Profiling The Business Of Reliance Industries Limited Commerce Essay

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The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is Indias largest private sector enterprise, with businesses in the energy and materials value chain. Groups annual revenues are in excess of US$ 58 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India.

Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain.

The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail and special economic zones.

Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products.

Major Group Companies are Reliance Industries Limited (including main subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure Limited

Reliance Industries Limited (RIL) is world's leading and India's no: 1 Private Ltd. Company. RIL group is a highly diversified group and is in to multiproduct business like oil / gas exploration, retail of petro / consumer products and mfg. of petrochemical / refining and textile products. Also, in to infrastructure and transportation sectors. The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest private sector enterprise, with businesses in the energy and materials value chain. Group's annual revenues are in excess of US$ 44 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India.

Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain. The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail and special economic zones. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. Major Group Companies are Reliance Industries Limited (including main subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure Limited

(source : oppapers.com)

EFFECT OF GLOBALIZATION ON INDIA'S ECONOMIC GROWTH

As a new participant in the globalization wave, India went through several structural and policy changes only in early 1990s, even if the awareness of need for opening up country's borders was started in late 1980s, when Mr. Rajiv Gandhi was at the helm of policy design. With almost 20% devaluation of the Indian rupee in 1991, the process began that for a while slowed down a little but rarely anyone was in doubt about its existence. The recent reports show that Indian economy grew at the record breaking and astonishing pace of 8% growth in real GDP in 2003-2004. The real question is how did the economy that was an "almost autarky" from 1950 to 1985 period, reached to such a realization that gains from trade are there to reap and the economic transition necessary for globalization is a pre-condition for wider economic growth? This paper attempts to investigate if globalization is a cause of India's economic growth and if the new culture of trade policy change in India is there permanently or temporarily.

The question of 'India in globalisation' is relevant in a fundamental manner. It is important in itself on account of its billion-strong population, its enterprises and its development model. Modern India nurses the ambitions of a continent and has the potential of a double gamble:

The emergence of world-class Indian companies busy developing specific strategies to seek realignments and strategic partnerships in world network capitalism and aiming at becoming 'price-makers' in their niche markets.

Setting up a new development model for 'emerging' countries, which is not only designed to compete (and cooperate) with the Chinese model but can also be exported to developing countries of the South and which seeks above all to avoid the Manichaeism proposed to poor countries, viz. the deadlock of import substitution vs. a dependent integration into the hierarchical world structure of liberalism.

No doubt a narrow path: India has the necessary industrial assets, the capacity to test its products in situ, the intellectual and human capital needed to entertain such an ambition, while it has to handle the issues of economic redistribution and social cohesion, with their strong and structuring Indian specificities. Economic globalisation of India has materialised as major changes in trade (imports of equipment as well as opening of opening of the domestic market), has combined with new regulatory and industrial policies, been accompanied by new World Trade Organisation (WTO) agreements and recent evolution on Foreign Direct Investment (FDI) policies. :

IMPACT OF GLOBALISATION ON INDIAN COMPANIES

If I were to summarise in one word as to what is Globalisation & Liberalisation is leading to …….. I will say 'Competition'.

The + ve impacts of Gglobalisation. It will raise standards of

Human rights

Law

Ethics

Corporate Governance

Globalisation at customer level means….the

Customers have easy access to information on Brands & Services therefore they have become more aware

Tastes of customers are converging

Whole world has become 'one single market'

Customers have become more discerning & assertive.

Customers want better & better product & services, at lesser & lessor cost.

Customers demand greater 'value for money'

Globalisation at manufacturing level means

There is global sourcing

Integrate manufacturing

Scales have become high

Customers - Manufacturers & Suppliers are linked completely.

At the Trading Level with the Advent of WTO

Trade barriers are falling

Tariffs are reducing

Good commercial practices are emerging

At the people level

Skill sets are changing

Free movement of people

There is virtual war for talent.

