The Lifestyle of Roman Abramovich - Essay Example

 Roman Abramovich Table of Contents Terms of Reference 3 2. Procedure: 5 3. Qualifications: 7 4. Roman Abramovich: 9 4.1. The Humble Beginning: 9 4.2. The Rise of Roman Abramovich: 10 4.3. The Management Style of Roman Abramovich: 15 4.4. The Lifestyle of Roman Abramovich: 16 5. Conclusion : 19 6. Literary References: 21 : 1. Terms of Reference: The businessman chosen for evaluation is the Russian born Roman Abramovich. The reason for this choice is that Roman Abramovich had very humble origins, and rose from these humble beginnings to become one of the ten richest men in a relatively brief period of time. Roman Abramovich has used a mix of good business acumen, political astuteness and excellent sense of timing of actions to scale these heights. By evaluating the rise of Roman Abramovich the aim is to acquire an insight into the use of these qualities in business along with the leadership qualities required to ensure excellent success in the world of business. Since it is a mix of qualities that have enabled this rise, Roman Abramovich provides the means to learning about several factors that play an important in becoming an extremely successful businessman. 2. Procedure: The means adopted to provide material for the literature review on Roman Abramovich will include a manual search in the local library for journals and books to provide the required articles on the life and successes of Roman Abramovich. The next step will be to use the Internet to access databases like JSTOR and EBSCO to acquire more articles on Roman Abramovich to strengthen the information received through the manual search of the local library. The final step will be to use the Google search engine to locate articles on Roman Abramovich, to provide information to fill up the gaps that may be present in the first two steps of securing the required literature for the evaluation of Roman Abramovich. Search terms used in the Internet exercise will include “Roman Abramovich”, “biography of Roman Abramovich”, “rise of Roman Abramovich”, “business successes of Roman Abramovich” and “political astuteness of “Roman Abramovich”. 3. Qualifications: This literature review has its limitations in that literature used for the study of Roman Abramovich is limited to the articles on Roman Abramovich found in the local library and in the JSTOR and EBSCO databases and the information yielded through the Google search engine. It would have been better to have used more databases to widen the panorama of information on Roman Abramovich, but this could not be done as access to other data bases could not be secured. Another issue is that all the information available is through secondary sources. A personal interview with Roman Abramovich would have provided his perspective of his rise and growth and the manner in which he has been responsible this spectacular success in the business world. This has not been possible as access for a personal interview of Roman Abramovich is not within the scope of this exercise. Thus this study of Roman Abramovich operates within these limitations. 4. Roman Abramovich 4.1. The Humble Beginning: Roman Abramovich was born on October 24, 1966, in the town of Saratov on the banks of the river Volga in Southern Russia. His father was a construction worker. He lost his mother soon from blood poisoning, which was closely followed by the death of his father in a construction site accident. This left Roman Abramovich an orphan before his third birthday (Smith, 2006). He was adopted by his father’s brother and went to live for some time with him in Moscow and from there to his maternal grandparents in the northern region of Komi. Roman Abramovich studied at the Industrial Institute, which was located in the city of Ukhta in Komi. He was drafted into the army and completed his draft time in the service of the Soviet Army. His early life gave no indication of the runaway success that he would have as a businessman, except for his foray into oil business activities trading in oil products that came from the largest refinery in Russia at Omsk in Western Siberia, demonstrating his interest in oil. His business fortunes started to light up when the most powerful of the Russian business tycoons Boris Berezovsky took him under his wing at the age of twenty-six in 1992. This gave him exposure to important politicians on the Russian political stage, which reached its peak when he was brought by Boris Berezovsky into the inner circle of the then President Boris Yeltsin. From this stage, Roman Abramovich's business activities took off and he was the son to turn tables on his master Boris Berezovsky, to take his place as the most powerful business tycoon in Russia (Tran, 2003). 4.2. The Rise of Roman Abramovich: The rise of Roman Abramovich from an orphan to an oligarch and on to one of the wealthiest men in the world reads like a fairy tale, but in reality is a mix of business acumen, making use of opportunities and the choosing of the right political connections. Hard times initially were a part of Roman Abramovich’s early independent foray into the business world, which included sleeping on the floor of the apartments of his friends and living on mustard sandwiches, while he initiated his early business forays of dolls in the Russian market. The early days of Roman Abramovich were spent under the influence of communism and it is hard to understand, where his entrepreneurial drive emanated from or how he kept it submerged in those days when entrepreneurship was hardly a characteristic of value on Russian society (Cuban, 2005). Then perestroika happened in Russia ringing the demise of Communism and the control of the state on several elements of the Russian economy. One such component was Roman Abramovich's favorite oil sector. The public sector undertakings were dismantled by the new Russian government, by selling stakes to private entrepreneurs. Using this opportunity Roman Abramovich bought into the Siberian oil company Sibneft in 1995 investing a hundred