ABOUT:

1) Birla Group had set out a vision “to be a premium global conglomerate with a clear focus on each business
2) US$28 billion conglomerate realising over 50% of its revenues from outside its home market, the group had
been deemed the best employer in India and among the top 20 in Asia by a Wall Street Journal study in 2007.
3) Despite the frenzied strategic refocus from slow-to-medium-growth value companies to high-growth business
sectors, the Birla Group had remained a step behind key rivals Tata Group and Reliance Group in terms of
revenue and market capitalisation.
4) Y2008: to maintain the existing diversity of businesses or to focus on even fewer companies. The Birla Group had
three flagship companies: Grasim Industries, Hindalco Industries and Aditya Birla Nuvo (“AB Nuvo”)
5) Grasim and Hindalco concentrated on commodity businesses and increased vertical integration to reduce
operating costs
6) AB Nuvo was shifting the balance of its portfolio from value companies to growth sectors
7) The Birla Group pursued a dual-track strategy of improving returns for value businesses while using its cash flow
to expand into growth sectors.
8) The Birla Group aimed to mimic the global conglomerate strategy of the likes of General Electric, but it
remained to be seen whether the Birla Group could outpace domestic challengers, to say nothing of competing
internationally.
9) Did the Birla Group have the right mix of businesses and management practices to achieve the goal of local
domination and global relevance?

PESTEL ANALYSIS [Macro-environment]

POLITICAL 1) Federal government’s deficit restricted the amount the government could invest in
education, healthcare and infrastructure.
2) Inherited a colonial-style bureaucracy from the British
3) Reputation for red tape from the days of the “licence raj”

ECONOMIC 1) One of the most attractive of emerging markets, huge consumption potential
2) Low per Capita GDP

SOCIAL 1) 1.1B people, large percentage lived below the poverty line

TECHNOLOGICAL

ENVIRONMENTAL

LEGAL

PORTER’S 5 FORCES [Industry Analysis]

Threat of new entrants
the bigger the limiting factors to entry,
the smaller the threat for existing players

Bargaining power of Suppliers/Inputs

The fewer suppliers, the more a company would depend
on a supplier, supplier has more power

Bargaining power of Buyers/Customers

The customers will have a lot of power when the
demand is low and many alternatives to choose from.

Threat of Substitutes
Companies that produce goods or services for which
there are no close substitutes will have more power

Rivalry among existing competitors

Rivalry is high when there are a lot of competitors that
are roughly equal in size and power.

COMPANY LEVEL
STRENGTH OPPORTUNITY
1) lower average operating costs than their peers
2) strong innovation in most of their business sectors

WEAKNESS THREAT

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