Building business empires: lessons from India

It was the American approach toward business management that spearheaded the current world obsession with MBA, as the main prequalification for any one who wants to make deeper inroad in today’s global business environment. An MBA from Harvard, Chicago, London Wharton, Stanford, or INSEAD is all that an inspiring youngster needs to secure a good white collar job that pays around $110,879 and prospect of making it to the top. Today, business schools around the world that run such programs are in thousands spreading from Western coast of United States to Japan, making billions of Dollars in the process. Even here in Nigeria we have good business schools such as the Lagos Business School that are doing well in that area. Though many academic studies have found little in the way of correlation between producing a business guru and possession of an MBA, recruiters still value applicants with the degree because it is a positive signal. Prominent individual in the business world from Jack Welch, Bill Gate, to Steve Jobs did what they are today acclaimed for around the globe without having any MBA, likewise thousands of other Gurus around the globe. While cases abound where big corporations, despite their policy of recruiting the top among the MBAs, collapsed; in what many sees as the problem of valuing qualifications over experiences which reach it climax with the collapsed of Enron in the US. Enron collapsed and that of other giants like long-term capital management had sent a strong signal to the corporate world.

One place to look at that provide an interesting case study of it own is India; that provides the best of the two world, the obsession with qualifications that is prominent in the West and conservative business tradition that emphasizes family connection and local knowledge of a typical developing country. As one of the fastest growing economies in the world India has provide ample opportunities for burden entrepreneurs to put their skills into practice; this has provides old businesses such as Tata group, Reliance industries, and Mahindra group to continue their consolidation without muscling the air out of new comers and start ups. One unique feature of Indian business that continue to baffle Western management Gurus is the continuous growth of conglomerates business model instead of the Western style special business that focus on one line of business. Most of the giant of Indian business that are making global headline today are conglomerates; examples here include Tata groups, Reliance industries, Mahindra group, Bharti, and Essar. While the only big prominent Western corporation type of business is Infosys, which specialize in IT soft ware business; companies such as Infosys are the exception rather than the rule in India murky business environment. But family control business is not only unique with India, as is a feature common in almost all developing countries and recently developed ones, for example, Chaebol in South Korea, Dantatas here in Nigeria, Sawiris in Egypt to mention just a few. Though a lot of changes are being witness in the way family business are run with the ascension of young generation mangers who received their education in the West to position previously occupied by their parents and grandfathers. According to some estimates, family businesses account for some 70% of total sales of India 250 biggest private companies.

Business executives such as Jack Welch are rear among the old guard of Indian business builders, some body with firm belief in capitalist mode of production and it emphasis on shareholders over other stakeholders. India executives, still due to their old linkage to socialist and central command system of the Indian economy of the post independence period, are very skeptical towards total embracing of the capitalist shareholder model of governing businesses. A turning point in the India business environment was the liberalization of the economy in 1991 that open the economy to competition. As a result of this liberalization many Western style business corporations evolves, threaten to take away large market share from family control businesses. Despite the success of companies such as Infosys, American style businesses have a long way to go in order to take away market share from the traditional conglomerates that dominate Indian business environment. One feature common to family businesses in India is that they are very cautious in their investment undertakings; sometimes they like to test waters with small investments to be followed later by large chunk investments. This in some ways has prevented them from riskier investments, but at the same time prohibited them from large windfalls that come with such investments when they succeeded. Riskier investment tends to be undertaking by new generation investors who cut their teeth in the western world. In Nigeria people like Dangote provide a good example of successful business individuals who come from wealthier business family but excel because of their adaptation of Western professional conduct of business. Though Dangote is educated to Masters of business level, his empire like that of Tata of India is a conglomerate rather than specialize type of business such as American technology giant Apple.

Despite the Indian resort to the family way of running business, some of the most successful family businesses in the country are run by family members with MBAs. A good example here is the Ambani brothers who manage the now split Reliance group; both the Anil and Mukesh Ambani hold MBAs from the famous Wharton Business School of the University of Pennsylvania. Even in the western world there are still a large number of businesses that are still been run by families, Rupert Murdoch business empire is a classic example. There are hundreds of family businesses in Germany and France that are run as successful as professional businesses, some even better. Thus, having family run business dominating commercial environment is not a bad thing, the most important things for these business is to ensure that they conform to the modern world and adapt to changes as they happen. In Nigeria we cannot say the same thing about family business dominating the top 100 businesses, as many of Nigeria’s top corporations are own by diverse shareholders, but still there are large number of family dominated business in the country. Some of the biggest business firm in South Korea such as Samsung, Hyundai, and Daewoo are own by family groups, yet Nigeria has a lot to learn from these big giants. Even the Western management Gurus are learning a lot of things from how these companies are run. I can recall (in recent years) when Obasanjo government tried to ginger the Nigeria private sector into creating large business behemoth like Korea’s Chaebol; though, the attempt failed because of hidden agendas of some people behind the undertaking. In conclusion, Indian business environment and from there the whole economy has reached the level it is today because of the roles family businesses such as Tata have played over many decades, and I am sure burden Nigerian entrepreneurs can learn one or two things from this.

Post Comment