments should be provided for R&D,
advertising, acquisitions and to increase the production capacity to meet the demand in the
future.

The third SBU, Reliance Footprint is a leading specialty family footwear retail chain from
over 50 prominent international, domestic, and own brands. It has medium attractiveness
strategy with average competitive positioning, so it should be allocated 400 crores as it has
returns but less as compared to other sectors, so it should allocate funds to segment the
market for better positioning as it has a market share of 30% across the industries.
 The fourth SBU, Ajio is a digital fashion extensive of reliance that unveiled in 2016 with pan
India as an e-commerce venture and has a dedicated manufacturing base of 250+ vendors in
south Asian India. It has medium attractiveness with average competitive positioning as per
the market growth and its distribution channel. It should be allocated 350 crores as an
investment for seeking opportunities in its market size, demand variability and its margin.

SEGMENT FUNDS (in crores) OPPORTUNITY

RELIANCE FRESH High market attractiveness,

500 Medium competitive positioning

RELIANCE DIGITAL High market attractiveness, High

750 competitive positioning

RELIANCE FOOTPRINT Medium market attractiveness,

400 Medium competitive positioning

AJIO Low market attractiveness,

350 Medium competitive positioning

Porters 5 Forces Model Analysis

AJIO - It has the following product lines:

1. Apparel
2. Footwear
3. Accessories

For better understanding of product lines by the application of Porter’s five forces the product
lines chosen for study are Apparel and Footwear category.

Porters 5 Forces Model for Apparel & Footwear Category

1) Rivalry to Competitors: (Refer to Table 1 in Appendix)

This industry faces cluttered competition with a lot of small and big players. It is driven
basically by a young demographic profile, increasing internet penetration and higher
disposable income. With the influx of FDI in ecommerce, Government initiatives like Digital
India, BHIM app, Tez, it will help increase digital payments in the country. The industry is
 associated with low initial setup and maintenance cost (rent, website, warehouse) hence it
incurs a low capital investment and fixed cost. AJIO clearly differentiates itself as trendy &
fresh with unique styles where one could express personal style fearlessly and with a
confidence. Though product differentiation in totality doesn’t exist amongst competitors in
this industry, since ticket size is low for consumers, it reduces the switching cost for the
company incurred to retain such customers. Hence the company faces a major threat from
competitors.

2) Barriers to Exit: (Refer to Table 2 in Appendix)

No special assets are needed in this industry apart from the online portal. Hence the company
will not have any problem like asset write-offs or inter-business dependencies due to which
cost of exit will be low. Industry doesn’t much of government benefits /incentives or
restrictions for license for operations in e-commerce sector. Hence the overall score for
Government restrictions will be low and makes it easy for the firm to exit from this industry.

3) Barriers to Entry: (Refer to Table 3 in Appendix)

Effective manufacturing operations benefit from Economies of Scale when logistics costs are
taken into consideration. Product can be differentiated in terms of Style, Type and fabric but
still it is difficult to find substantial differentiation. Brand Identity is very important since
reliability for quality products and the confidence for first time purchase lies with the brand.
This industry witnesses an easy access to channels of distribution since an online platform is
used. Marketplace model requires less capital requirements while inventory based needs to
bear warehouse and inventory holding costs. The industry has an easy access to technology
and raw material given the simplicity of operations but lacks regulatory framework and no
entry barriers on new players due to which overall barriers to entry is low.

4) Threats from Substitutes: (Refer to Table 4 in Appendix)

Apparel does not have any other substitutes because of which all the parameters listed here
are given low rating.

5) Bargaining Power of the Buyers: (Refer to Table 5 in Appendix)

Customer base is expanding at a high rate. Since it is a B2C industry, the buyer’s backward
threat of integration threat is very low. The Industry could look for forward integration for
services like logistics and customer care. Consumers have high power to exert pressure on the
 industry to provide best quality at lower price owing to the nature of ecommerce. Buyers are
strong and have made the industry more competitive reducing the profit margins for sellers,
resulting in high buyer profitability.

