Family businesses show good growth: PwC survey

Family businesses are facing challenges globally and more so in Bangladesh. Five major challenges faced by such businesses in Bangladesh are skill and efficiency, innovation, domestic competition, rising prices of energy and raw material and information management. However, family businesses are thriving better in Bangladesh, with higher growth rates than the global average. Where the global average for growth in family businesses last year was 34 per cent, in Bangladesh it was 53 per cent.

The ‘Bangladesh Family Business Survey 2018’ run by the international consultants PricewaterhouseCoopers (PwC) was released yesterday, Wednesday. While the organisation publishes such surveys every two years, this was the first time it focussed on family businesses in Bangladesh.
A total of 2,953 businesspersons with annual turnovers exceeding five million dollars, from 53 countries around the world, participated in the survey. The interviews for the survey were taken between 20 April and 10 August 2018.

According to the survey report, the challenges to family businesses in Bangladesh are higher than the challenges faced globally. Globally, competence constitutes 60 per cent of the challenges, but in Bangladesh this makes up for 66 per cent. But when it comes to innovation, for Bangladesh the challenge is 63 per cent, less than the global 66 per cent.

In the case of competition, the global challenge rate was 49 per cent. This was 14 per cent higher in Bangladesh, standing at 63 per cent. Bangladesh fared worse when it came to the prices of energy and raw material. The global challenge in this sector was 43 per cent, but for Bangladesh it was 63 per cent. Also, in information management, the global challenge was 39 per cent, but in Bangladesh it was 53 per cent.

The other challenges highlighted in the survey were professionalism, cyber security, family feuds, finance, international competition, corruption, legacy, etc. The survey reflected considerable scope for hope as well. Among the businesspersons taking part in the survey, 50 per cent felt they would be exploring newer markets in the days to come.

Bank loans constitute 94 per cent of family business in Bangladesh, while globally this is 81 per cent. And 63 per cent of the businesses in Bangladesh are financed with capital from local sources, while this is 71 per cent globally. In Bangladesh, 75 per cent of the businesses appoint professionals from outside the family to assist in running the business. This trend is noted in India as well.

The report noted that Bangladesh’s business do not have significant long-term and mid-term plans. On a global scale, 49 per cent of the businesspersons have such planning, while in Bangladesh it is only 34 per cent. Also, 50 per cent of family businesses in Bangladesh have informal planning, while globally this is 30 per cent.

They survey found that 72 per cent of family businesses in Bangladesh have certain policies and procedures in place, as against the 84 per cent global average in this regard.
However, Bangladesh was near the global average when it came to agreements among the shareholders, family councils, arbitration, etc. In Bangladesh, nine per cent of the family businesses report to third-party resolution if required as against the 24 per cent global rate. According to the survey, 25 per cent of the board members in Bangladesh’s family businesses are women. Globally this is only 21 per cent. However, only 14 per cent women are actually on the management team in Bangladesh, while globally this is 24 per cent.

The survey included case studies of four successful business groups in Bangladesh, Rahimafrooz Group, Transcom Ltd, Ananta Group and Meghna Group of Industries:

Innovation and discipline: Niaz Rahim, Rahimafrooz
In 1954, Abdul Rahim started a trading entity focused on garments retail. By 1958, he and his company, Rahimafrooz, entered into a joint venture with British investors in the battery industry as a distributor. By 1990, Rahimafrooz took over the manufacturing operations, becoming the leader in the industry. Since then, the company has grown into one of Bangladesh’s most prominent conglomerates, always focused on exploring new market segments.

In the early 2000s, it started the first highly successful supermarket chain in Bangladesh, challenging the traditional cultural buying habits of households. Rahimafrooz kept expanding into unchartered territories of the automotive aftermarket, power and renewable energy sectors.

The five fundamental values of Rahimafrooz are integrity, excellence, customer satisfaction, innovation and inspiring people. ‘The moral values that he (Abdul Rahim) emphasised continue to be values that we try to hold on to today,’ said Niaz Rahim, one of Rahim’s sons and a Group Director of Rahimafrooz. Emerging out of the company’s values is the inner drive that leads it to focus on creating new markets and taking on non-mainstream ventures.

