Family business in india

FAMILY OWNED BUSINESS IN INDIA
Dr SVK

Entrepreneurial companies often become
family-owned businesses

• 'India has third highest number of family-owned
businesses’
Family-owned and family-controlled firms account for
approximately 90% of all incorporated businesses in the
India
• Only 15% of Indian family businesses have robust
succession plan
• In India, 15 of the top 20 business groups are family-
owned!

Indian Family Business
A family business is a commercial organization in which decision-making is influenced
by multiple generations of a family — related by blood or marriage or adoption —
who has both the ability to influence the vision of the business and the willingness to
use this ability to pursue distinctive goals

GENESIS (1868-1932)
 The foundation of
the Tata Group was laid in 1868 by
Jamsetji Nusserwanji Tata.
 The Headquaters of Tata
Group
is situated in Mumbai,
Maharashtra.
 Tata Group was firstly established
as a trading company.
Jamshetji Tata

Pioneers
Jamshetji Tata (1887–1904) Sir Darob Tata (1904-1932)
Nowroji Sakatwala
(1932-1938)
J.R.D Tata (1938-1991) Ratan Tata (1991-2012) Cyrus Mistry (2012-2016) Natarajan Chandrasekaran(2017-)

1877
In 1877, The Central India Spinning, Weaving and Manufacturing Company was
established in Nagpur. This was the first of the big industrial project undertaken by the
Tata Group.
1892
In 1892, Jamsetji Tata established the JN Tata Endowment to encourage Indian scholars
to take up higher studies. It was the first of a multitude of philanthropic initiatives.
1903
In 1903, under Jamshetji Tata the most dazzling personality of Tata group, Taj Mahal
Hotel was build in Bombay.
1907
The Tata Iron and Steel Company (now Tata Steel) was established to set up India's first
iron and steel plant in Jamshedpur in the year 1907. The plant started production in 1912.

Consolidation (1932-1989)
 The Tata group ventured into new areas and built on
the foundations, in spite of the restriants imposed by a
controlled economy.

Expansion (1990 onwards)
 The liberalisation of Indian economy unleashed a
period of remarkable growth for Tata group, in India
and worldwide.
And Many More…

land to entice tata to set
• Land acquisition controversy
Bengal government forcefully acquired agricultural up
manufacturing unit.
Mamta banergee’s entry and Tata’s exit
Farmers of singur, with the support of TMC,force tata to move out.

Speed breaker – Nano on fire!

GENESIS
Reliance industries is started in 1966.
It is Headquartered in Mumbai, Maharashtra.
largest private sector enterprise in India, with
businesses in the energy and materials value chain.
The largest polyester yarn and fibre producer in the
world.
Top five to ten producers in the world in major
petrochemical products.

MUKESH D
AMBANI
Chairman & MD
Nita M. Ambani
Hital R. Meswani Nikhil R. Meswani P.M.S. Prasad P.K. Kapil R.A. Mashelkar Adil Zainulbhai
Mansingh L.
Bhakta
Dipak C. Jain Dharam Vir
Kapur
Yogendra P.
Trivedi
Ashok Misra Raminder S.
Gujral
Board of
Directors

1940 – 1980
The company was co-founded by Dhirubhai Ambani and his brother Champaklal Damani in 1960s as
Reliance Commercial Corporation
In 1975, company expanded its business into textiles, with "Vimal" becoming its major brand in later
years.
1981 – 2000
In the year 1995–96, the company entered the telecom industry through a joint venture with NYNEX,
USA and promoted Reliance Telecom Private Limited in India.
In 1998–99, RIL introduced packaged LPG in 15 kg cylinders under the brand name Reliance
Gas.During 1998–2000, the company completed setup of integrated petrochemical complex at
Jamnagar in Gujarat
2001
In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two largest companies
in terms of all major financial parameters.In 2001–02, Reliance Petroleum was merged with
Reliance Industries. In 2012, RIL set up a joint venture with Russian Company Sibur.for setting up
a Butyl rubber plant inJamnagar, Gujarat. The plant is scheduled to be operational in 2015

Reliance's failed bid to win LyondellBasell could
have put India's richest man firmly on track to
becoming the world's richest man
THE DEAL

The government has slapped an additional penalty of
$792 million on Reliance Industries Ltd (RIL) for
producing less than targeted natural gas from its
eastern offshore KG-D6 block
PENALTY

GENESIS
Aditya Birla Group started in 1857.
Shiv Narayan Birla started cotton trading operations in
the small town of Pilani in Rajasthan.
Ghyanshyamdas Birla (GD birla)-1919-he set the
manufacturing company.
Grandson of G.D.Birla is Aditya Vikram Birla (A.V.Birla)-
1964
Son of A.V.Birla is Kumar Mangalam Birla(K.M.Birla)-
1995.
Headquartered in Mumbai.
Operates in 33 countries with more than 1,33,000
employees worldwide.
US$ 35 billion conglomerate which gets 60 % of its
revenues from outside India.

