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Amazing Business Story: Dhirubhai Ambani

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Dhirubhai Ambani was born on the 28th of December,1932 at Chorwad, Junagadh to Hirachand Gordhanbhai Ambani and Jamnaben in a Modh family of very moderate means. He was the second son of a school teacher. Right from a young age Ambani was aware of the insufficiency in his family so he began early to try his hands in a couple of small business ventures. he was also very active politically.

When he was 16, Ambani had to give up schooling due to his father’s ill health and the poor living conditon of his family (although being the son of a school teacher, Ambani had never been very interested in formal education nor was he so much a brilliant student). Just like many Indians during that time, he travelled to Aden, Yemen, and took up a job.

Aden was one of the busiest ports in the world and offered a lot of jobs in those days. Ambani took up a job as a clerk with A. Besse & Co, which was one of the biggest trading firms in the region. ambani used this opportunity to learn about commodity trading, import and exports, wholesale merchandising, marketing, sales and distribution. In order to even know more, Ambani worked during the night for yet another trading firm, Gujarati trading firm, where he learnt accounting, book keeping and preparing shipping papers and documents. he also acquired the skill of dealing with banks and insurance companies, as well as being familiar with currency trading.

in 1954, Ambani married Kokilaben. That same year, his employer, A. Besse & Co, became the distributor for Shell products, and Ambani was promoted to manage the company’s filling station at the port of Aden. Ambani and Kokilaben had four children, two boys; Mukesh Ambani and Anil Ambani, and two daughters; Nina Kothari and Deepti Salgaocar.

In 1958, Ambani returned to India. This was against the prevailing tide as most Indians were migrating to Britain due to the crisis in Yemen at the time. In India, Ambani discovered he had little capital to go into any meaningful business. The businesses he could attempt with what little he had were to small compared to the dreams that he had. Then, suddenly, an idea came to him. He got in touch withhis Arabian contacts offering to export spices, sugar and other Indian commodities at very low prices. His business focus was on low profits, high volumes and rich quality. Although his profit margin was low, the bulk nature of his exports helped to compensate. Soon orders started coming in and Reliance Commercial Corporation was born.

Just like his business name Ambani grew his business to be dependable and trustworthy. He never failed in keeping a promise and that gave more people confidence to do business with him. His reputation even helped in borrowing of funds for his business.

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He however soon realized that commodity trading could not really take him very far so he diversified into yarn. This is was a very risky venture as prices were known to fluctuate quite often. But Ambani was not deterred by this, rather he was attracted to the great dividends that yarn business promised. Starting on a small scale Ambani was able to learn the tricks of the business and began to grow his business tremendously. He was able to seal to hefty yarn business which provided him the needed capital to go into production.

Ambani had opted to go into textile production and decided to build a textile mill in Naroda, Ahmedabad in 1966. But hardly did he know how difficult this task would be. During the building of factory the valuation of the rupees dropped thereby increasing the project cost. But nonetheless he continued. His aim was to produce the best quality nylon the quickest way possible and in large quantity.

By August of 1966 the construction work in factory was finished, with equipment and machinery being installed. Production started on the 1st of September. But yet another problem reared its head, the company had no buyers in the market because the wholesalers refused to buy Vimal, Ambani textile name, at the instant of other big mill owners. Refusing to accept defeat Ambani bypassed the wholesalers (middlemen)and began to sell directly to the retailers. The doggedness, persuasiveness and smart business strategies of Ambani impressed many people and soon the market for Vimal began to expand. Soon all of India began to wear textiles that came from Reliance factory.

The growth of Reliance was unprecedented; the increase in demand for Vimal led to increased sales hence increased profits. The profit were reinvested to further expand the business by buying better machinery.

In the 1970s Reliance had become huge and thriving, a stark contrast to its starting days, it also received a nod of excellence from the World Bank which further speeded up the upgradation and expansion of all plant operations.

In 1981, Ambani’s first son, Mukesh joined the family business and played a vital role in the diversification of the company into petrochemicals, petroleum refining and oil and gas exploration and production. This move agreed with the long time ambitions of Ambani. While managing  A. Besse & Co filling station in the port of Aden, Ambani had expressed the intention of building his own refinery.

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In 1983, Ambani’s younger son, Anil joined the company and took over as Chief Executive Officer. In 1986, Ambani suffered a stroke which paralyzed his right hand and caused him to slow down while handing over the reins of control of the company to his two sons. Between the mid 1980s and 2000s, Reliance Industry expanded and diversified widely into other sectors like telecommunication, information technology, energy, power, capital market and logistics.

Reliance was the first Indian company to feature in Forbes 500 list, and one of the top 500 companies in the world in terms of revenue.  The company currently has 85,000 employees and is a provider of approximately 5% of Indian’s Central Government’s total tax revenue. Dhirubhai Ambani  died on the 6th of July, 2002, aged 69, after a major stroke.

In November 2004, Mukesh Ambani, the business magnate first son, admitted to having differences with his younger brother over ownership issues. Hence the company was split into Reliance Industries Limited, headed by Mukesh Ambani, and Reliance Anil Dhirubhai Ambani  Group (Reliance ADA Group), headed by Anil Ambani.

The Ambani family are the third richest family in the world with a combined fortune of $60 billion.

I was doing a business consultation with a young lady who wanted to go into a new business when she asked me my opinion about pricing for her products. I advised her taking a cue from Dhirubhai Ambani’s main business strategy; low profit, high quality and high quantity. This strategy is one that has been used time and time again by successful world entrepreneurs; the likes of Sam Walton of Walmart, John D. Rockefeller of Standard Oil etc.

But just as this young lady was stunned and almost offended when I told her to aim for ‘low profit, high quality and high quantity’, many people regard this strategy as nonsense or even a business killer.

Sam Walton bought in wholesale and retailed it out to consumers at very low prices (hence low profit). He simply reasoned that it was better and more profitable in the long run for 100 people to buy a product at $1 than for 5 people to buy at $5. The high number of buyers made up for the low prices.

John D. Rockefeller was brutal in the usage of this strategy, he used it majorly to push a competitor out of the market. John D. never minds to sell his product below the cost price, all he aims to do is to get rid of his competitor; and he always does.

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