FAMILY BUSINESS

·         FAMILY BUSINESS
ENTREPRENEURSHIP/ ENTREPRENEURSHIP DEVELOPMENT

·         DR SHASHI AGGARWAL

   INTRODUCTION

1. FAMILY BUSINESS IN INDIA HAS BEEN PRACTICE SINCE LONG
2. THE ORIGIN OF FAMILY BUSINESS IN INDIA IS TRACED BACK TO THE BAZAAR SYSTEM IN THE ANCIENT TIME
3. INITIALLY FAMILY BUSINESS IN INDIA STARTED IN THE FORM OF TRADING AND MONEY LENDING INVOLVING THE HUSTLE AND BUSTLE OF THE BAZAAR
4. CONFINED TO CERTAIN COMMUNITIES OF JAINS AND MARWARIS ESPECIALLY IN NORTHERN INDIA
5. IN INDUSTRY FORM IS RELATIVELY OF RECENT ORIGIN ( BRITISH RULE AND THE FIRST WORLD WAR)
6. CAWASJI DAVAR : FIRST COTTON MILL IN BOMBAY IN 1954
7. INTRODUCTION
8. CONSEQUENT UPON THIS SOME TRADING COMMUNITIES STARTED TEXTILE MILLS IN BOMBAY AND AHMADABAD
9. THE TRADING COMMUNITIES : AGGARWAL AND GUPTAS IN THE NORTH
10. CHETTIARS IN THE SOUTH,THE PARSEES,GUJARATI JAINS AND BANJAS,MUSLIM,KHOJAS AND MEMONS IN THE WEST AND MARWARHI ALL OVER THE INDIA
11. THE MANAGING AGENCY SYSTEM CONTINUED TILL 1970 AS AN INSTRUMENT OF MAINTAINING FAMILY CONTROL OVER BUSINESS ENTERPRISE.

12. IN INDIA THE MAJORITY OF BUSINESS ARE IN DOMINANT CONTROL OF THE FAMILIES
13. ESTIMATED THAT 90% OF THE BUSINESS IN INDIA IS CONTROLLED BY FAMILIES
14. MOM AND POP KIRYANA STORE TO LARGE BUSINESS HOUSES
15. MOST OF BIG CORPORATE BUSINESS HOUSE LIKE TATAS, AMBANIS,BIRLAS,GODREJ,WADIS,MUNJALS,MAHINDRA,THAPARS,MITTAL,SHAPRAJI,PALANJI,JINDALS,ADANIS  ETC ARE CONTROLLED BY FAMILIES

   MEANING

1. FAMILY  +BUSINESS
2. FAMILY BUSINESS REFERS TO A BUSINESS RUN BY A FAMILY
3. INTIALLY WHEN A BUSINESS STARTED IT IS LIKE ORDINARY BUSINESS BUT WITH THE PASSAGE OF TIME,MANY GENERATION OF THE FAMILY GETS INVOLVED IN THE BUSINESS
4. AFTER THAT IT BECOMES FAMILY BUSINESS IN WHICH SIGNIFICANT MANAGERIAL POSITION ARE HELD BY THE FAMILY MEMBERS.
5. FAMILY BUSINESS IS A COMMERCIAL ORGANIZATION IN WHICH DECISION MAKING IS INFLUENCED BY MULTIPLE GENERATION ( FAMILY RELATED BY BLOOD OR BY MARRIAGE)
6. THE MAJORITY OWNERSHIP OR CONTROL LIES WITH IN THE FAMILY ITSELF
7. DECISION MAKING AUTHORITES LIES ONLY WITH THE FAMILY MEMEBERS IN FAMILY BUSINESS
8. TOP OF MANAGEMENT : POLICY FORMULATION AND DECISION MAKING POWER IS CENTRALIZED

   DEFINITION

  THE TERM FAMILY BUSINESS,FAMILY FIRM,FAMILY COMPANY,FAMILY OWNED BUSINESS,FAMILY OWNED COMPANY AND FAMILY CONTROLLED COMPANY ARE USED TO REFER TO A FAMILY BUSINESS

  BARRY : OWNERSHIP CONTROL BY THE MEMBERS OF A SINGLE FAMILY IS KNOWN AS FAMILY BUSINESS

  P DAVIS: FAMILY BUSINESS ARE THOSE WHER POLICY AND DECISIONS ARE SUBJECT TO SIGNIFICANT INFLUENCED BY ONE OF MORE FAMILY UNITS. THIS INFLUENCE IS EXERCISED THROUGH OWNERSHIP AND SOMETIMES THROUGH THE PARTICIPATION OF FAMILY MEMBERS IN THE MANAGMENT

  A FAMILY BUSINESS REFERS TO A COMPANY WHERE THE VOTING MAJORITY IS IN THE HANDS OF THE CONTROLLING FAMILY INCLUDING THE FOUNDERS WHO INTEND TO PASS THE BUSINSS ON TO THEIR DESCENDENTS.