Baldeo Das
Birla
Gajanan Ashok Yashovardhan
Birla
Rameshwar
Das Birla
Madhav Prasad Birla
Jugal Kishore Birla
Ghyansham
Das Birla
Lakshmi Niwas Sudarshan Siddharth
Krishna Kumar
Birla
Basant Kumar
Birla
Aditya Vikram
Birla
Kumar
Mangalam
Birla
Braj Mohan
Ganga Prasad
Birla
CK Birla
Family Tree

1857-1988
The foundation of the Birla Group of Companies is laid by Seth Shiv Narayan Birla – cotton
trading operations commence at Pilani, Rajasthan and independence marked the
commencement of Grasim
Hindalco is incorporated.Joint venture with Hindustan Petroleum Corporation Ltd (to set up a
three-million- ton refinery, Mangalore Refineries and Petrochemicals Ltd.
2000-Present
Indian Rayon acquired Madura Garments. The Group's cement business was earlier under
Grasim Industries and UltraTech Cement. The two entities have now been merged into
UltraTech Cement to form India's largest cement company. UltraTech Cement was acquired
from L&T in 2004.
• Aditya Birla Group is the majority shareholder of Idea Cellular. Idea Cellular was started as a
joint venture with the group, AT&T and the Tata Group. After
• an IPO on the Indian stock markets, Idea Cellular now accounts for a third of the group's
market capitalization. The company is headquartered in Mumbai.

DISSATISFACTION
 Moneylife Foundation had received complaints
from its members that they are not
receiving their fixed deposit maturity amounts
from two Yash Birla Group companies namely
Zenith Birla (India) and Birla Power Solutions

ABORT
The Chennai-based Apollo Hospitals called off its
joint venture with the Yash Birla Group, citing delays
in obtaining approvals. Interestingly, fixed deposits-
related issues plagued Zenith Birla (India) and Birla
Power Solutions. The latter had problems paying its
tax dues as well.

Indian Family Business
A family business is a commercial organization in which decision-making is influenced by multiple generations of a
family — related by blood or marriage or adoption — who has both the ability to influence the vision of the
business and the willingness to use this ability to pursue distinctive goals

DEFINITIONS
Family business is a corporation that is entirely owned and managed by members
of a single family.
Family firm is a corporation that is entirely owned by members of single family. It
is also known as company owned, controlled and operated by members of one or
several families.
Family business is one in which one or more members of one or more families
have ownership, interest and significant commitment towards business.

CHARACTERISTICS OF FAMILY BUSINESS
Family business are ideal in nature as they are loyal to the
principles of the founder and thus ensure uniformity in their
operations.
Succession is one important decision which determines future
effectiveness in terms of company operation.
family business comprises of family members in business
operations ensuring effective utilization of in house talent in family.
Single minded dedication of family members ensures survival of
family business through toughest times.

Effectiveness and existence of family business is determined
depending on understanding persisting within the family.
Family business may be comprised of one or more then one family in
business operations.
Family members who are not contributing or not involved in business
are part of business.
Family business values are reflection of values possessed and
followed by family members.
Members of family have legal control over business.

IMPORTANCE OF FAMILYBUSINESS
Contributing to economic development : family business play
crucial role in economic development of most of the countries. Retail
sector, small scale industry, and service sector are owned by family
business.
Spirit of entrepreneurship : family business as contributes towards
development and has been successful in country like India it paves
way to various families to initiate and bring up new ventures in country.
Philanthropy : family business in India along with their development
have also concentrated towards welfare of general public by investing
on hospitals, educational institutions, constructionof roads etc.
E.g. reliance.

Trust Lowers transaction cost : partnership and other forms of
business involving outsiders usually leads to conflict in long run. In
case of family business as all the parties in family are affected by loss
incurred in company do not involve any sought of conflict and
difference in point of view arises they try and solve it internally in the
family ensuring business is not affected by the same.
Small, nimble and quick to react : as managing team size in family
business is small compare to other form of business decision making
process involves less period of time which helps to take timely
decision.
Information as source of advantage : as family business is private
firm it is not required to take decision in accordance with pressure from
other sources and strategies of business need not be revealed to
outsiders of business.

3 CIRCLE MODEL OF FAMILYBUSINESS
Ownership
BusinessFamily

3 CIRCLE OF FAMILY BUSINESS
Business system : comprises of start up, expansion,
formalization and maturity of business.
Family system : youngbusiness family, entering
business family, working together etc.
Ownership system : controlling owner, sibling
partnership, cousin consortium.