‘The founder’s belief in taking risks has always inspired us. We believe in going into undiscovered sectors to become market leaders and frontrunners,’ said Niaz Rahim. ‘We will never compromise on our integrity for profitability,’ he added. Having transitioned from a typical FB into a corporate business structure in 1998, Rahimafrooz prides itself on its transparency and integrity.

In 2009, a family council was set up. The family council hosts annual assemblies to keep all members of the family, both those active and inactive in the business, informed on the progress of the company. ‘In times of crisis we debate, discuss, and unanimously make decisions for the company, as everyone is affected,’ explained Niaz Rahim.

Success amidst adversity: Latifur Rahman, Transcom Ltd.
Success through sustainability and respect has guided the way for Transcom Ltd. Having started in 1885 in Jalpaiguri with tea plantations, Transcom has witnessed the challenges of independence in India and Pakistan and later, Bangladesh. During the tough ’50s and ’60s, the company diversified into jute manufacturing and saw immediate success. Post liberation, industrial nationalisation efforts led to severe financial difficulties.

‘I restarted my office with rental furniture and four people. There were times I had less than 100 taka for my family. [Going] from a place of affluence to such hardship taught me a big lesson about the importance of ensuring sustainability and believing in all of my endeavours. There was no question of giving up. Putting my feet up and giving up were not in my DNA. Whatever it is I decide to do, I’ll have to find a way to excel at it,’ said Latifur Rahman, Chairman of Transcom Ltd.
Rahman signed a bartering agreement with the Bangladesh government and Germany to import pesticides for the government and make payments with tea, since at that point of time the Central Bank of Bangladesh had very limited foreign currency reserves to settle the bill. This opened the gates for more opportunities globally. Transcom soon became the official buyer and exporter of tea for one of the largest Dutch tea trading companies in the world. Since then Transcom diversified its business into multiple sectors by partnering, franchising and working with leading global multinational corporations.

In 1983, the name of the organisation was changed from Tea Holdings Ltd. to Transcom Ltd. Latifur Rahman views all those in Transcom Ltd. as his professional family and leads by example by living his values in his day-to-day life, thus enabling the values to permeate the company’s culture and practices. Honesty and transparency are basic requirements for Transcom Ltd, as Latifur Rahman highlights the necessity of maintaining global standards in everything it does, makes or sells. ‘I try my best to create a work environment based on merit-based compensation, respect and empowerment.

Every single person in Transcom deserves respect for their role and contribution,’ said Rahman. Such a philosophy creates an atmosphere of trust and collaboration amongst the management teams in Transcom Ltd.’s various companies. He added, ‘By encouraging senior management members to discuss and learn from one another’s unique channels, a sense of familial cohesion has been cultivated within Transcom Ltd., allowing each of the companies to adapt, adjust, and evolve independently with a strong emphasis on norms and values.’

Through the growth and expansion of Transcom Ltd. Latifur Rahman has incorporated subsequent generations into the businesses. However, joining the FB is not an expectation, and family members are given the liberty to choose their career. Next gens who decide to join the business go through rigorous training to understand the business ethos of the company and how it operates. Given its affiliation with the highest number of global companies in Bangladesh, Transcom prides itself on never having defaulted on payments.

With the growth of Transcom Ltd, Rahman sees the major part of future management of the organisation comprising more non-family members, which he believes will be beneficial for all stakeholders. He views the sustainable growth of Transcom to be essential and aspires to make it a global organisation. In his own words: ‘I hope the future of Transcom will see it develop from a Bangladeshi company into a regional company, and then into a global company while retaining its Bangladeshi identity and roots.’

Transforming traditions: Sharif Zahir, Ananta Group
Challenging traditional norms and innovating to push boundaries have been the guiding principles that have propelled Ananta Group into becoming one of Bangladesh’s most prominent garment manufactures. The organisation was established in 1991 by Humayun Zahir. The initial years of Ananta Group saw it venture into manufacturing industries such as garments, paper mills and toys.

