Family Business

Module 4

(Selected topics from Chapter 4,(Page 71-75) Text 2) and (Selected topics from Chapter 6(Page No. 111-117) & Chapter 7(Page No. 140-142), Text 2)

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Family Business: Role and Importance of Family Business, Contributions of Family Business in India, Stages of Development of a Family Business, Characteristics of a Family-owned Business in India, Various types of family businesses Idea Generation and Feasibility Analysis- Idea Generation; Creativity and Innovation;

Identification of Business Opportunities; Market Entry Strategies; Marketing Feasibility; Financial Feasibilities; Political Feasibilities; Economic Feasibility; Social and Legal Feasibilities; Technical Feasibilities; Managerial Feasibility, Location and Other Utilities Feasibilities.

Text Books

• Principles of Management – P.C Tripathi, P.N Reddy, McGraw Hill Education, 6th Edition, 2017.ISBN-13:978-93-5260-535-4.
• Entrepreneurship Development Small Business Enterprises- Poornima M Charantimath, Pearson Education 2008, ISBN 978-81- 7758-260-4.
• Dynamics of Entrepreneurial Development and Management by Vasant Desai. HPH 2007, ISBN: 978-81-8488-801-2.
• Robert D. Hisrich, Mathew J. Manimala, Michael P Peters and Dean A. Shepherd, “Entrepreneurship”,8th Edition,Tata Mc-graw Hill Publishing Co.ltd.-new Delhi, 2012

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• *Presentation Contents based on the Text Books

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INTRODUCTION

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• A family-business is one that satisfies any one of the following criteria:
• There is management or ownership control by direct descendants of the founders.
• A number of generations of the same family are involved in management or ownership.
• Two or more extended family members influence the business through the exercise of kinship ties, management roles, and ownership rights, which the owner intends to pass to a family heir.
• A high percentage of share capltal is owned by a family member, elther jointly or individually, and family members are employed in the highest decision-making posts.
• Therc is an expression of intent to maintain family involvement in the future.

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ROLE AND IMPORTANCE OF THE FAMILY BUSINESS

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• Families arc vital and supportive environments for entrepreneurial behaviour.
• Some of the Worlds largest family-owned firms are WaI- Mart Stores, Inc., Ford Motor company, samsung, the Fiat Group, L’Orca1, IKEA, the Tata Group, Havells, anal McCain Foods.
• It has been observed that family support and the presence of self-employed parents are important influences in venture initiation and business ownership.

ROLE AND IMPORTANCE OF THE FAMILY BUSINESS

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• In India, family-owned businesses have played and will continue to play a central role in the growth and development of the country.
• Indian business firms such as Havells India, the Aditya Birla Corporation, and Tata Sons are making acquisitions abroad and expanding their businesses globally.
• Individual associations and relationships can complicate the management and negatively affect the objectives of the family business.
• The issue of succession can cause immense strain w'ithin a family business.
• It is not surprising then that, on an average, only three out of ten family businesses survive to the second generation and only one to the third generation.
• As more and more family businesses are handed down from one generation to the next, more and more family legacies are lost due to lack of planned transitions.

Contributions of Family Business in India

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• India has a rich and glorious history of family-owned enterprises.
• Tatas, Birlas, and Godrej, have run their businesses over a hundred years and influenced the economic and political situation of country.
• Indian family businesses have made significant contributions in several areas.
• Indian freedom movement, import substitution and economic freedom
• Godrej enterprise was started by Ardeshir Godrej in 1897 within a vision to promote india’s economic freedom.

Stages of Development of a Family Business

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The typical family business goes through four stages in its development.

• Entrepreneurial: The Business in customer centric
• Functional Specialized: Growth Phase of family business
• Process Driven: A family business is system-oriented and processes are set.
• Market Driven: The family business matures and is completely driven by market forces.

Characteristics of a Family-owned Business in India

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• Importance of Family Relationship
• Composition of the board directors
• Loyalty
• Dedication of family members
• Male-Dominated
• Dominance of certain trading communities

Various types of family businesses

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• Family –owned business: It is a for-profit enterprise owned by members of a single extended family.
• Family –owned and managed business: It is a for-profit enterprise owned by members of a single extended family. The business also has the active participation of at least one family member in the top management of the company.

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• A family- owned and led business: It is a for-profit enterprise owned by members of a single extended family. The business also has the active participation of at least one family member in the top management as well as on the board of directors of the company.

