Reliance Industries SWOT and PESTLE Analysis

Strength

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Weakness

1. Limited success outside core business: The profitability of RIL outside core business is not that successful as compared to its competitors. On the outside, diversification might seem like a valid solution to increase revenues but in the case of RIL, they have been eating up resources. In the case of media services, The Voot app has not been as successful as other online media streaming services like Prime video, Netflix or its direct rival Hotstar. Even the JioCinema app is not that competent as the major competitors in this field are Netflix & Prime Video whose core business is online media streaming. The core sectors of RIL have been providing the major chunk of profits whereas the non-core sectors have not been that profitable for RIL.

2. Less investment in R&D: Given the scale of expansion and size of projects being undertaken, RIL investment in getting the latest technology and R&D is comparatively less. Though RIL’s investments in R&D of Rs.1824 crores in FY18, which translates to just 0.004% of its revenues is much higher than its competitors in absolute terms, it hasn’t led to any significant innovation giving a competitive advantage. The lack of product positioning and undefined unique selling propositions has made it open to attacks from its competitors. The company’s present investment in procuring and integrating new technology and R&D is not in tandem with the vision of the company.

Opportunity

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Threat

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Political

1. Political stability in existing markets: RIL operates across several countries on the globe and has to make country specific industrial requirements policies in Oil & Gas operations. Reliance holds a high echelon of political and administrative circles to safeguard the company’s interest and getting the sanction requests obliged. Talking about the Indian scenario, some sort of political patronage is required to successfully establish a mul-billon company. For RIL, in the countries it operates there is a risk of military invasion, but in India there is no disruption of business activities due to military policies or terrorist threats. The level of corruption also affects the business environment due to bureaucracy and interference of government especially in capital goods sector. RIL should also have close association with NGOs, pressure groups and activists’ movement as they play a significant role in influencing the process of policy making to align the community goals with the corporate goals.

2. Importance of local Governments: In most of countries where RIL operates there is not much importance to local governments rather the operations are influenced by the Central government. But in case of India, RIL needs to follow the guidelines of the states and territories to carry out the operational activities smoothly as the local governments have a big say in the policy making. Also, RIL needs to adhere to the resource allocation and time scale norms in the state they are operating. Over or under production may lead to penalties and fines. Also the new Indian policies can be profitable for investment in energy sector.

3. Change in Taxation policies: Incorporation of GST, despite initial hiccups made the system stable and the environment conducive to work. The taxation which was centralized earlier was split into central and state taxes alleviating the State-center fight for taxes. In the last 2 decades, lower taxation policies benefitted Reliance in the western countries resulting in high profit margin and increase spending on R & D. Also some countries other than India are looking at taxation policies to control the carbon footprint in the energy sector. Trade regulation and tariffs play another important role and control the import and export of goods, products and services. These Trade regulations are established by the Country’s government and are subject to change over time. The company needs to closely monitor the countries trade policies and if possible try to earn favored trading partners status to ensure smooth and free trade.

Economic

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Social

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Technological

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Legal

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Environmental

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