Lessons in entrepreneurship from Dubai: Manu Chhabria, an electronics giant
November 2, 2014
At the turn of the century Dubai was a place few people had heard of. Today it is the 22nd most expensive city in the world and home to more than a few entrepreneurs who have found their fortunes in this small, stable corner of the Middle East.
Let’s take a look at some of those success stories and the lesson you can learn from their success:
Manu Chhabria and Vidya Chhabria, Founders and owners of the Jumbo Group
It all began with a single store in 1974 and a view that this tiny little part of the Middle East may just be full of future potential opportunity. Many Chhabria founded the Jumbo Group off the back of the growing consumer electronics market. IN the preceding decade the personal computers designed by Italian company Olivetti gave every day consumers an insight into how they could have a computer at home without it taking up a room the size of a football pitch. It was in the seventies that we saw the rise of Apple, Samsung and many other companies focussed on building technology for the household and not just business – from gaming to the first designs of the mobile phone and dot matrix printers.
Chhabria had a background in consumer electronics having first worked in his families shop in Mumbai trading radio assemblies and electronic components before moving to Dubai in 1973 to run Jumbo Electronics which was nothing more than a sales office. His first deal was to secure a contract with Japanese giant Sony who became the sole distributor for the UAE market.
As fortune would have it the decade also saw the oil boom hit and all of a sudden Dubai was flush with cash. Like all things related to the growth of a consumer market as soon as incomes grow so to do does consumptive spending and it wasn’t too long before Jumbo became one of the UAE’s first mutli-national corporations.
But it wasn’t just through consumer spending that saw an empire emerge. Chhabria was ab le to leverage his contacts and purchase businesses and assets that were realtively cheap and under-valued. There was also not a real connection between the main electronics business and the purchases which included Shaw Wallace (a liqour manufacturer), Dunlop and Falcon Tyres and freight carrier Woodroffe.
It didn’t all go well and the company eventually became mired in legal disputes across a multitude of jurisdictions. Some have suggested that Chhabria’s management style and non-strategic way of dealing with his purchases were to blame and one could argue that on the one hand there appeared to be a focus on diversification across multiple industries. The reality is however, diversification works when it is across a single industry creating new or additional product / services lines. It is hard to see how you could integrate management experience or cost savings across a group as diverse as Jumbo that was into tyres, electronics, alcohol and freight.
That said, after his death in 2002 the company was valued at more than $1.5 Billion and the companies better performing business units are run by his family members with Shaw Wallace merging with SAB Miller.
The lessons we can learn from Chhabria, one of Dubai’s first multi-national entrepreneurs are:
Always look out for exclusive contract opportunities such as the one he was able to negotiate with Sony. It can be a veritable gold mine especially in a developing country – and it would seem that there is still a lot of opportunity out there. He was able to generate wealth fairly quickly that then enabled him to build a solid capital base for future buys.
Look for an economy that is on the up as opposed to at its height or on the way down. Governments are more likely to offer greater incentives to set-up and establish a business in a growing economy as opposed to economies that are at a peak.
Don’t stray too far from your original knitting – in other words diversification is important but if you diversify outside of your original industry then you need to understand the limitations of your experience and knowledge.
Always look for cost savings in back room operations and administration when purchasing a business. Some think that just buying something with an effective sales and revenue line is great business – the reality is you can achieve even greater cost savings across your business by merging functions and back office roles to save more money and more tightly integrate the business together. This creates great opportunities for better efficiency gains.
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