CHALLENGES BEFORE INDIAN BUSINESS HOUSES

ABSTRACT The Indian state makes Indians business houses, to overcome basic constraints and succeed with what we have we have to innovate and improvise. This article will describe how the Indian Business and its entrepreneurial spirit play an important role in Indias growth. The article discusses the challenges corruption, terrorism, and unfinished economic reforms that India faces and their impact on growth on Indian Business houses. The Joint Family Structure, a peculiarly Indian phenomenon, has powered the success of many Indian businesses. But that success has, in turn, been enabled by the broad sweep of economic liberalization in India. That success will continue only if the reforms continue and if the risks that could derail the growth terrorism, political corruption/stalemate, stalled reforms and growth that focuses only on the urban rich are contained. We will learn what needs to be done to maintain business as usual. KEYWORDS Business, Joint Family Business; Challenges; Entrepreneur INTRUDUCTION Before 1991, Indian business success was a function of ambition, licenses, government contacts, and an understanding of the bureaucratic system. Decisions were based on connections, rather than the market or competition. Pre-1991 policies were inward looking and geared towards the attainment of self-reliance. During this era, for the Business houses, the capital was limited and India had very few success stories. In 1991, the Indian government liberalized the economy, thus changing the competitive landscape. Family businesses, which dominated Indian markets, now faced competition from multinationals that had superior technology, financial strength and deeper managerial resources. Thus, Indian businesses had to change their focus and re-orient their outlook outward. A few existing Indian

business families adapted to the new economic policy while others struggled. Importantly, a new breed of business was born, one that focused on ICT (Information and Communication Technology) and created wealth for owners and employees. For the old business houses, success had come from the close-knit joint family structure that fosters family values, teamwork, tenacity and continuity. Under this structure, generations lived and worked together under one roof, reaffirming the Weberian values and trust that have built successful businesses. Wealth from the businesses supported the joint family by providing a social safety net for members. In the structure, businesses and families were intertwined though they were also distinct entities with separate rules. Hence, survival of the family became synonymous with the survival of the business. Liberalization, however, changed the very nature of the joint family. If large Indian businesses were to succeed, the family would have to re-orient itself to compete in a global, competitive environment. Post liberalization, IT businesses succeeded because they were customer focused and professionally managed. The old, family-managed businesses, which formed the backbone of the economy, needed to evolve and become more institutional, if they were to extend their life cycle. Below, using the Indian mythology trinity of creation, preservation and destruction, I explain the changes that family businesses would have to make below. Challenges before Indian Business Houses Family Businesses -It is well-known that most large Indian family businesses have outperformed traditional non-family companies, including several MNCs, on metrics of financial stability, performance and sustained growth. Nevertheless, many Indian family businesses of medium size, typically Rs 1,000 to Rs 2,000 crore companies, continue to grapple with challenges related to managing growth within the country and outside. The impediments appear to be arising from inadequate understanding of corporate strategy and a lack of focus on family governance. There are exceptions: Some large family business operations of sizes exceeding several thousand crore, such as the erstwhile Satyam Computer Services, have had to deal with issues emanating from lack of governance while there have been cases of a very high order of governance being demonstrated by smaller players. Mentoring is an effective tool that organizations use to nurture and develop their top family managers as well as to groom the next generation. The mentor's job is to hand-hold and facilitate a system of intense learning; to use experiences as a learning tool through case examples. The family managers at top functions need a sounding board when trying to audit proposals and help resolve relationship management issues between family and non-family managers. Companies like VIP

Industries and HRH Group (a major chain of luxury hotels in Rajasthan) have successfully used the mentoring tool. The essential elements of mentorship in family business include facilitating, coaching, setting goals, auditing performance and sharing experiences. A very important aspect of Indian family businesses which does not emerge as important elsewhere is the issue of family tradition and culture. Sensitivities concerning emotional bonds can be major impediments to implementation of good governance practices. But emotions will have to be addressed and cannot be wished away. Today, about a third of Indian family businesses address this issue against maybe a tenth a decade ago. There can be no defined family governance process unless there is 100 per cent ownership and commitment to an organizations vision, mission and values. These must under no circumstances be conflicting with family traditions, ethos and value. Once this is achieved, the formulation and implementation of a corporate strategy becomes much simple and sustainable.

