Reliance Telecom:Related or Unrelated Diversification? A Case Study

Traditional perspectives in strategy literature deliberate the superiority of related over unrelated diversification, as it presumably allows the corporate to exploit the interrelationships that exist across businesses. However, there is still a considerable disagreement about how and when related diversification can be used to build long-run competitive advantage (Markides and Williamson, 1994). The reason being, top managers often view relatedness from the myopic market/industry point of view. These frames offer limited perspectives on how top managers can leverage their core competence. Therefore, synergies across businesses are not sustainable in the long term. However, if we view relatedness from the strategic point of view, sustainability becomes achievable. Reliance Telecom provides some glaring insights on the above. Incorporated in 1966, Reliance Industries started integrating backwards all the way from textiles to naphtha cracking and ultimately to oil and gas exploration. Desperately seeking to maintain its growth, the need of the hour was to go beyond the vertical chain. In the midst of such dilemma was one such emerging opportunity—Telecom. The paper concludes that relatedness or unrelatedness per se arises not on account of differences in market/industry structure; but due to differences in a shared dominant logic (Prahalad and Bettis, 1986).