It was when we went shopping through the streets of Bangalore that we happened to notice that a lot of retail shops belong to the same parent company. Working with Aditya Birla Group for the first time in my life, I was eager and excited to see the name “Aditya Birla Group” wherever I went. But when one of my team mates pointed it out that, unlike in the US markets, these conglomerates penetrate into every possible industry and still succeed that I started thinking about it. I discovered the huge extent to which these big conglomerates have penetrated into the Indian market and have become an indispensable part of Indian life.
In this era, where innovation is the single biggest factor that enables companies to survive, we still see organizations that are not ready to change their business models by trying out highly innovative and transformative ideas. Instead, they capture profits by using simple barrier-to-entry techniques. They flood the market with their own products and make it less profitable for their competitors to enter into their zone of operations. This pattern is very evident with many big Indian conglomerates; their footprints are in almost every industry and they enjoy almost absolute monopolies. I understood this phenomenon when I saw the name “Aditya Birla” on almost every shop or mall that I walked into. Aditya Birla Group has a dominating presence in chemicals, metals, cement, fashion, telecom services, financial services and other retail operations. The same is the case with Reliance and TATA, the first big conglomerates in India.
As a one of the three biggest conglomerates in India, Aditya Birla Group enjoys a fairly monopolistic position in their chosen industries. Retail clothing/fashion is an interesting case in point. The Birla’s have conquered the Indian clothing market by either owning or being the licensee for using and retailing multiple brands that compete with each other. They have Peter England for the mainstream class, Van Heusen for luxury clothing in formals, Allen Solly to satisfy the target segment that lies between the former two and finally Louise Phillippe operating within Luxury formals as well as casuals. These brands satisfy the needs for different classes of people with different price points. Although initially I was a sure that these brands would cannibalize each other, their operational strategy makes it evident that by avoiding all types of competition, they succeed in capturing significant market share and drive huge revenues because of it. It also prevents loss of market share from switching customers as they offer an end-to-end solution within the clothing industry. The same is the case with other Indian players such as the Biyani group and the Singhania group. While the Biyani group controls the Pantaloon or Central malls, their Future Group handle brands like Urbana, Indigo Nation, RIG, Scullers, UMM, John Millers. And then, there is the Singhania group that sells the Raymond, Park Avenue, Colorplus and Parx brands and offers the sharpest looks possible.
The more I read and tried to understand the business strategy of these companies, I was able to see that the underlying principle behind their operations is “Platform Sharing”, a concept first used by automobile manufacturers in the early 20th century. By having almost the same raw materials for their entire product range, they are able to drive down costs by achieving economies of scale. Basically, they offer differential pricing to mutually exclusive customer segments for the same product that is sold under different brand names. In addition, the company is financially sound with highly efficient R&D, production and supply capabilities, and streamlined operations. Last but not least, the brand equity for Birla is incomparable The end-consumer clearly knows what they are paying for even if it comes with a premium pricing as they are ever ready to accept any product that comes from the parent company. Having said that, a benefit of working for ABG is that they offered us a 25% corporate discount for any purchases we might make from their local outlets :-).
To sum up, it was interesting for me to learn more about how these Indian conglomerates companies operate after seeing them through the lens of a foreigner and comparing their operations to other conglomerates around the world.