Another aspect of family business governance is the need to have a professional and harmonious relationship between family and non-family managers. Similarly, only the best within the family must be assigned responsibilities, and must earn the respect of their non-family colleagues through their achievements and strategy and sincerity of purpose. Many family businesses in India suffer from the display of what is loosely called the malik attitude of senior board members from the family. They may display arrogance, which destroys relationships between non-family and family managers, and harms values openly espoused by all. This attitude could erode the value of an organisation rapidly. I have seen some very capable managers leaving a company for just this reason. Terrorism -- As per Wikipedia, Terrorism in India is primarily attributable to religious communities and Naxalite [militant Communist Group] radical movements. It can be stated unequivocally that terrorism creates uncertainty and delays investments in any country. However, we need to comprehend a countrys culture, constitution and its past response to terrorism to consider and assess its fate. Culture is a broad-based word but a powerful concept. Culture is rooted in myths, institutions, television, globalization, upbringing, religion and history. Foreigners have invaded India, but we have learnt to absorb and assimilate them into our society. India has the second-largest Muslim population in the world. Buddhism and Jainism had their roots in India but only traces exist today, as Hinduism absorbed their teachings. The Indian culture is tolerant and can deal with differences. The difference between Europe and India is that Europe is a continent with independent countries while India is one country that has united many divergent countries.

The Indian culture is also resilient and able to respond sensibly to any terrorist activities. As evidence, Indians response to the November 26th 2008 terrorist attack in Mumbai was balanced and restrained. I am confident that, given Indias history and behavior, we will remain united as a country. Political Risk-- India is a complex country with myriad castes, religions and languages. The political parties have evolved to address their needs and give the minority groups a platform and a voice that are heard at the national level. The foreseeable future will be characterized by coalition politics. It is unlikely that either of the two major political parties BJP or Congress will win a majority. This is a reality, but India has the experience to manage the political processes and differences. It is evident that a coalition government slows the reform process. However, it is a positive development, that, irrespective of the coalition government (lead by either BJP or Congress), we have stayed the path of liberalization. Economic Reforms -- Growth needs to continue and India needs another dose of reform, aimed at markets for inputs, from electricity to labor and land They [1991 reforms] freed markets for products. [The Economist, July 2011]. If we are to continue to maintain the growth trajectory, the market for inputs needs to be liberalized. These are difficult political decisions and coalition politics will make the process slower and difficult. It will be easier for the government to address and repair old infrastructure through public private partnerships. India is going through a structural not a cyclical change; hence, the process is slow and driven by the political process. We need investments in power, roads, ports and bridges. An important area of reform is the power sector, as no industry can achieve a successful transformation without sufficient power. This is why the Indian government needs to push through the reforms on power generation, transmission and distribution. Corruption could be viewed as one of the challenge for Indian Business houses, and bring in slow pace of economic reforms. Overspending on the Commonwealth Games and the Department of Telecoms under-pricing of 2G spectrums resulted in heavy losses for the exchequer. Indians frustrations were channeled through the Gandhian leadership of Anna Hazare.

Following is the chart of critical business challenges:

Conclusion: I believe that it varies according to ones viewpoint. Politics is the biggest challenge. Hence, it is essential that the Indian government address issues of corruption and continue with the next phase of reforms to accelerate the decision-making process. Reform will continue but at its own pace. I have observed that companies that have taken risk and stuck to a sound business plan succeed in India. It is difficult to dampen the Indian entrepreneurial spirit. It has grown and competed in the global market despite the controls of the Indian government. The Indian Business houses have shown their ability to adapt to the changing economic environment and deal positively with the uncertainties in the market place. Yes, the joint family structure the spawning ground for entrepreneurs continues to evolve and compete effectively in the world market. But if that success is to be sustained, the economic reforms will also have to continue.

REFERENCES: www.businesstoday.com; www.economictimes.com

Author Name Organization Designation Email Id Contact no Prof. Deepali G Mane. N.D.M.V.PS Karmaveer Adv. Baburao Ganpatrao Thakare, College Of Engineering, Nashik-013 Lecturer (MBA) deepali_3395@yahoo.co.in 9764800058