ENTREPRENEURSHIP
ASSIGNMENT
FAMILY BUSINESS-SCOPE
AND CASE STUDIES
Done by:
S.Mathangi 20062746
Dhaval S. Mehta 20062747
J.Mohana priya 20062748
Neha Reddy 20062749
Ayesha
Aarthi
WHAT IS A FAMILY BUSINESS?
A family business is a business in which one or more members of one or more families have a significant ownership interest and significant commitments toward the business’ overall well-being. In some countries, many of the largest publicly listed firms are family-owned.
Family businesses may have owners who are not family members. They may also be managed by individuals who are not members of the family. However, family members are often involved in the operations of their family business in some capacity and, in smaller companies, usually one or more family members are the senior officers and managers. Many businesses that are now public companies were family businesses. Advantages of family businesses
A family-run business is typically one in which more than half the shares are controlled by members of the same family, or one that has been passed between generations.
Starting, leading and working in a family business can bring valuable benefits compared with other businesses - from greater trust between staff to increased flexibility. Without careful management there can also be problems - from poor communication to clashes over pay.
This guide sets out the main advantages that come with running a family business. It also looks at some of the key challenges and suggests ways these can be channelled to become positive forces for business growth and success.
ADVANTAGES OF FAMILY BUSINESS:
If you start or join a family business you're likely to benefit from a range of advantages which you often don't find in other enterprises.
· Common values - you and your family are likely to share the same ethos and beliefs on how things should be done. This will give you an extra sense of purpose and pride - and your business a competitive edge.
· Strong commitment - building a lasting family enterprise means you're more likely to put in the extra hours and effort needed to make it a success. Your family is more likely to understand that you need to take a more flexible approach to your working hours.
· Loyalty - strong personal bonds mean you and family members are likely to stick together in hard times and show the determination needed for business success.
· Stability - knowing you're building for future generations encourages the long-term thinking needed for growth and success - though it can also produce a potentially damaging inability to react to change.
Decreased costs - family members may be more willing to make financial sacrifices for the sake of the business. For example, accepting lower pay than they would get elsewhere to help the business in the longer term, or deferring wages during a cashflow crisis. You may also find you don't need employers' liability
Setting up a family business can be an exciting challenge. Before you go ahead it's important to consider how you'll deal with a number of issues that commonly confront such ventures. Think about how:
· the business' shares will be allocated between family members and if there willbe non-family shareholders
· toensure business decisions are taken for business reasons,rather thanpersonal ones
· the roles and responsibilitieswill differ between family shareholders who are active in the business, those who aren't, and outside shareholders
· to reward family members, whether it will be different to remuneration for non-family members and what problems this could cause
· you will cope with conflict when it arises
· to be open with your family when you are also their boss
· to avoid resentment when deciding who will succeed you
· to ensure that the family's finances aren't entirely dependent on the business
· insurance if you only employ close family members.
Communication and family businesses
Many misunderstandings and potential areas for dispute in family businesses can be avoided if you ensure good communication channels are in place.
The risks are that:
· family members assume they know what other family members feel or want
· personal ties inhibit honest opinions being expressed
· the head of the family may automatically assume control of the business even if they don't have the best business skills
· one family member ends up dominating the business
· family-member shareholders not active in the business fail to understand the objectives of those who are active, and vice versa
· personal resentments become business resentments, and vice versa
· non-family board or management members feel excluded
To avoid these pitfalls, you should foster an atmosphere in which open discussion is welcomed and concerns can be voiced without blame being cast.
There are a number of practical things you can do. You might:
· remove personal issues from business discussions by holding all meetings in a work rather than home environment
· create mechanisms for providing constructive feedback - this can help prevent staff, particularly non-family employees, from feeling demotivated and uninvolved
· arrange occasional away days to discuss the business' strategy and direction
· appoint a non-executive director to the board, or establish an advisory board to provide an impartial viewpoint and help prevent emotions from clouding business decisions
· establish a family constitution creating policies that will guide the family's relationship with the business
Draw up a family-business constitution
One way to successfully manage conflict in a family business is to have a family-business constitution. When well drawn-up, such a document can even prevent conflict occurring in the first place.
A family-business constitution - sometimes known as a family charter or creed - is partly a statement of general principles. It outlines your business' core values and vision, and your family's commitment to them.
Importantly, it is also a practical guide for running the business and a framework you can use to deal with family business issues that have the potential to cause disputes.
The process of drawing up a family constitution should be collaborative, involving everybody with a stake in the business. The document should be regularly reviewed.
Structure your constitution
A typical family-business constitution might include the following sections:
· the business' strategy, objectives and values
· leadership
· management structure
· entry principles for family members
· succession and exit policies
· rights, responsibilities and obligations of family appointments
· rights, responsibilities and obligations of family members not working in the business
· appointment and rights of non-family board members, management and employees
· training, remuneration and appraisal of employees - both family and non-family
· involvement of non-executive directors and other outsiders
· communication channels
· dispute-resolution procedures
CASE STUDIES
HISTORY OF NALLI-THE ICON OF FAMILY BUSINESS:
Nalli, synonymous with Silk, was established in the year 1928 and has been a leader in the textile and retail business for over 80 years. An icon of South India, Nalli has become synonymous with silk or kanchipuram sarees. Nalli's success story has a fairy tale ring to it.It started as a small retail store for silk Sarees in Chennai by a young man called Nalli Chinnasami Chetty in 1928.He was a Kanchipuram weaver who visited Madras twice a week to sell sarees .His son-in-law M.Lakshmiah Chetty managed deliveries from Kanchipuram, while he took care of the retailing front.The family-run shop did steady business for thirty years after which the grandson, Nalli Kuppusami Chetty took over.