million dollars. This deal was to prove to be a brilliant stroke and there is hardly any doubt the deal was eased by his political connections at the Kremlin and other key positions (Cuban, 2005). Around the acquisition of a stake in Sibneft for a meager price and then selling it back to the Russian authorities for a colossal sum revolves the success story of Roman Abramovich. In Russia, the political climate and business rules are far different from that of the Western world, particularly with its liability for abrupt change. Many attribute the success of Roman Abramovich to his ability to understand and react to these sudden changes in an unobtrusive manner. This ability has enabled him to continue his rise in business activities, while the original Russian oligarchs of Boris Berezovsky and Khodorkovsky have fallen, discarded by the political masters in Moscow. In the case of Boris Berezovsky, it is surprising, as he is believed to have assisted Mr. Putin’s succession to Boris Yeltsin, as President of Russia. Yet, it was not long before he was chased out of Russia, which enabled Roman Abramovich to seize the business opportunities created by the vacuum of Boris Berezovsky’s exit. There is speculation that Boris Berezovsky’s forced exit from Russia is because of his lack of understanding of President Putin and the manner in which he works, while Roman Abramovich understood President Putin much better, which made it possible for President Putin and the political machinery to work more at ease with Roman Abramovich than with Boris Berezovsky, which led to the downfall of Boris Berezovsky (The survivor). Roman Abramovich’s success story is linked to the manner in which he has ingratiated himself to the political machinery in Moscow and retained the patronage of President Putin, while the other Russian oligarchs like Khodorkovsky and Boris Berezovsky, who like Roman Abramovich made their millions from the restructuring of the public sector enterprises, are either in Russian jails or exiles from their motherland. It is speculated that this contrast from the fallen Russian tycoons stems from the generosity he offers Mr. Putin’s government from the colossal amount of money he was allowed to make and retain. He provided a stake to the Kremlin in the television company that he acquired from Berezovsky. He has also pledged to finance a new national football stadium (The survivor). Another feature of Roman Abramovich is that though he remains the governor of a remote region of Russia called Chukotka, he has demonstrated no political ambitions, and hence remained from the perspective of President Putin and the political bigwigs of Russia as a person who despite his massive personal wealth is not a political trouble maker, but rather a supporter of the political manoeuvres that occur in the Kremlin. He has always maintained a low political profile in spite of the lavish life style that he maintains. This investment in the political climate of Russia has paid him not simple interest, but compound interest, which has contributed to his spectacular rise (The survivor). The first phase of his growth saw Roman Abramovich make investments in the state owned Sibneft and then expand the investments in the public sector undertakings. At the peak of his investments in Russia his holdings in several Russian companies were believed to be substantial, which included nearly twenty-five percent stakes in the national airline Aeroflot, almost fifty percent stakes in the second largest producer of aluminium in the world RusAl, nearly all of the second largest Russian automobile company GAZ, the metal combine Avtobank and insurance giant Ingosstrakh and many others. When the investment climate in Russia, changed for the worse Roman Abramovich divested many of these holdings to make himself a billionaire several times over (Abramovich Investment Fund Registers in Russia). The most striking event in these divestments was the sale of his stake in Sibfnet. In 2005, Roman Abramovich sold his stakes in Sibfnet to the Russian state controlled gas giant Gazprom for a whopping sum of over thirteen billion dollars (Abramovich Investment Fund Registers in Russia). There is speculation that Abramovich was a willing partner to this deal in assisting the state of Russia to gain back control of a critical element in its economy namely oil. In return, Roman Abramovich was paid the market price for his holdings in Sibfnet (Oil's well that ends well). Roman Abramovich used his company Millhouse Capital for his disinvestments in Russia starting in 2001 and culminating in 2005. In 2006 a reversal of this trend of disinvestment was observed with Roman Abramovich showing interest in making a three billion dollar investment back into Russia in the steel giant Evrez. There is much speculation on this turnabout in Roman Abramovich. People more generous to his entrepreneurial skills claim that he is making use of the opportunity of the better investment climate in Russia and in a sector, which the state authorities may not be considering as strategic component of their economy, as was demonstrated in the proposed tie-up between the European steel giant Arcelor and Russia's Severstal. Those that know of the political shrewdness of Roman Abramovich and his cosiness with President Putin, however, suggest that this move of Roman Abramovich is an indication of the Russian administration’s interest in the steel sector, which is finding expression through Roman Abramovich and will be a repeat of the Sibfnet story, with Roman Abramovich making a lot of money for his cooperation (Prodigal’s return?) The only political inclination shown by Roman Abramovich has been his election as Governor in 2000 of Chukotka, a remote and desolate province in the north-eastern part of Russia. Since then he has pumped money into the province, which has a population of only seventy-three thousand people. By 2002 it is estimated that Roman Abramovich had spent anywhere between two hundred to three hundred million dollars building hotels, cinemas and