Birla 1: The Unknown Global Indian Conglomerate Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Problem Statement

Birla group named them self as the number one conglomerate among the other competitors existing in India. After its establishment in 1857, the company has been diversified into many businesses that includes its presences in consumer goods, textile, chemical, and mineral industry. From large enterprises to small Birla group has established their vision of consistent growth with great efforts.

Currently, the conglomerate is highly concerned to maintain their number one position as a successful conglomerate in the market. Dealing with high competition the company is now focusing on the building of a diversification strategy and in which sector they must invest for being diversified. Birla’s diversification decision is getting so much intense for its top management. This condition requires management’s choice between concentric or horizontal diversification which would highly depend upon the nature of the sector in which Birla group is going to get diversification.

Introduction

After the death of Birla’s first chairman, the chairman position had been acquired through his son who has also been making his mark by investing more in the existing business units. However, the chairmen were also a concern regarding conglomerates’ market position with respect to its main competitors that were TATA and Reliance group. All these competitors were eradicating their declining low-margin businesses and manufacturing firms and were now the concentrating on innovative high-margins and high-growth investment opportunities.

Now Birla group must also scrutinize their business unit and eliminate those units that are becoming a stain on Birla’s company portfolio and should invest on its cash cows business units. By looking at its competitors Birla group, has also diversified its production in VSF that is viscose staple fiber that is use in place of cotton in the making of the dress and high-quality apparels. Now the Birla’s are making their strengths by seeking several opportunities into fiber industry.

Industry analysis

Birla group can diversify their business into automobiles, food and beverages business, real estate and developing companies. Birla Group should mainly focus on diversifying its consumer goods and service industry.

Sector

The company already exist in the manufacturing sector through its chemicals, textile and fiber business units which would support its entrance in the automobile industry. Birla group can go for all the sectors present in the automobile industry by offering 360 degrees extended products in the market. From two scooters and motorcycles that falls under the category of two wheelers to the commercial and passage vehicles for all classes are existing in India.

Geography

Geographical factors play a very crucial role in the diversification strategy. Geography will help the company in selecting the region of its target market, in this case Birla group would take a hybrid of local and global market as its geographical region. In India Jamshedpur, Pune, Luckow, Delhi, Mumbai and Bangalore, however internationally Birla Group would go for their automobile diversification in Thailand, Indonesia, and Philippines.

Growth/income

As it is focusing in the developing countries so the company would go to promote its products to the middle class and lower class citizens living in big cities of the respective countries.

Birla’sstrategy to avoid conglomerate discount

In Conglomerate discount, Birla’s conglomerate at risk regards its overall corporate financial value. In order to get rid of this situation, the company would highly concentrate on the combined value creation of the automobile business with its other existing units by innovative use of technology.

Possible for a conglomerate to become fully diversified

A conglomerate is a group of different companies that means that it will be highly strong in terms of finances and managerial practices. These are the characteristics that could make any company to move into a fully different business and get succeeded in it. As far as Birla group is concerned, same strategic characteristics would make it successful in every sector.

Diversification create value for the Birla Group in India

Diversification in India will initially provide a sort of market standing risk to Birla group, but it seems difficult due to Birla’s strong roots in the domestic since independence. They possess strong brand market equity in India which will support their new sector penetration. As the conglomerate has plan to move into the automobile industry with some innovation i.e. biogas and ethanol gas which would be highly encouraged by the low-income groups so the diversification will be beneficial in India....................

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Established in 1857, Birla Group has become one of the largest conglomerates in India. The company has invested in a wide range of industries, including textiles, cement, tea, sponge iron and aluminum, and dozens of smaller companies. Death of a President Birla in 1995 shook the company. His son, Mangalam Birla Kumar, took over the age of 28, and after a period of economic reforms in India, redirected the focus of investment group. Along with the increase of investment in a relic of industries such as cement, sponge iron and carbon, the group invests in new industries, including viscose staple fiber, non-ferrous metals, branded apparel, and financial services. The group reformed Birlafiber can be viewed as the following models General Electric in about mid-1980, with a mixture of old and new, not knowing their future direction. Rival Indian conglomerates such as Tata and Reliance have also changed with the economic reforms of the period. They shed a dying low-profit enterprises and industries, and focused on the new high-margin, high-growth investments. Nevertheless argues that "Birla # 1," its slogan for generations is the group actually still number one, or is it left behind its more aggressive rivals? "Hide
by Venkat Subramanian, Richard Farmer Source: University of Hong Kong, 40 pages. Publication Date: June 23, 2010. Prod. #: HKU910-PDF-ENG