Dhirubhai Ambani and Reliance

BUILDING RELIANCE contd...

In the mid 1960s, the Government of India (GoI) introduced an export promotion scheme under which the earnings from the export of rayon fabrics could be used for the import of nylon fiber. This attracted Dhirubhai's attention and he decided to switch from spices to textiles. In 1966, he set up a spinning mill at Naroda 20 kms from Ahmedabad with borrowed funds of Rs 2,80,000 and registered it (Reliance Textile Industries) as a powerloom unit with a paid up capital of Rs 150,000.

He said “I do not consider myself cleverer than my colleagues in the industry. If there was a very large margin of profit, why did they not take advantage of it?”^[1] When the High Unit Value scheme ended in 1978, Dhirubhai focused his attention on the domestic market. During this time, Reliance Textiles was not a very well known name in the domestic market. His first priority was to establish the Vimal^[2] brand, under which Reliance Textiles sold its fabrics in India. An advertising programme was launched to facilitate its entry into the domestic market. Dhirubhai knew that a strong brand image was crucial for winning the consumer's confidence. To achieve this objective, Reliance tried to emphasize the superior quality of its fabric in all its advertisements. Besides this, Dhirubhai also took steps to develop an efficient distribution system for Vimal as he found that the existing marketing channels were inadequate and inefficient.

However, things were not that easy. When Reliance entered the domestic market, it faced lot of resistance from the traditional cloth merchants, as their loyalties lay with the older mills. Confronted with this situation, Dhirubhai decided to move away from the traditional wholesale trade and open his showrooms to tap new markets. He appointed several agents from non-textile backgrounds for the same.

Dhirubhai adopted the concept of company stores from its main competitor, Bombay Dyeing (Refer Exhibit IV), and pursued it on a grand scale. Dhirubhai toured the entire country intensively, offering franchises to shareholders. Dhirubhai promised that Reliance would provide financial and advertising support. In his search for high volumes, Dhirubhai identified a new market - the non-metro urban segment. By 1980, Reliance fabrics were available all over India through 20 company owned retail outlets, over 1000 franchised outlets, and over 20,000 retail stores.
 

^[1] Gita Piramal, Business Maharajas, Penguin Books, 1996.

^[2] Named after Vimal, Dhirubhai's eldest nephew.

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