Is Indian business in the hands of family entrepreneurs’?

This very good article wrote by my friend Mr. K. Raja Sekar of IBS-B School,kochi…thanks a lot Raja for giving your valuable information and insight about family entrepreneurs.

Is Indian business in the hands of family entrepreneurs’?
Recent years are golden years for Indian economy, which had a potential capital inflow from Foreign Institutional Investors and an emerging market, which is the destination for all the developed and saturated markets to print their footsteps for further development in their businesses. However it is true, in the same time, a dominant place occupied in the financial dailies about the partition among Ambani brothers, the two business giants of India. Every Indian to think about, is Indian businesses are in the hands of family entrepreneurs’ only. To support that we have a large set of family entrepreneur’s in their success way such as BAJAJ group, MAHINDRA group, SATYAM groups (now in the control of Mahindra).

When we search in the pages of history we will see traditional based family entrepreneurs. In ancient times we had farmers under the Jamindars control and it has been transformed into other shapes such as trading castes. Nevertheless India is dominated by the trading castes present across the country (It is predominantly the Aggarwals and Guptas in the North, the Chettiars in the South, the Parsees, Gujarati Jains and Banias, Muslim Khojas and Memons in the West, and Marwaris in the East. Of these, the Marwaris have been the most successful.)
In another scenario,the developed economies not surprisingly having a major contribution of their GDP’s by the family entrepreneurs. Like in US 40% of the GNP shared by the family entrepreneurs and 80% of the business people are family entrepreneurs. The private sectors of France, Italy, and capitalist Chinese societies like Hong Kong, Taiwan, and the marketised parts of the People’s Republic of China (PRC) are dominated by smaller, family-owned and managed businesses. In most of the countries of retail trade, small industry and all manner of services are in the hands of the family, from the corner store to the most high-tech manufacturing.
In contrast to that, the industrial revolution started from late 19th century and end up in 20th century have a proof that Germany, Japan and the US were quick to adopt the corporate form of organisation as they industrialised and today their economies are hosts to giant, professionally managed corporations like Siemens, Toyota, Ford, and Motorola. The family entrepreneurs’ has an advantage of decision making process with their integrity, working apart from office time. Though advantages are there, unfortunately these may create in certain problems. To exceed the rules and regulations are a biggest challenge for them to achieve success.
Because of competitive pressures unleashed by the economic reforms, it is beginning to dawn on Indian businessmen that superior companies are built by superior people; that the success of their company depends on their attitude towards men and women of high ability and advanced training. Familial capitalism is not necessarily a disadvantage or a weakness in the global economy. The inability to professionalise – to bring in and retain outside talent, to institutionalise, to separate the family’s interest from the firm’s interest – is clearly a weakness. In the successful exporting nations, family firms have overcome this weakness. In India, they are still grappling with this issue. ‘Does the joint business family have any advantages?’ One is commitment, which in a simple-minded way gets translated into hard work. The other is continuity. As to continuity, it seems to be often a liability rather than an advantage when you can’t replace a family member who does not perform.’ If there are advantages to life and work in a joint family, why indeed have they split up? Bharat Patel, a corporate executive and an astute observer of Gujarati joint families, suggests an answer. ‘When one brother has only one son, while the second one has three, there is an inherent inequality because the second one gets three times the income and wealth of the first. This situation is exacerbated if the single son turns out to be the brightest and a go-getter and takes the family business to glory. He then feels even more short-changed because the rewards are not commensurate with effort.

Our cultures define our fundamental beliefs about how the world works and forms ways in which we interact and communicate with others and develop and maintain relationships. Doing business in a particular nation requires a focus on a multi-dimensional understanding of its culture and business practices. Understanding those differences and adapting to them is the key.
India is a complex country, and those arriving here to do business will discover that the path to success is often, not very smooth. These form the basis of doing business in India as well as closely connected to risks of doing business in India.

In a global perspective of business, the fifth largest economy in the globe, second largest in Asian continent, a 1.2 trillion GDP output of India are showing a new dimension and leads to the reach our former president Dr. A P J Abdul Kalam’s words and many Indians childhood dreams that India a developed country. Though some problems are there in family entrepreneurs’, we should welcome the younger talents from the family and non-family businesses to reach our destination. A new path will always be not fruitful, but if we are able to accept the pains we would be feeling that we could climb more number Of steps. We should develop ourselves to reach our destination; it may be either in family or non-family businesses.

K. Raja Sekar (IBS-KOCHI)