Post Mica Report Harillela Entreprise

The Harillela Enterprise An Indian Family Business in Hong Kong Post-MICA Report Ali Dhanji Djalal Lougev Galina Savitskaya Haithem Hentati

Table of Contents 1) Lead team preperation: .............................................................................................3 A. Debate objectives:.................................................................................................3 B. Leading the debate:................................................................................................3 2) Ice breaker (5min)......................................................................................................5 3) Summarizing the Case and Issues:.............................................................................5 FAMILY ISSUES: ....................................................................................................7 BUSINESS ISSUES: ................................................................................................8 4) The Debate:..............................................................................................................10 Yellow Team v/s Green Team – issue: Should the Harilella Enterprise continue diversifying into hotels and other new ventures, or stick to what they are best at? 10 Green Team v/s Yellow Team v/s Gold Team – Issue: Did the Harilella family make decisions based on profit maximization or passion and entrepreneurial spirit? ..................................................................................................................................11 5. Feedback: ................................................................................................................12 Conclusion:...................................................................................................................13 2

1) Lead team preperation: A. Debate objectives: o We compiled a report, which included all of the main arguments from the three participating teams. The debate was based around 3 family issues and 3 business issues in the Harillela Enterprise case, with recommendations to overcome them. However, we found that some teams had left out vital information or missing pieces, which we noted down and brought up as the main debate questions. An example of this is the question of intention and motive, and whether Hari made harsh decisions as an entrepreneurial spirit or for profit maximization. o The focal points of the debate were around succession planning, future strategy and going public, business diversification, corporate governance and informal policies. B. Leading the debate: o A PowerPoint presentation was made to capture all the main issues, and organize them in a comprehendible fashion. o Facilitate a good flowing discussion, with amicable comments and critical thinking. o Control noise, time and direction of arguments. Also make sure all individuals participate. Person Role Responsibility Ali, Djalal, Galina, Ice-breaker presentation 1. Explain instructions Haithem of ‘pass the parcel’ 2. Conduct the activity, making sure of a clear 3

objective and controlled environment – and keeping it fun! Djalal, Galina Moderators 1. Share all team’s arguments. 2. Point out the conflicting issues, and unfeasible recommendations. 3. Ask groups to re- visit their points and make changes. Ali + Djalal Analyst + Questioner 1. Summarize case, and highlight main issues. 2. Kick-off debate and ask questions, allowing only 5 minutes per issue. 3. Ask probing questions, which were not included in the reports. Haithem Note taker, feedback 1. Document full advisor, report head. process. 2. Identify strengths and weaknesses of all groups and individuals. 4

3. Provide thorough feedback. 2) Ice breaker (5min) Based on the cultures which we had focused on in class; India and China, we thought it would be interesting to test the cultural knowledge of our class. We prepared several general knowledge questions about China and India, such as: - What time zone does India fall in, in regards to GMT? - How many countries border China? - What city in India is known as the ‘Diamond city’? These questions were asked on individual basis, by passing around an object with Chinese music playing in the background, and stopping the music at random times, forcing the individual whose possession the object is under to answer the question. This also allowed us to hand pick the individuals who we thought should participate more, and they were rewarded with chocolates and sweets. We chose to reward individuals with big packets of assorted chocolates such as chocolate peanuts, to facilitate more team-work and sharing, as was the purpose of our ice-breaker. 3) Summarizing the Case and Issues: As mentioned earlier, the lead team summarized all of the main business and family issues submitted by the participant groups. To start however, the lead team chose the summary of the case from the team who wrote it best, the Green Team. Brief summary of the case: The Harilela family business started with a small company which sold Chinese antiques. Unfortunately due to the great depression, the company didn’t last for long. He then opened another shop in Mongkok, but with WWII, he lost everything once again. He and his brothers then became the main suppliers for the army, providing high quality uniforms for the army. They soon had important retail stores and they soon bought their first hotel, Imperial hotel. 5

The brothers diversified the business into a number of properties, expanding their business and creating a partnership with holiday inn. Despite the financial crises and the property prices crashing, the Harilela Enterprise Company reached a value of $3.5 billion in 2000. 6

Family Issue 1 Issue 2 Issue 3 Green Disagreements within family, too many No equal shares/interests in the Informal set of rules to maintain children, one main decision maker (Hari). group. Potential problem amongst relationships – could potentially lose R: Concentrate on one family business brothers’ wants/direction. control over members. instead of diversifying so much. R: Annual meeting to evaluate R: Establish ground rules to gain respect brothers’ performance, redistribute of boundaries. shares. Yellow No clear succession plan No defined formal and informal rules Inefficient decision making process R: Clear specification of positioning R: Written set of rules R: Schedule and structure of the meetings and voting should be set. Voting power should be revised. Gold No defined formal and informal rules Family too closed, possibly need to Decision making methods (please split to advance into 2nd generation. elaborate) R: Currently live all together, 2nd R: Hari made mistakes must consult Generation needs space. brothers and consultants before making decisions. FAMILY ISSUES: 7

