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The strategic alliance between two organizations includes co-operation in business activities with the purpose of benefiting with the strengths of each other and gaining a competitive advantage.
Strategic alliances are critical to organizations for a number of key reasons:
1. Organic growth alone is insufficient for meeting most organizations' required rate of growth.
2. Speed to market is essential, and partnerships greatly improve it.
3. Complexity is increasing, and no single organization has the required total expertise to best serve the customer.
4. Partnerships can defray rising research and development costs.
Through strategic alliances, companies can improve their competitive positioning, gain entry to new markets, supplement critical skills, and share the risk and cost of major development projects.
Founded by Mukesh Ambani, Jio had transformed India’s technology market when it started in 2016 by offering free calls and cheap 4G internet service. Widely welcomed by users hamstrung by slow 3G connections and high tariffs, Jio’s entry obliterated competitions, including Airtel and Vodafone.
India has been going through a rapid digital transformation over the last few years. It will not be wrong to say that Jio has contributed a sizable chunk to this. Since it has played a big role in bringing millions of Indians and small businesses online, Facebook, with this investment, will have closer access to Jio users.
In a joint interview, Chief Revenue Officer at Facebook, David Fischer, and Managing Director of Facebook India, Ajit Mohan said that one possible collaboration would be JioMart. For years, WhatsApp has worked to build tools for small businesses and taken an avid interest in payment systems, and Facebook has also done something similar. By bringing together JioMart, which is Jio’s small business initiative with WhatsApp, Facebook plans to connect people with businesses, shops, and purchase products, seemingly giving them a chance to discover new products.
Based on the Investor presentation by Reliance Industries for Q4 FY 2019-20, Jio is growing at YOY 27% in Revenue & 43% in EBITDA. ARPU was at Rs. 130.6 while data traffic up by around 50% post lockdown imposed by GOI due to COVID-19. Jio is the digital lifeline of around 388 Mn. Users expected to grow at a higher rate in the future considering the potential growth planned in the business model by the entity in the upcoming years.
Indian investors and traders are sensitive to business news which results in an impact on share prices of the entities to a good extent. The same thing noted around 22nd April 2020 when the market was in the position of COVID-19 impact in spite of recovery reflected some extent from 24/25th March 2020 for maximum large-cap entities.
The news came up around 22nd April 2020 and the share price of Reliance Industries surged around 11.92% in one day. Even this impact was not only because of the investment by Facebook but the majority of the impact relates to that.
If one understands that in the COVID-19 situation if the market giant like Facebook is investing in Reliance Jio, the definite results of other investments could be expected and exactly which occurred in the next 2 months after investment by Facebook.
2nd investment by Silverlake resulted in a day jump of around 2.67% while back to back third investment by Vista resulted in an 8.16% one day jump in share price and so on which can be seen through the above infographic.
So, after 10 huge investments till 18th June 2020 the share price of holding company i.e. Reliance Industries was up by around 47.34% and it kept on surging thereafter since the chairman of the company Mr. Mukesh Ambani announced that he has fulfilled his promise to make company net debt-free much well before the expected date. So, one of the purposes of such investments already resulted positively in a short time of 2-3 months.
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