In a radical departure from convention, Nalli Kuppusami decided that the shop would do no discount selling Nalli soon built up an image of unrivalled quality at reasonable prices; its roster of loyal clients also grew multifold. An 80 year brand with considerable equity in the South, Nalli's is still the popular destination of choice for silks and wedding sarees today.
Today, Nalli's business focus has broadened, becoming not only a leading sari-retailer, but also one of the foremost manufactures and exporters of fabrics, apparel and home furnishings.
Nalli Silk Sarees is a creation of Ramanathan K. Nalli, son of Dr. Nalli Kuppusami Chetty. Under his guidance and direction, Nalli Silk Sarees has made geographical expansions by opening retail outlets in Delhi, Mumbai, Bangalore, Hyderabad and Vishakapatnam. He has also started an exquisite shopping paradise of about 50,000 Sq.feet in the heart of Chennai, a stone's throw away from the original family run shop(started on 26th April 1951). An iconic heritage brand steeped in tradition, Nalli upholds the core values of Trust and Quality, converting generations of new sari-owners into loyal Nalli patrons.
Branches:
Chennai
Hyderabad
New Delhi
Mumbai
Bangalore
Trichy
Tirunelveli
Coimbatore
Overseas:
USA-San Fransisco
Singapore
Annual Turnover rate:
Nearly Rs.200 crore
Under their management: Nalli Silks, Nalli fashions,Nalli silk emporium and an MNC company, Nalli Silk Inc.
Business Case Study 2 | Amway | Introduction
The History of Amway
What does the word Amway mean? Amway is an abbreviation for "American Way" and was coined in 1959 by company founders, Jay Van Andel and Richard DeVos. Short, unique and easy to remember, Amway has been registered as a corporate name and trademark ever since.
In the following decades, Amway Corporation successfully established itself as a leading multilevel marketing business, built on strong values and founding principles that continue to sustain our company today. The business is built on the simple integrity of helping people lead better lives.
Today, Amway is a multibillion-dollar international business representing freedom and opportunity to millions of people in more than 88 countries and territories around the world. Amway generates US$6.4 billion (September’04 - August’05) in sales at estimated retail through this global product distribution network.
A SOLID FOUNDATION :
The cousins,Rich DeVos and Jay Van Andel actually began a business proposition, when Rich struck a deal with Jay for a ride to school for 25 cents a week. After high school they entered the military, but they planned to start a business together after separate tours of duty. Their relationship has involved them in a business that has lasted to this day
THE EARLY YEARS:
Amway quickly outgrew its original facilities in the basements of Rich DeVos's and Jay Van Andel's homes. In its first full year of business, Amway's sales were more than half a million dollars.
Founder's Fundamentals:
Rich DeVos and Jay Van Andel built the Amway business on the following principles, which they and their families believe constitute a sound foundation for a meaningful life.
VALUES EMBRACED:
1.Freedom
Provides conducive environment in which to live, work, achieve and grow. The Amway business recognizes, supports and expands freedom, which is both personal and economic. It gives the freedom to operate as independent business people and conduct a full-time or part time business.
2.Family
The family is our primary social structure, providing love, heritage and legacy. The Amway business respects and supports the family, as evidenced by the Amway Board of Directors and the prominence of “family” in Amway business. Amway provides the opportunity to build a family-owned business which can be passed on to generations.
3. CORPORATE SOCIAL RESPONSIBILITY:
Corporate Social Responsibility (CSR) means businesses and organisations working responsibly and contributing positively to the communities they operate in. It involves working with employees, their families, the local community and society at large to improve their quality of life. Companies that operate in a socially responsible way strengthen their reputations. In business, reputation is everything. It determines the extent to which customers want to buy from you, partners are willing to work with you and your standing in the community.
The company:
Amway is one of the world's largest direct sales organisations with over 3 million Independent Business Owners (IBOs) in over 80 markets and territories worldwide. It is a family-owned business with a strong emphasis on family values. Its IBOs are often couples. Many of these are raising families. They therefore have a strong bond with children. These families are more than happy to partner with Amway, who, as part of its Corporate Social Responsibility strategy, works with UNICEF, the United Nations Children's Fund.
What does Amway do?
Amway distributes a range of branded products. These products are sold to IBOs worldwide. The IBOs are Amway's links with consumers and the communities in which they operate. The IBOs are self-employed and are highly motivated. IBOs sell to people that they know or meet. They can introduce others to the Amway business.
Typical products that IBOs sell include:
· personal care – fragrances, body care
· skin care and cosmetics
· durables such as cookware and water treatment systems
· nutrition and wellness products such as food supplements, food and drinks.
IBOs play a key part in helping Amway to deliver its Global Cause Programme
Celebrate Achievement:
1959
Amway Corporation founded by Jay Van Andel & Rich DeVos
Launch of LOC Cleaning Product
1963
Gross sales over $6 million
1971
Amway expands
Australia
Europe
Japan
Korea
Thailand
Malaysia
1980
Sales pass the $1 billion mark
1981
Amway Grand Plaza Hotel opens
1997
Sales force surpasses 3 million.
Amway expands to Africa
2006
Nutrilite Health Institutes Center for Optimal Health Opens
We own farms in:
Brazil,
Mexico,
United States
Nutrilite is the world’s leading brand of dietary supplements
A global leader in prestige beauty
Advantages and Disadvantages of family business:
Advantages to the individual:
· Puts you in control of your own destiny