Suggestions for companies of all size

Indian companies must align with the global trends

Identify desired skill sets and competencies, classify HR as 'Real Talent' and 'must keep' categories and strategies to motivate them, excite them and retain them.

To manage talent - first build a database of employee evolution. Start with the employee's current strength and his value for organization, potential future role, gap in skills, coaching and mentoring requirements.

Development policies and compensation systems should be put in place.

Build leaders within organisation, within this talent pool.

Corporate Governance at Reliance

At Reliance, it is a belief that as its move closer towards its aspirations of becoming a global corporation, its corporate governance standards must be globally benchmarked. That gives RIL the confidence of having put in the right building blocks for future growth and ensuring that RIL achieve its ambitions in a prudent and sustainable manner. RIL are committed to meeting the aspirations of all its stakeholders. This is demonstrated in shareholder returns, high credit ratings, governance processes and an entrepreneurial, performance focused work environment.

Reliance customers have benefited from high quality products delivered at the most competitive prices and employee satisfaction is reflected in the stability of senior management, low attrition across various levels and substantially higher productivity. Above all, RIL honoured to be an integral part of India's social development. Details of several such initiatives are available in the section on Corporate Social Responsibility.

Traditional views of governance as a regulatory and compliance requirement have given way to adoption of governance tailored to the specific needs of the Company. Clause 49 has set the benchmark compliance rules for a listed company and the baseline for governance standards. Reliance not only adheres to the prescribed corporate practices as per Clause 49 but is constantly striving to adopt emerging best practices worldwide. RIL endeavour is to achieve higher standards and provide oversight and guidance to management in strategy implementation and risk management and fulfillment of stated goals and objectives. Corporate governance has indeed been an integral part of the way that RIL has done business for several decades. This emanates from

RIL strong belief that strong governance is integral to creating value on a sustainable basis. Since RIL's IPO 32 years back, have grown revenues and net profit by a Compounded Annual Growth Rate (CAGR) of 28.42% and 30.91% respectively. The financial markets have endorsed this sterling performance as is reflected in a 35.80% CAGR growth in market capitalization in the past five years. In terms of distributing wealth to RIL shareholders, apart from having a track record of uninterrupted dividend payout, RIL has also delivered a consistent unmatched shareholder returns since listing. What epitomizes the impact of all that RIL do is the fact that its shareholder base has grown from 52,000 after the IPO to around 3.6 million now. Corporate governance is a journey for constantly improving sustainable value creation and is an upward moving target.

( source : RIL.com)

International Business Environment affects the development of RIL

India imports about two-thirds of its crude oil requirement. Exploration and production of oil and gas is critical for India's energy security and economic growth. Reliance's oil and gas exploration and production business is therefore inexorably linked with the national imperative. Exploration and production, the initial link in the energy and materials value chain, remains a major growth area and Reliance envisions evolving as a global energy major.

Over the years the E&P industry has registered significant growth, primarily due to spiraling crude oil and gas prices. With growing competition and ever growing demand for energy, especially from developing countries, the focus is on energy security.

RIL began gas production within six and a half years of gas discovery, in comparison to the world average of 9-10 years for similar deep water production facilities. Continuous gas production for about a year, with 100% uptime, once again demonstrates the Company's flawless commissioning and execution capabilities.

In April 2010, RIL entered into a joint venture with the USA based Atlas Energy, Inc. (Atlas) under which RIL acquired 40% interest in Atlas' core Marcellus Shale acreage position. RIL has become a partner in approximately 300,000 net acres of undeveloped leasehold in the core area of the Marcellus Shale region in south western Pennsylvania for an acquisition cost of $ 339 million and an additional $ 1.36 billion capital costs under a carry arrangement for 75% of Atlas's capital costs over an anticipated seven and a half year development programme.