GOVERNANCE OF FAMILY BUSINESS
There are three components to governance of family business :
1.Perodic assemblies of family
2.Family council meeting : if the size of the family is small in size than
members of family can meet on frequent basis, when the operation of the
family business expands geographically each team has to choose in
representative for every unit who on behalf of every area can meet on regular
basis to decode on plans, create policies, and strengthen family business
communication.
3.Family constitution : family policies and guiding vision and values that
regulate members relationship in business. Developed plan may be detailed or
simple in nature but every family is benefited by the same.

SUCCESSION IN FAMILY BUSINESS
1. First family succession plan, then business succession plan :
family business plan must recognize and accommodate the needs, goals
and objectives of each member of family. Family succession plan has to
be developed first as if business plan is designed in advance it proves to
be difficult for owner to coordinates goals of family members towards
business.

Family business plan should include following
dimensions
strategies to put business interest ahead of
family business.
Emphasise merit over family position
Income for working members of the family and
shareholders.
The business environment during transition
Treatment of loyal customers
Tax consequences.

2.Family first business or business first family : important issue to be
determined before beginning family succession plan is whether yours is
family first business or business first family. It is often seen that most of the
business fail to succeed when managed by second and third generation of
business.
3.Succession management : business families take advice of business
advisory board who suggest on eligible person for transition. Advisory board
are not experts in managing business but are consultants who suggest
strategies for effective succession management.
https://www.facebook.com/ialwaysthinkprettythi ngs

4.Business valuation : may not be formal written report but is required as part
of annual strategic planning process. Reasons for valuing family business
are as follows :
 Buying or selling shares to employees
 Retiring or selling to other family members
 Planning gifts for hires
 Anticipating estate tax problems
 Providing adequate key man insurance coverage
 Tracking of business plan towards achievement of
results.

5. Buy or sell agreement : is used to transfer share owownership for
buy and sell agreement. This agreement is established between
related parties and shareholders in family.
It is an agreement to transfer a business interest to hires for less than
fair market value
The agreement is real ; it is part of bona fied business arrangements

KEY POINTS TO BE CONSIDERED BEFORE
SUCCESSION PLAN
Quick decision on business plan process will provide more alternatives to the
process.
A child than having right to inherit business should have ability to manage
family business. Children's must be encouraged to out of family business so
that they have better insight about competition persisting in market and
accordingly develop strategies for development of own business.
Establishing an outsider as advisor for family business may prove to be risky
for which experts in succession planning should be chosen from management
team with in the family business.

 Conducting family meeting on regular basis will help establish and keep the family
focused on rules, goals and objective
 Develop non business interest
 Develop financial resources that are independent of business
 Evaluate component successor : which requires to assess whether person to be
chosen as successor has potential to lead the business, will he be accepted by all
members in family, check his willingness to control the business.
 Person who will be chosen as successor should be give an appropriate standard to
be achieved which will help him deign effective strategy and have yardstick to
compare his actual performance with expected one.

Problems
1. The interests of a family member may not be aligned with the interest of the business.
2. The interests of the entire family may not be balanced with the interests of their business.
3. the interest of one family member may not be aligned with another family member
4. Who will take over the business?
5. No exit plan or lack of succession planning
6. Sibling rivalry
7. Pressure to hire family members (Nepotism)
8. Separating Business from Personal Feelings
9. Letting Emotions Run the Business
10. Losing Non-Family Employees
11. Raising capital

APPROACHES TO AVOID CONFLICTS IN FAMILY BUSINESS
Coping approach : which involves adopting to negotiation among family members try and
resolve conflict and agree on common terms.
Arbitrary approach : in this approach the elder person of the family will be allotted with the
power to frame rules and control business activity. But this approach has not proven to be
successful as most of the time elder person in family may not prove to be effective manager
for business.
Managed approach : this approach states that person who has ability to maintain better
relationship with key individuals of business and have ability to understand business and
manage the same should be appointed as lead person for the business.

Measures to overcome family business
challenges and problems
1. Family Constitution or Governance
2. Developing a Succession Plan
3. Family Gathering and Get Together
4. Appointing an outside Board of Advisors
5. Training and orientation
6. Know Your Purpose
7. “Treat each other with grace and respect,”
8. Keep the Lines of Communication Open

RULES TO SAVE FAMILYBUSINESS
Formulate policy frame work rules
Families must serve the business
Future outlook
Accountability addressing the issue
Addressing the issue
Creating shared vision
Rule 1
Rule 2
Rule 3
Rule 4
Rule 5
Rule 6

What makes Indian family business
special ?

Some international Family Businesses

Family business in india

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Family business in india