6) Bargaining power of Suppliers: (Refer to Table 6 in Appendix)

Industry witnesses huge number of suppliers with moderately lower switching cost for the
company when it switched from vendor to the other. Due to high and risky investments,
Industry’s threat of backward integration is low. Here, contribution by suppliers to Quality
will be high since it is the same quality of fabric passed onto consumer. They even have high
contribution to cost. Industry’s importance to supplier – Low due to less share of e-commerce
in retail industry.

7) Government Actions: (Refer to Table 7 in Appendix)

The industry lacks a legal framework that restricts or protects a given e commerce company
from carrying its operations in any manner.

Overall Assessment: Refer to Table 8 in Appendix

Strategy Recommendation

AJIO could cross sell its apparel accessories and footwear category by selling a complete
attire under sub heading of ‘Best Picks for You’. It can make a larger collection of bigger size
available since currently its limited.

Long-term Strategy:

1. It could leverage JIO content and showcase its outfits worn by actors/actresses on a
newly launched series. This video could be shared on YouTube to increase reach.
2.
3. It could employ AI enabled chat boxes that can provide shopping consultancy services
depending upon the skin tone, occasion likings for a consumer.
4. AI could also be used to design products under ‘AJIO’ label which can data mine past
purchases about popular patterns of apparel or footwear amongst consumers.

SWOT Analysis: Reliance Fresh

Strength Weaknesses
 Pan-India presence with 7500+ retail  No established online retail channel for
outlets consumers
 Efficient Supply chain of farmers,  High rental costs are unable to serve
suppliers etc. to achieve high penetration consumers with low prices
in local markets

Opportunities
 Grocery Retail projected to grow at 15%
annually till 2019-20
 Increasing footprint of formalised retail
outlets
 Increased consumption in Tier-2 & Tier-
3 cities
 Penetration of organised retail is only
9%, which is expected to become $960
billion by 2020.
Threats
 Increasing penetration of online grocery
retail through Amazon Pantry, Big
Basket etc.
 Low penetration of organised retail
 Price competition from unorganised
retail in Tier-1 & Tier-2 cities
 Digital Integration with local kirana
stores to provide credit to customers in
small localities

SWOT Analysis: AJIO

Strength
 Digital integration with Jio platform to 
reach wide consumers
 Strong tie-ups with international brands
with strong demand in Indian market
 Increasing penetration of Jio exposing
consumers to online fashion retail
Opportunities
 Online fashion retail projected to grow 4
times to $30 billion by 2020
 Increasing digital and smartphone
penetration is enabling consumers to
shop online
 30% of shoppers first apparel purchase
Weaknesses
Only 10% penetration of online fashion
retail in $70 billion apparel retail
market.
 Low assortment of goods compared to
competitors
 Lack of digital wallet, preferred buying
options like Amazon Prime.
Threats
 Strong presence and market reach of
brick and mortar stores
 Increasing presence of commercial real
estate such as malls, shopping centres in
Tier-2 & Tier-3 cities.
 Established presence of Amazon,
 happens online in India Myntra with robust supply chains in a
 Increasing purchasing by women in Tier- highly competitive market with low
2 & Tier-3 cities margins

APPENDIX

Table 1

Table 1: Rivalry among competitors Price Competition often Leaves the entire industry worse off
  Wt % Attractiveness   Remarks
Low       High
1 2 3 4 5
No. of competitors Large 35.00% Y         Small 0.35

Industry growth Slow 25.00%         Y Fast 1.25

Fixed cost High 10.00%       Y   Low 0.40
Differentiation Low 8.00%   Y       High 0.16
Switching cost Low 4.00%   Y       High 0.08
Excess capacity Large 8.00%       Y   Small 0.32
Strategic stakes High 10.00%     Y     Low 0.30
    100.00%             2.86

