Impact of Family Business on the Overall Business Growth in the India and the World

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Director’s Project

SCMHRD- Foundation Course-MBA Batch 2011-2013

Topic- Impact of Family Business on the overall business growth in the India and the world

Family enterprises form a backbone running right through the economy. They are particularly prevalent in the micro business sector (firms with fewer than ten employees). But they are also common in the rest of the small and medium enterprise (SME) sector, and some of the very largest private and quoted companies are family firms. Not only do family firms vary significantly in size, but they also differ in the degree of family involvement in the business. Some families will take a role in the day-to-day running of the business, whilst others will take a more hands-off approach with the involvement of professional non-family managers. Family firms also range in terms of longevity from early-stage to long-standing multi-generational firms. Precise definitions of a family business vary, but the firms should have to meet some criteria about their ownership or management. A commonly accepted definition, as worded by “The Family Entrepreneurship Working Group” set up by the Finnish Ministry of Trade and Industry in 20042, is that: • The majority of votes are held by the person who established or acquired the firm or their spouses, parents, child or child’s direct heirs. • At least one representative of the family is involved in the management or administration of the firm. • In the case of a listed company, the person who established or acquired the firm or their families possess 25% of the right to vote through their share capital and there is at least one family member on the board of the company.

India has always been a capital-scarce economy. Historically, large Indian family-run groups like the Tatas and the Ambanis have stepped in to fill this gap, and have moved aggressively to take advantage of newly deregulated markets. But over the last decade, many smaller and regional family groups also have expanded their businesses to achieve national scale in various markets. Many of these companies have done so by partnering with foreign private-equity investors as non-Indian capital has become more widely available—and Indian companies have come to value the guidance private-equity investors can offer. India today is among the most attractive investment destinations globally, driven by a combination of strong economic growth, an improving regulatory environment and favourable demographics. As India continues on its rapid-growth path, several large investment sectors such as financial services, infrastructure and domestic consumption should offer significant opportunities for savvy investors. I believe India’s family groups will continue to be the entrepreneurial growth engines for these sectors, and partnerships between families and new outside investors will turbocharge this growth.

Some Family Led Businesses:
Tata Group:
The Tatas are a wealthy Parsi family in India. Originally a priestly family in Navsari, they have been active in industry and philanthropy since the nineteenth century. The Tata Group, founded by Jamsetji Tata, is one of the largest private employers in India. It has interests in communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The Tata Group has operations in more than 80 countries across six continents and its companies export products and services to 80 nations. Ratan Naval Tata is the present chairman of the Tata Group.

Reliance Industries:
Reliance Industries is the largest private sector conglomerate company headquartered at Mumbai, India. Reliance was founded by the Indian industrialist Dhirubhai Ambani in 1966. Company's petrochemicals, refining, and oil and gas-related operations form the core of its business. Other segment of the company includes textile, retail business, telecommunications and special economic zone (SEZ) development After severe...
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