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,
[Link]-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 [Link].-new Delhi, 2012
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● *Presentation Contents based on the Text Books
 INTRODUCTION
● 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
4 in the future.
 ROLE AND IMPORTANCE OF THE FAMILY BUSINESS

● 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.

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 ROLE AND IMPORTANCE OF
THE FAMILY BUSINESS
● 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
6 to lack of planned transitions.
 Contributions of Family Business in
India
● 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.
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 Stages of Development of a Family
Business
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.

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 Characteristics of a Family-owned Business
in India

● Importance of Family Relationship

● Composition of the board directors

● Loyalty

● Dedication of family members

● Male-Dominated

● Dominance of certain trading communities

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 Various types of family businesses
● 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.

● 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.
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 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