Diversification: Success Stories – Business Ideas
The Murugappa Success Story :
The Rs.24,300 crore Murugappa Group, one of India’s leading business conglomerate is today a 115-year-old entity with 28 businesses, including 11 listed companies. The group has a workforce of over 32,000 employees.
So how did this group come to be a formidable force within the Indian business world? The answer: Carefully thought out Unrelated Diversification and responding to the needs of the market.
The foundation of the successful Murugappa enterprise was laid way back in the 1900s when young A.M. Murugappa Chettiar started as an apprentice at his uncle’s money lending business in Burma (now Myanmar). He later started a money lending and banking business in coastal Moulmein in 1915 in partnership with Ramanathan Chettiar, under the name AMMRM. Later, Murugappa Chettiar bought out his partner.
After having gained a strong foothold in finance, Chettiar diversified into textiles, rubber plantations, insurance, and stockbroking between 1915 and 1934. He also took his businesses to Malaya (now Malaysia), Vietnam, and Ceylon (now Sri Lanka).
The Strategical Move
The firm strategically moved its assets to India in 1941, just before the Japanese Invasion of Burma in World War II, where Chettiar had to start from scratch—a move that would herald the group’s success. The enterprise moved out in different directions, successfully anticipating the business needs of the time. The Murugappa opened a sandpaper plant, built steel safes, opened an insurance firm, and went on to acquire EID Parry India Ltd—an acquisition that grabbed headlines way back in 1981.
Today, one can live the “Murugappa” life, as the conglomerate pretty much offers everything for the common man. The diverse interests laid the foundation for one of the best-run and largest family-owned businesses in South India. In fact, one can go as far as saying that India’s Murugappa is equivalent to Virgin in terms of its diversification strategies. This brings us to another successful Diversification strategy of all times.
This has become a household name in the world.
Under the strong and able leadership of its founder, Sir Richard Branson, the Virgin Group has pursued an opportunistic strategy to build a company with an estimated annual sale of over US$10 billion (and growing). The Group started from scratch in 1968, since then, it has tried a series of strategies over the next 30 years. Branson’s aim was to find opportunities to grow the business. The trial-and-error process was strategic rather than accidental, and this became one of the key elements for the brand’s success.
The brand first started off with Virgin Records. The then young Richard Branson developed a small record mail-order business in 1969 to take advantage of the end of resale price maintenance in the UK. He opened his first record shop two years later and consequently developed it into the Virgin Megastore chain.
At the same time, he was attempting to develop a record label by signing up various pop artists of the time, which led to Virgin Label is one of the most successful enterprises ever. He then met an entrepreneur wishing to develop an airline business that led to the birth of Virgin airline with its first route to New York in 1984.
In the later years, the company diversified into a variety of business ventures – from Virgin Bride and Virgin Cola (although the cola enterprise tanked owing to serious competition from the market leader of all times-Pepsi and Coca Cola) to Virgin Trains and Virgin Mobile and even Virgin finance.
On basis of the Virgin success story, there are several lessons to be learned in terms of able leadership. These are:
Don’t be afraid to diversify. The key to the tremendous success of Virgin is unrelated Diversification. Of course, there are success stories in Related Diversification as well.
In terms of its strategy, Virgin Group claims to examine business opportunities carefully and responding to the needs of the time. Hence, the successful unrelated diversification, in anticipation of the needs of the market.
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