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Asian Tribune is published by E-LANKA MEDIA(PVT)Ltd. Vol. 20 No. 104

Are joint family owned business disintegrating?

By *R.K. Bhatnagar - Syndicate Features

Are Joint Family owned Business Houses disintegrating? Old order changeth yielding place to new is the adage we are familiar with for ages.

The Reliance battle after the demise of Dhirubhai Ambani ended only after Mukesh and Anil agreed on the separation plan. Now the two wheeler giant, Bajaj Auto, is all set to be carved into separate auto and finance entities, to be headed by group chief Rahul Bajaj’s sons Rajiv and Sanjiv respectively. A plan for demerger to utilise the company’s cash surplus will be put before the Bajaj Auto board in the coming months.

As per the plans, Rajiv who is currently the managing director of Bajaj Auto and credited for turning around the company, would continue to look after the core automobile business. The financial services company is expected to be headed by Sanjiv, a management graduate from Harvard.

In the last century, Delhi had two big business houses headed by two brothers Sir Sri Ram and Sir Shanker Lal. They are divided now into small segments with the third generation, each unit folding one by one. There must be something in the air that’s triggering this epidemic of family battles in Corporate India.

The Birlas launched on all out offensive against their one time confidante turned alleged usurper Rajendra Lodha. The patriarch of BPL Group, TPG Nambiar took his son-in-law Rajeev Chandrasekhar to court over control of BPL.

The Chhabria family, which controls the liquor major, the Shaw Wallace (SWC) among a host of other companies is witnessing a battle between the late Manohar Rajaram (or Manu) Chhabria’s mother, Rani Rajaram and his wife, Vidya Manohar Chhabria.

In the aviation sector, two major private airlines owned by and promoted in the nineties by Nasir A Wahid and B.K. Modi closed business following non-professional management by family members. Only Jet Airways owned by Naresh Goel from the early entrants has weathered all storms mainly because of running on sound business lines.

The Deccan Airways has changed the aviation idiom with its professional and innovative approach. Several budget airlines have followed its lead though some of them are facing the music.

Chairman of Godrej group, Adi B Godrej, says the family concept in business is as old as commercial enterprise itself. Yet, popular myth, which conveys that these enterprises as capricious, short-lived and small, is by and large not factually correct.

Worldwide as in India family owned businesses have survived multiple generations. What is more they have grown to become multi billion dollar corporations and continued to make significant contributions to the economy.

The reader may be surprised to learn that the oldest family- owned business still in operation is the Japanese construction company, Kongo Gumi, founded in 578 AD. It is currently managed by the 40th generation!

There are more than 100 family businesses that are more than 200 years old. Many family businesses have attained considerable size too. The largest retail company in the world, Wal Mart is a family business. Worldwide, there are around 200 family businesses with annual revenues of at least Rs.8, 800 crores each.

Family owned businesses have played a crucial role in the economy of most countries. Much of the retail trade, the small scale industry, and the service sector are run by family business.

Further, family managed businesses employ half the world’s workforce and generated well over half the world’s GDP. In the United States, 24 million family businesses employ 62 percent of the workforce and account for 64 percent of the GDP. In India, it is estimated that 95 percent of the registered firms are family businesses.

Family enterprises existed in India since as long ago as recorded history. With time, the contribution of family businesses has gone beyond simply paying taxes and employing people. During the last 100 years or so, Indian family businesses have made significant contributions in three areas: the freedom struggle, lowering transaction costs, and ensuring broad basing of Indian industrial base.

Despite all the succession battles and break ups we hear and read these days, Adi Godrej sees a bright future for joint family concept in ownership pattern. He, however, has a mantra for success of joint family’s business.

His “Three R’s” for success are modern management and technology, long term, performance focused strategies and corporate governance. A willingness to change, learn and excel is also a pre-requisite for survival and growth.

Many Indian Business Houses have already displayed this willingness in substantial measure. And in the process have become Indian MNCs on the prowl for Mergers and Acquisitions (M&A).

* R.K. Bhatnagar - The writer is a former Press Secretary to President R Venkataraman

- Syndicate Features -

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