More than 70 percent of India's market capitalization is in the hands of family businesses. While this is not entirely unusual, the Hindu Undivided Family business (HUF) is unique, and operates under very particular rules and restrictions. It is crucial to understand how these companies operate if you are to do business with them. Most Indians live in "Hindu joint families," where several generations of the male line live under one roof. The eldest male is usually the head of the family and of the family business. Many of the biggest Indian businesses are family dynasties run along the HUF model, though there are signs of change, notably in the IT sector. HUFs can be secretive and inwardlooking, with senior positions chosen for family reasons rather than merit. Work continues 24/7; policies are discussed at the dinner table; middlemanagement is often weak or nonexistent; and little career progression is on offer. If you are seeking a distribution contract, an HUF with a good reputation may be ideal, but for joint ventures you need to ensure that your partner is open to Western ideas of transparency, merit, training, and promoting talent.
The HUF is recognized in Indian Hindu law. All male members of the family, known as "co-parceners," operate the business together under the leadership of the head of the family, known as the Kartha. Legally, the Kartha can commit an HUF company to a joint venture, as its representative, but the company cannot commit to anything without him. In effect, any deal is simply done with the Kartha-and he accepts legal responsibility in person when he makes the deal. There is no legal requirement for this kind of business to be registered, although the family still enjoys the same legal rights as non-family firms. While the Kartha alone has the legal right to manage the business, and has unquestioned authority in relation to all company decisions, the family as a whole has unlimited liability for any decisions that are made. It is common to hear Indians say "old is gold" in reference to the wisdom that age and experience bring to human enterprise. At the same time you will notice an obsession with the movers and shakers in the 18-28 age group who are filling some of the most lucrative jobs and introducing new management models into India. Take the time to recognize and understand the differences in attitude between these groups-the so-called Guru generation and GenNext-when working with them. For India's Hindu majority, the older generation, raised either in family businesses or in the pre-1991 government-controlled sector, operates on traditional Hindu organizational values.
These are deferencebased, and reflect the ancient relationship of the guru and his pupil: you respect and obey your superior, and are obeyed in turn by your junior. The relationship between seniors and juniors within this type of organization is defined by two processes: sradha-unquestioning loyalty and obedience to the senior, and sneha-condescending affection toward and mentoring of the junior. Globalization and the growth of Indian companies into multinational corporations has driven traditional Indian families to adapt-often by sending their children to the world's best management schools. The young guns of GenNext are likely to have studied at an Indian Institute of Management or Technology, in the US, or in the UK. The result is a young workforce equipped with well-tested Indian negotiating techniques combined with the best of Western management and HR knowledge. The guru culture and GenNext often coexist within Indian family businesses that have gone global, but in the relatively new IT, BPO, and R&D (Research and Development) sectors the new breed holds sway. They are highly trained, can operate at a cross-cultural level, and make valuable employees, but you will need to pursue a very proactive HR approach in order to find and retain them. India's growing market is huge and complex: it has over 20 languages, and many social strands that are constantly shifting due to income growth, increased exposure to global media, and sea changes in values and beliefs. Companies that understand the complexity of this vast consumer base will be the most successful in the domestic market and can expect to benefit from great economies of scale.
By 2025, vast numbers of Indians will have risen from poverty to form a middle class of around 600 million people. Domestic consumption is already a major driver of that growth, and there is growing demand for cars, motorbikes, telecommunications, domestic and foreign holidays, healthcare, education, branded clothes, and luxury goods. It is not, however, a virgin market, and foreign arrivals have lost ground by making false assumptions. India's consumers are canny, quality-focused, and price-sensitive, as Motorola discovered when they found no takers for their mobile phones at Rs30,000 ($700). When they cut the price to Rs10,000 ($230), they sold out. India's urban population is wealthier than the rural: the average urban income is US$2,250, while people in the country earn less than half of this. But don't ignore the rural market: incomes there are growing at the same speed as those in the cities, and the population is vast-three times as many people live in villages as in the cities. While the urban market accounts for most luxury branded sales, branded basics-such as household cleaning products, refrigerators, stoves, gas, lighting, and televisions- are all selling in increasing volume outside the towns and cities. The rural market is interested in wellpriced, practical goods that improve their standard of living. And although the population is scattered over a vast area, wireless internet and mobile communications are well developed and are making the market easier and cheaper to target. With more than 750 million people and a market in Fast Moving Consumer Goods already overtaking that in the cities, India's rural areas present an unprecedented opportunity for those prepared to invest in researching, understanding, and targeting the market. India's rising middle class is not the only driver of growth in the country-some of the biggest market successes have been scored by companies selling to the poor. This market is not one indistinguishable mass, but a differentiated market with considerable spending power: useful, good-value products have created markets where no-one thought they existed.
Sahara, a media and financial services corporation based in Lucknow, created a multibillion-dollar empire from para-banking-taking as little as one rupee per week from poor villagers into savings accounts. Today it employs just under a million workers. The Ambani family created a US$45 billion company by buying US$10 mobile phones from China and selling them cheaply to rickshaw pullers and domestic servants throughout India. The mobile phone giant Nokia scored a hit in India by selling a low-cost, dust-proof handset with nonslip strips and a built-in flashlight-it became a firm favorite with India's legion of truck drivers, who found it practical. India is a young country, with a huge population bulge-it has half a billion people under 25 and more than 250 million between the ages of 15 and 25. But almost two-thirds of teenagers are poor and live in the country. The same is true of the 20-24 age group. The relative "big spenders"-of which there are around 7 million-watch MTV, visit multiplex cinemas, hang out in malls, and buy the latest branded games and music players, designer jeans, and grooming products. India's working singles spend an average of $2,671 per year, which goes on essentials, such as food (33 percent), transportation (8 percent), and rent (14 percent). When they marry, their spend dips to $2,509, but more goes on household groceries (38 percent). Money is earmarked for education, publications, stationery, music, and communication.
Our website is not responsible for the information contained by this article. Articleinput.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
Note: This article was sent to us by: Kathy E. at 12272009
1. Start a debt recovery trial if you want your money back
All articles are property of their respective authors. Please read our Privacy Policy!
© 2009 ArticleInput.com.