Table 2

Table 2: Barriers to exit

  Wt % Attractiveness   Remarks
Low       High
1 2 3 4 5
Asset specialization High 15.00%       Y   Small 0.60
Cost of exit High 50.00%       Y   Small 2.00
Government High 35.00%         Y Small 1.75
restrictions
    100.00%             4.35

Table 3

Table 3: Barriers to entry

  Wt % Attractiveness   Remarks
Low       High
 1 2 3 4 5
Economies of scale Small 10.00%     Y     Large 0.30
Product differentiation Low 5.00%   Y       High 0.10
Brand identity Low 15.00%     Y     High 0.45
Switching cost Low 20.00% Y         High 0.20
Access to channels of Easy 15.00% Y         Limited 0.15
distribution
Capital requirement Small 15.00%   Y       Large 0.30
Access to technology Easy 10.00% Y         Restricted 0.10
Access to raw material Easy 5.00% Y         Restricted 0.05
Government protection None 5.00% Y         Substantial 0.05
    100.00%             1.70

Table 4

Table 4: Threat from

substitutes  
  Wt % Attractiveness   Remarks
Low       High
1 2 3 4 5
Availability of close High 70.00%         Y Low 3.50
substitutes
Switching cost Low 15.00% Y         High 0.15
Profitability of the producers High 15.00% Y         Low 0.15
of substitutes
    100.00%             3.80
Table 5

Table 5: Bargaining power of

buyers  
  Wt % Attractiveness   Remarks
Low       Hig
h
1 2 3 4 5
Number of buyers Small 15.00%         Y Large 0.75
Availability of substitutes Many 15.00% Y         Few 0.15
Switching cost Low 18.00% Y         High 0.18
Buyer’s threat of backward High 0.00%         Y Low 0.00
integration
Industry’s threat of forward Low 10.00%       Y   High 0.40
integration
Contribution to quality Low 10.00%       Y   High 0.40
Contribution to cost High 17.00% Y         Low 0.17
Buyer’s profitability Low 15.00%         Y High 0.75
100.00
    %             2.80

Table 6

Table 6: Bargaining power of suppliers  

  Wt % Attractiveness   Remarks
Low       High
1 2 3 4 5
Number of suppliers Smal 20.00%         Y Large 1.00
l
Availability of substitutes Few 20.00%       Y   Many 0.80
Switching cost High 15.00%       Y   Low 0.60
Supplier’s threat of forward High 5.00%       Y   Low 0.20
integration
Industry’s threat of backward Low 5.00%   Y       High 0.10
integration
Contribution to quality High 10.00%   Y       Low 0.20
Contribution to cost Low 15.00%       Y   High 0.60
Industry’s importance to supplier Low 10.00% Y         High 0.10
    100.00%             3.60
Table 7

Table 7: Government actions

  Wt % Attractiveness   Remarks
Lo       Hig
w h
1 2 3 4 5

Industry protection Low 40.00% Y         High 0.40

Industry regulation (pollution, etc.) High 35.00%       Y   Low 1.40
Customs and tariff restrictions abroad High 25.00%         Y Low 1.25
100.00
% 3.05
Table 8

Table 8: Overall assessment    

Wt % Detail Attractiveness Remarks
   Score Low       High
1 2 3 4 5
Table 1: Rivalry among competitors 22.00% 2.86     Y     0.6292
Table 2: Barriers to exit 18.00% 4.35         Y 0.783
Table 3: Barriers to entry 18.00% 1.70   Y       0.306
Table 4: Threat from substitutes 2.00% 3.80       Y   0.076
Table 5: Bargaining power of buyers 28.00% 2.80     Y     0.784
Table 6: Bargaining power of suppliers 9.00% 3.60       Y   0.324
Table 7: Government actions 3.00% 3.05       Y   0.0915
Table 8: Overall assessment 100.00%             2.99