   FAMILY BUSINESS IN INDIA

   MEANING OF FIRST GENERATION ENTREPRENEUR

1.       SIMILAR TO NEW ENTERPIRSE

2.       ACTUALLY THE WEALTH CREATORS AND FRESH LEADERS

3.       WILL HAVE TO FACE THE HURDLES AND THEY CONTINULLAY ASK HOW TO STAY MOTIVATED THROUGHOUT THE DAY AND HAVE IDEOLOGY TO WIN THE LONG ROAD RACE

4.       THEY WILL NOT GET ANY AID BUT USE THEOR INNOVATION AND CREATE AN OWN WAY TO DO THE BUSINESS AND SUCCED IN LIFE ARE CALLED FIRST GENERATION ENTREPRENEUR

5.       EXAMPLES : DHIRUBHAI AMBANI,JEHANGIR RATANJI DAABHOY TATA,SHIV NADAR (HCL INFOSYSTEMS ),LAKSHMI NIWAS MITTAL (ARCELOR MITTEL).GHANSHYAM DAS BIRLA,AZIS REMJI

   MEANING OF SECOND GENERATION ENTREPRENEUR

1.       GETS AN OPPORTUNITY TO LEAD A FLOURSIHING BUSINESS,HIS OR HER ABILITIES AND ACTIONS ARE ALWAYS UNDER THE SCANNER

2.       ENTER THE FAMILY BUSINESS AT MID OR SENIOR MANAGEMENT LEVEL  AND AFTER THEY HONE THEIR SKILL AND DEMONSTRATE THEIR ABILITIES HANDS ON THEY ARE HANDED OVER THE REINS OF THE BUSINESS

3.       CRITICAL TO MAINTAIN THE EXISTING GOODWILL AND MARKET USP,THE SECOND GENERATION ALSO NEEDS TO INNOVATE AND ESTABLISH HIS CORE TEAM AND CONSTANT NEED TO STAY UPDATED WITH THE TECHNOLOGICAL DEVELOPMENT AND THE LATEST TREND.

   FEATURES OF FAMILY ENTREPRENEUR

1. MUTUAL TRUST :ALL THE MEMBERS OF THE FAMILY SHARE THE COMMON ORIGIN,SAME SET OF VALUES,ETHICS AND BUSINESS ORIENTATION
2. HIGH MOTIVATION LEVEL: HIGHLY MOTIVATED TO TAKE THEIR FAMILY,STRONG FEELING OF LOYALTY,HARDWORK,COMMITMENT AND DEDICATION TOWARDS THEIR BUSINESS GOALS
3. INTEGRITY AND TRANSPARENCY :    A VERY HIGH STANDARD OF INTEGIRTY AND TRANSPARENCY
4. CUSTOMER FOCUS : FOCUS ON HAVING CUSTOMERS LONG RELATIONS
5. COMPLETE CONTROL : THE ENTIRE DECISION MAKING POWER REMAIN RESTS WITH FAMILY AS THEY DO NOT AVAIL LOAN FROM FINANCIAL INSTITUTIONS OR RAISE FUNDS
6. OWN CAPITAL : FINANCED THROUGH OWN FUNDS,THE REASON BEHIND NOT TO DILUTE THE CONTROL. INTERNAL FINANCIAL RESOURCES OF FAMILY ARE INVESTED TO MEET THE FINANCIAL REQUIRMENTS,
7. COMPLETE CONTROL
8. RAPID DECISION : DECISION MAKING IS CENTRALISED AT TOP MANAGEMENT
9. ETHICAL VALUES : TRY TO FOLLOW CULTURAL,MORAL AND ETHICAL VALUES OF THE COMMUNITY
10. SOCIALLY RESPONSIBE FOR DEVELOPMENT OF THE COMMUNITY

   ROLE OF FAMILY ENTREPRENEUR

1.       ECONOMIC DEVELOPMENT  : BY PARTICIPATING IN GDP,ASSET CREATION AND WEALTH CREATION

2.       EMPLOYMENT GENERATION

3.       ALSO ENGAGE IN EXPORT BUSINESS. SO GENERATE FOREIGN EXCHNAGE

4.       SOCIAL WELFARE : ESTABLISH SCHOOL,HOSPITALS AND DO CHARITABLE WORK

5.       ENTREPRENEURIAL SPIRIT : GUIDED BY ENTRPRENEURIAL SPIRIT

   ROLE OF FAMILY ENTREPRENEUR

§LOWER COST :