Low operating costs and proximity to USA northeast gas markets combine to make the Marcellus Shale region one of the most economically attractive, unconventional natural gas resources play in North America. The acreage will support the drilling of over 3,000 wells with a resource potential of approximately 13.3 Trillion Cubic Feet equivalent (TCFe). While Atlas will serve as the development operator for the joint venture, RIL is expected to become a development operator in certain regions in the coming years in the JV.

Atlas will continue acquiring leasehold in the Marcellus Shale region and RIL will have the option to acquire 40% share in all new acreages. RIL also obtained the right of first offer with respect to potential future sales by Atlas of around 280,000 additional Appalachian acres currently controlled by Atlas (not included in the present joint venture). The RIL-Atlas joint venture has the potential to become one of the largest prime acreage holders in the Marcellus Shale region.

This joint venture will materially increase RIL's resource base and provide an entirely new platform from which to grow its exploration and production business while simultaneously enhancing its ability to operate unconventional projects in the future.

Additionally, RIL has farmed out 20% PI in the blocks Borojo North and Borojo South in Colombia; and 30% PI in block 18 and 25% PI in block 41 in Oman. The Regional Government of Kurdistan has assigned third party participating interest of 20% each in blocks Rovi and Sarta to M/s OVM; the assigned agreement is yet to be signed by RIL. RIL now has 13 blocks in its international E&P portfolio including 2 in Peru, 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Kurdistan and Colombia, 1 each in East Timor and Australia; amounting to a total acreage of over 93,500 sq. kms.

Sustainability Strategy adopted / used by RIL in Global Markets

Reliance has made sustainable development a cornerstone of its business strategy to achieve sustainable and profitable growth. RIL adopted principle of materiality and prioritized key issues after collective deliberation by management and key stakeholders. These issues include; Energy Security, Health & Safety, Corporate Governance and Transparency, Product Responsibility, Climate Change and Waste Management.

RIL sustainable development strategy draws on proven technology and risk management framework and evolves from the materiality analysis that has been performing over the years. The focus areas under sustainability development strategy include the following:

Energy Security

As a company RIL involved in the energy and materials value chain, so it is committed to responsible use of energy. Its systems and processes ensure optimum energy usage by continuous monitoring of all forms of energy and increasing the efficiency of operations.

Growth through Innovation

RIL firmly believe that growth through innovation will give a big competitive advantage and will be a key differentiator. Companies goal is to make RIL one of the most innovative companies in the world and to achieve breakthrough growth in revenues and profits by creating and implementing sustainable solutions. RIL is developing an innovative ecosystem that builds on organisational systems and processes, talent management, open innovation and world class R&D facilities.

Health and Safety

Safety overrides all production targets - this vision drives RIL to continuously look for ways to achieve zero accident at workplace. RIL vision is to develop a dedicated pool of safety professionals and lead in safety performance across its operations by focusing on process safety and behavioural safety..

Environment

Protecting the environment and preserving natural resources is a high priority area. Through annual environment plan and business targets, RIL identify projects and take action to reduce water consumption and become carbon neutral and achieve maximum possible recycling and reuse of wastes. RIL set targets for key environment-related performance indicators such as material intensity, GHG emissions, air quality, water consumption, effluent discharge, waste generation and disposal, and conservation of bio-diversity.

Product Responsibility

For RIL, product responsibility is to offer efficient and reliable product and services with minimum environmental impact throughout the life cycle of the product from the cradle to the grave. Its product and services are designed, manufactured and delivered with principle consideration of customer safety.

Social Institution Building

Social welfare and community development is at the core of RIL/s Corporate Social Responsibility (CSR) philosophy. RIL strategy is to have close and continuous interaction with the people and communities around our manufacturing divisions to bring qualitative changes and support the underprivileged.

Strategy Milestones

Made significant investments in E&P of O&G to secure energy supplies

Implemented systems to monitor and measure sustainability performance

Introduced sustainability awareness programmes in the intranet

Formed the Reliance Innovation Council

Sustainability report assured by an independent assurance provider

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