The sons, Sharif Zahir and Asif Zahir, had to take over Ananta Group after their father’s demise. After taking over, the brothers revamped the organisation and went on to make a mark in the highly competitive garments industry in Bangladesh. ‘I believe in stability; we were young at the time and wanted to change everything, so I took time to adjust,’ said Sharif. Having been driven by the values set by their father, as well as learning from big industry players, Sharif and Asif Zahir set out to differentiate themselves in an already established industry. They led the group in a new direction, focusing on specialising in the garments industry and initiating an industry-wise transformation.

When they started, Ananta Group consisted of a single factory with 1,500 employees, but through their efforts at expansion, the organisation, as of 2018, consists of eight factories with 26,000 employees. A defining characteristic of Ananta Group has been its tendency to break out of the mould for Bangladesh’s garments industry. As Bangladesh is well known for denim bottoms, Ananta Group initially focused on the value-added aspect of the product, developing expertise in the finishing process. Additionally, the organisation has ventured into a diversified range of products within the apparels industry that are not common in Bangladesh, such as suits, sweaters and lingerie, thus making it both unique and a pioneer.

Ananta grew at rates of 25-30% per year in the last decade, while the industry grew at 15-20%, thereby staying well ahead of the curve. The driving force behind Ananta Group’s growth has been the shared passion of the brothers to make a difference. ‘We were quite obsessed…I was quite obsessed with what I was doing. Our discussion from morning till evening at home, all our private discussions, were about the company. Even now it’s like that,’ said Sharif. Asif, after his stint with Google, joined his elder brother Sharif at the FB and complemented him in terms of strategic thinking.

Values, the biggest driver: Mostafa Kamal, Meghna Group of Industries
Established in 1976 as the Kamal Trading Company, the growth and expansion of Meghna Group of Industries have made it one of the frontrunners and drivers of Bangladesh’s emerging economy. It went from being a trading entity to a manufacturing conglomerate that seeks to generate value for consumers, the organisation, stakeholders and society in general.

The Meghna Group of Industries was established with a value-driven culture, strongly inspired by the mother of Mostafa Kamal, Chairman of Meghna Group, who instilled in him her strong sense of morality and work ethic. In the words of Mostafa Kamal, ‘Due to my upbringing, there was always a considerable amount of appetite in me to face challenges with courage and passion. As an organisation, we always put respect, responsibility and relationships first to foster humanitarianism. Any beginning requires a great deal of curiosity, agility and simplicity to develop a mind-set of openness in the organisation.’

In its transformational journey, the Meghna Group faced various challenges. ‘We were convinced to take risks without fear of failure. Facing the unknown required resilience,’ said Kamal of the initial years of growth. Having diversified into various industries such as shipping, consumer goods and cement, Meghna Group currently consists of 35 industry verticals, though they are pushing to make it 50 industry verticals by 2020. As Mostafa Kamal puts it, ‘To make such colossal growth sustainable, we must count every paisa. Gradually, we are embracing every new concept, system development and automation with the aspiration of adopting the latest technologies constantly.’

Establishing a sense of family and community within the organisation has been an essential component of the company’s success. Corporate strategy sessions are conducted on an annual basis with senior members of the organisation and family members to understand how best to implement the long-term vision of the company. With the vision to ‘be Bangladesh’s most progressive and admired global conglomerate’, Meghna Group believes the keys to success are customer focus, integrity, respect, teamwork and keeping promises.

Incorporating his children in the business has been important for Mostafa Kamal. Currently, three of his children have joined the business after having completed their higher education, but they are still learning the inner workings of the organisation in order develop a personal and professional connection with it. As Kamal put it, ‘When I first acquired the land in Meghnaghat back in the late ’80s, I used to take my eldest daughter along with me for her to see the pain, agony, dreams and hopes that go hand in hand. I usually spend at least a whole day in a week in the factory with one of my family members.’

‘Meghna Group of Industries will grow and excel based on a shared value system, which will distinguish us and give us a competitive edge,’ Mostafa Kamal said.