1.       WANT TO GROW AND EXPAND

2.       FEEL CLOSE ASSOCIATION

3.       COMMITMENT AND LOYALTY

4.       TRY TO AVOID CONFLICTS

5.       REDUCE THE COST

   STRCTURE OF FAMILY BUSINESS : THREE CIRCLE

   STRCTURE OF FAMILY BUSINESS : THREE CIRCLE

1.       EXTERNAL INVESTOR : OUTSIDERS AND OWN PART OF THE BUSINESS. DO NOT WORK

2.       NON FAMILY MANAGEMENT AND EMPLOYEES

3.       OWNERS : WORK IN BUSINESS BUT WHO ARE NOTTHE FAMILY MEMBERS

•                        FAMILY MEMBERS OWN SHARES IN THE BUSINESS BUT ARE NOT EMPLOYEES

•                        FAMILY MEMBERS WHO ARE NOT ACTIVELY INVOLVED IN THE BUSINESS BUT WHO DONOT HAVE OWN SHARES

•                        FAMILY MEMBERS WHO WORK IN THE BUSINESS BUT WHO DONOT OWN THE SHARES

•                        INHABITING ALL THREE CIRCLE ARE OWNERS WHO ARE ALSO FAMILY MEMBERS AND WHO WORK IN THE BUSIENSS

   STAGES OF DEVELOPMENT FOR EACH CIRCLE

§FAMILY :                    STAGES OF DEVELOPMENT

•                                                              YOUNG BUSINESS FAMILY

1.                                              ENTERING THE BUSINESS

2.                                              WORKING TOGETHER

3.                                               PASSING THE BATON

   BUSINESS

1.       START UP

2.       EXPANSION OR FORMALISATION

3.       MATURITY

   OWNERSHIP

1.       CONTROLLING OWNER

2.       SIBLING PARTNER

3.       COUSIN CONSORTIUM

   GOVERNANCE MODEL FOR FAMILY CIRCEL

  FAMILY COUNCIL : ALL ADULT MEMBERS AND THEIR SPOUSES AND PROPER COMMUNCIATION PROCESS AND PREPAREF FAMILY BUSINESS PLAN THAT IS BUILT ON A SHARED VISION AND A CODE OF UNDERSTANDING. POWERFULE FORUM FOR SOLVING FAMILY CONFLICTS AND SUCCESSOR

  FAMILY PLAN : INTEGRATED DOCUMENT AND LOOKS AT THE PAST AND FUTURE OF THE FAMILY. EXPLAINS THE FAMILY HISTORY,FAMILY VISION AND MISSION AND ACTION PLAN.

   GOVERNANCE MODEL FOR BUSINESS CIRCEL

  MANAGEMENT TEAMS: KEY MANAGERS FROM THE FAMILY AND NON FAMILY MEMBERS. INCLUDE : CONTROLLING OWNER AND TOP HUMAN RESOURCES. PLANNING THE DEVELOPMENT FOR KEY MANAGERIAL ROLE IN FUTURES

  PLANNING : BUSINESS PLANS,STRATEGIC PLANS FOR APPROVAL OF THE BOARD OF DIRECTORS. HUMAN RESOURCES AND PERFROMACNE MANAGEMENT PLANS TO SUPPORT EVALAUTING MANAGEMENT SUCCESSORS AND CONTIGNECY PLANS

   GOVERNANCE MODEL FOR OWNERSHIP CIRCLE

  BOARD OF DIRECTORS :. MONITOR THE PERFORMANCE OF THE COMPANY AND ADVISE THE CEO REGARDING DIVIDEND AND REINVESTMENT OF PROFITS

  PLANS : OVERSEES SUCCESSION PLANNING.SETS THE SSTRATEGIC DIRECTIONS

  TEAM OF ADVISORS : ACCOUNTANT,FINACIAL PLANNERS,INSURANCE

   KINDS OF FAMILY FIRMS

1.       FAMILY OWNED BUSINESS :OLDEST TYPE.FOR PROFIT AND OWNED BY MEMBERS OF SINGLE EXTENDED FAMILY

2.       FAMILY OWNED AND MANAGED BUSINESS : SINGLE EXTENDED  FAMILY OWN THE MEMBERS OF VOTING SHARES. ACTIVE PARTICIPATION OF ATLEST MEMBER

3.       FAMILY OWNED AND LED BUSINESS :PROFIT ORGANIZATION

4.       SOLE PRACTIONERS : ONE MAN CONTROLLED TYPE OF FAMILY BUSINESS

5.       ASSOCIATED PARTNERS

6.       FAMILY CONTROLLED AND FAMLY INFLUENCED BUSINESS