Idea Generation and Feasibility Analysis

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Idea Generation and Feasibility Analysis- Idea Generation

Brainstorming:

• It is a technique used to quickly generate a large number of ideas and solutions to problems.
• The Brainstorming session is conducted to generate ideas that might represent business opportunities.
• Brainstorming works well individually as well as with a varied group of people.
• A group brainstorming works with 8-12 people and should be performed in a relaxed environment.

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Idea Generation

• Survey Method:
• The survey method is used to collect information by direct observation of a phenomenon or systematic gathering of data from a set of people.
• The survey method involves gathering information from a representative sample population, a fraction of the whole population under study that presents an accurate proportional representation of that population.

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Idea Generation

Reverse Brainstorming:

• This is a method that is similar to brainstorming, with the exception that criticism is allowed.
• It is also called Negative brainstorming.
• In this technique, the focus is on the negative aspects of every idea that has been generated through brainstorming.
• It is also called the sifting process, this process most often involves the identification of everything that is wrong with an idea, followed by a discussion of ways to overcome these problems.

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Idea Generation

The Gordon Method:

• This is a creative technique developed by A.F. Osborn in his book L’arte della Creativity to develop new ideas.
• This method is similar to brainstorming.
• Collective discussion addresses every aspect of the planned product in an uninhibited solution-oriented way.

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Creativity and Innovation

• Entrepreneurial opportunities often come into being because of certain external changes such as technological change, regulatory and political change, social and demographic change and economic change.

Technological Changes:

• Technological changes lead to Entrepreneurial opportunities because they make it possible for people to do things in new and more productive ways.
• Technological changes can take the form of five forms of business opportunity – new products and services, new methods of production, new markets, new ways of organizing and new raw material.

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Creativity and Innovation

Political and Regulatory changes:

• Political and regulatory changes lead to business opportunities by paving the way for new, more productive use of resource or a redistribution of wealth from one person to another.
• Statutory and regulatory requirements create opportunities for entrepreneur to start firms that help other firms and the community to comply with the requirements.

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Creativity and Innovation

Social and Demographic changes:

Social and demographic changes, such as changes in

• family and work patterns
• the ageing of the population,
• increasing diversity at the workplace,
• increasing focus on health and fitness,
• the increase in the number of cell phone and internet users, and
• new forms of entertainment, lead to the creation of business opportunities.

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Creativity and Innovation

Economic Changes:

• Economics forces affect business opportunities by deternining who has money to spend.
• An increase in the number of women in the workforce over the last few decades and their related increase in disposable income is largely responsible for the number of boutique clothing stores targeting professional women that have opened in the past few years.

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Identification of Business Opportunities

• They are three general approaches entrepreneurs use to identify an opportunity.

Observing trends:

• Entrepreneurs can identify business opportunities by carefully observing trends.
• The most important trends to follow are economic, social, technological and political trends.

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Identification of Business Opportunities

Solving a Problem:

• To recognize and solve a pressing problem that customers are facing today.
• From an entrepreneur’s point of view, every problem is a disguised opportunity.

Finding gaps in the marketplace:

• To find a gap between what is needed by the customer and what is actually provided to the customer.
• Finding such gaps can help entrepreneurs develop new products and improve existing ones.

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Market Entry Strategies

• This is also known as a project feasibility study.
• Once a project proposal is identified and if the project seems worthwhile, detailed analysis of the marketing, technical, economic and ecological aspects are undertaken.
• The important facets of project analysis are market analysis, technical analysis, financial analysis, economic analysis and ecological analysis.

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Marketing Feasibility

• This mainly deals with determining the potential market and the market share for the proposed project.
• Market analysis is concerned with forecasting the demand for the product/service under consideration.
• It requires finding a variety of information on consumption trends, cost structures, structures of the competition, the elasticity of demand, consumer behavior and exports and imports.

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Financial Feasibilities

• This mainly deals with determining the risk and return for the proposed project.
• Financial analysis seeks to ascertain whether the proposed project will be financially viable.
• It requires finding a variety of information on the cost of the project and the means of finance, cost of capital, the projected profitability, cash flows of the project, the break even point, the level of risk, the investment outlay and worthiness and projected financial position.

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Economic Feasibility

• This is also called social-cost benefit analysis and is mainly concerned with judging a project from the social point of view.
• The focus is on the social costs and benefits of the proposed project.
• It deals with determining benefits and costs in terms of shadow prices and other social impacts.

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Technical Feasibilities

• This principally deals with determining the technical viability for successful commissioning of the proposed project and for ascertaining whether sensible choices have been made with respect to location, size, process etc.
• Technical analysis requires finding a variety of information on the availability of raw material and various other inputs, the type of technology to be adopted, choosing a suitable layout for the site, building and plant, and choosing the appropriate plant, machinery and process.

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Thank You