Impact of Family Business on the Overall Business Growth in the India and the World
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
Introduction:
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
SCMHRD- Foundation Course-MBA Batch 2011-2013
Topic- Impact of Family Business on the overall business growth in the India and the world
Introduction:
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
Bibliography: www.google.co.in www.ifb.org.uk www.bvp.com/india www.ifera.org http://finmin.nic.in