supermarkets in this remote region (Tran, 2003). The real reason for this move of Abramovich remains a mystery. There are those who speculate that Abramovich’s motives in Chukotka are purely pecuniary, from the tax benefits he has derived and continues to derive for developing a remote area. Others speculate that Chukotka is another example of Roman Abramovich’s cultivation of political support in the Kremlin, through this activity of development of a remote area. Abramovich himself claims that his liberal spending in Chukotka is a means of giving back to the people of Russia a part of the money he has earned from the land. Whichever is true Chukotka has been a smart move from his side that has furthered his rise (Smith, 2006). Roman Abramovich has shown a spectacular appetite and capacity for amassing wealth through his shrewd investments. In today's world, he rubs shoulders with the ten wealthiest individuals in the world. A list that includes Warren Buffet, Carlos Slim Helu, Bill Gates, Lakshmi Mittal, Anil Ambani, K.P. Singh, Ingvar Kamprad, Sheldon Adelson and Patrice Motsepe (Billionaires 2008). 4.3. Management Style of Roman Abramovich: Understanding Roman Abromovich’s sense of management means going back to the formative years of his childhood and stint in the Red Army. Being an orphan from a Jewish family was not an easy life in a nation known for its anti-Semitism. In his early childhood, Roman Abromavich learned to become emotionally self-sufficient in a world that offered him some and laid the foundation for his unobtrusive management style. His next teacher was the Red Army. His stint in the Red Army would have been a traumatic one given the ways in which young servicemen were treated. Yet, it was a key phase in the development of his strong character. It taught him to confront and survive in trying conditions, refining him socially and making him self-reliant and independent. Just the right ingredients for a nascent businessman (Midgeley, 2004). The remarkable feature is that in spite of the rough childhood and stint in the army, his style of management is just the opposite in that his guiding hand is light and almost imperceptible. Yet, there is general agreement that it has proven to be highly effective. The best example is in the way he runs the Chelsea Football Club, which he owns. He hardly interferes in the team talks or the manager and the players of how to do their job, but what is required and each link in the team does what is required of him and maintains strict discipline within the ranks. This is reflected in the words of one player “I don't want to get the sack. We're all well aware that Roman doesn't drink or mess about, and he wouldn't be happy if he knew we were. And he'd know. He's got a super intelligence system for back-up” (Midgeley, 2004). In addition to these qualities is his ability to read the minds of people he deals with whether they be other businessmen or politicians. He has also the humility to submerge his ego when the occasion demands. He appears an informal individual die to his informal dress habits, but within that demure is a razor sharp mind that dreams and works towards success (Midgeley, 2004). 4.4. The lifestyle of Roman Abramovich: Roman Abramovich is among the rich Russians that have settled down in the most exclusive neighborhoods of London. He is the second richest resident of Great Britain and maintains a lifestyle that is the envy of many. The list of elite properties that he owns includes an fifty-four million dollar townhouse in Belgravia, a ten million dollar townhouse in Knightsbridge, and a 440-acre estate in West Sussex that was once owned by the King of Jordan He also owns a ten million St Tropez villa, two super yachts and a Boeing 767 (Murphy, 2007). Roman Abramovich is a lavish spender on things that he likes, which is reflected in the purchase of the Chelsea Football Club. On 2003, he purchased a majority stake in the Chelsea Football Club for a princely sum of $233 million and then lavished another $470 million spent on players to make the club a force to reckon with in the English Premier League and the European Club Football scenario. He continues to underwrite $200 million towards the annual salaries of the club (Cuban, 2005). 5. Conclusion: The rise of Roman Abramovich from a poor orphan to among the richest ten men in the world sounds like a fairy tale, but behind this spectacular success lies a man full of characteristics that have propelled him on towards this path of fame. In a land that needs deft and quick positioning, Roman Abramovich has been fast in spotting opportunities and utilizing them. He has shown the patience to wait for the right opportunity to make his move, and the humility to suppress his ego when the times demand it. His political shrewdness is remarkable ability to locate where the true political power lies and keeps in the good books of it. He is not daunted by setbacks and to go after his vision. With these qualities, it is no wonder that the rise of Roman Abramovich has been spectacular. 6. Literary References ‘Abramovich Investment Fund Registers in Russia’, 2006, Emerging Markets Monitor, vol.12, no.4, pp.8. ‘Billionaires 2008’. Forbes, vol.181, no.6, pp.80-81. Cuban, M. 2005. ‘Roman Abramovich’, Time, vol.165, no.16, pp.63. ‘Oil's well that ends well’. 2005, Economist, vol.377, no.8446, pp. 57-58. Midgley, D. 2004, ‘BEING ROMAN ABRAMOVICH’, Management Today, Nov. 2004, pp.76-83. Murphy, K. 2007, ‘Ruble Rousers’, New Republic, vol.236, no.13, pp.34-38. ‘Prodigal’s return?’ 2006, Business Eastern Europe, vol.35, no.22, pp.4-6. Tran, M. 2003, ‘Roman Abramovich', THE OBSERVER, guardian.co.uk. [Online] Available at http://www.guardian.co.uk/world/2003/jul/02/russia.football (Accessed on April 15, 2008). Smith, D. 2006, ‘Inside the hidden world of Roman's empire', THE OBSERVER, guardian.co.uk. [Online] Available at http://www.guardian.co.uk/world/2006/dec/24/sport.football (Accessed on April 15, 2008). ‘The Survivor'. 2005, Economist, vol.376, no.8439, pp. 56. Read More