BUSINESS ISSUES: Business Issue 1 Issue 2 Issue 3 Green Hari reallocated funds to full-hotel Family members losing focus on core Should the company go public? Can this concentration, despite disagreements with business, and shifting to smaller cause frictions? brothers / borrowing funds and the selling personal ventures, i.e. Thomson R: Go public due to lack of funds, and to of Imperial hotel. (merchandising), import/export, etc. expand into new markets. R: Shifting business sectors (from tailoring R: Periodic meetings to update to hotels) in a period of growth for the members, and discuss core former. competence to give it importance. Yellow Business concentration: the risk is not Non-family partners are not involved Lack of future strategy spread R: To include non-family members R: Elaboration of the future strategy. R: The focus should be shifted to the other with voting rights. External help Revision of franchising, going public and businesses. Investments in real estate the board structure. Gold Should the group go public? Should they Current management system – Should the board structure be maintained cut costs or prices? maintain it or change it? for the future? R: They should go public to gain access to R: Change to a franchise system for R: Board structure should change, to capital markets. Focus on hotel business global standards. More suitable for maintain harmony and relations in next where ‘synergies’ exist. second generation. generations. 8

4) The Debate: After a group meeting and a thorough analysis of the submitted repors, we pointed out different contradictory and agreeable issues; from which we formed a debate. The way we structured the debate was different because we allowed individuals to give their points and represent their teams loosely, in order to make it more flowing, as opposed to appointing a spokesperson. Most of the ideas were very similar, except for one main clashing issue between the green and yellow team, which we started the debate with. This issue was about diversity; followed by motives, and finally corporate governance. Yellow Team v/s Green Team – issue: Should the Harilella Enterprise continue diversifying into hotels and other new ventures, or stick to what they are best at? a. The yellow team raised a good point, that diversifying was to spread risk. An example used was that they could open restaurants in all of their own hotels, and maybe this could begin a new venture for them. b. The green team, remained adamant that diversifying would make them lose focus, as it did in the past. They had suffered too many losses, and it was best to stick in the hotel business, now that they have invested so much money into it. c. The Yellow team rebutted by saying the reason that the Harilella hotels were a success was due to them diversifying from textiles into hotels, which has gained them family assets and good will as well. d. The green team finalized this debate by saying that the Harillela’s had tried diversifying into smaller business ventures, on an individual basis, such as buying stakes in Thomson merchandising, or import/export which were failures and the whole family suffered the consequences. If diversification is to be done, the Green Team suggest a formal structure first. 10

2) Green Team v/s Gold Team – issue: Informal business policies, and a grey area between the family and the business. a. The green team stated that the family relied on informal sets of rules, which maintained a harmonious relationship within the family as it was easy to lose control over the members. The informal rules were dangerous, and recommended that formal rules should be established so the members can respect the boundaries and the organization can run more professionally. b. The gold team rebutted by saying that formal rules were not viable, however monthly meetings to keep all the members informed with issues would be more effective. c. Eleonora from the green team stated that organizations can only have informal rules at a certain size, however once they grow beyond ‘small firm’ status, they must formalize all their policies to increase a functioning corporate governance system. d. Yousef from the gold team finalized this debate very well by saying that family firms seem to lose their flexibility and potential when rules are formalized. What makes a family firm organic and harmonious are the informalities, which give the firm a family feel. Green Team v/s Yellow Team v/s Gold Team – Issue: Did the Harilella family make decisions based on profit maximization or passion and entrepreneurial spirit? e. Sophia from the green team stated that the Harilella enterprise should continue following their personal interests, and not profit maximization. They had done this when they bared major losses with the construction of their hotel; which shows their persistence and long- term thinking. f. Shaan from the yellow team agreed with this, however he said that the family passions should be followed such as opening restaurants instead of investing in completely independent businesses. He claimed it was important all the incomes were shared by the family as in the past. 11

g. The gold team decided to throw in their opinion, which was different from the rest, claiming that Harilella Enterprise should go public for future foreign investments. This would help them gain access to capital markets, and achieve a higher added value. In turn, the dividends paid out could fund the private businesses that all the individuals seem to want to partake in, e.g. restaurants, merchandising, etc. 5. Feedback: Finally, after the debate was over, Haithem gave the groups feedback on their points, which we have used to make the below table. This table portrays the team’s contributions: Issue Team Performance 1. Diversification Yellow team had best argument, that diversification was the reason for success, hence it should continue. 2. Corporate Governance Gold team made the best points, especially by evaluating that Harilella was too big and interdependent to lay down formal rules. Monthly meetings were a better solution, especially with Yousef’s remark that the firm will lose its flexibility with formal and strict policies, and going international will be harder. 3. Motives and Culture Green team made the best argument, claiming that Harilella’s culture and motives were to pursue interests and goals as opposed to only making money. Sophia also recommended they stick to their entrepreneurial spirit which had made them. We found this to be true, and would be the best recommendation to give the family. 12

Conclusion: From the table above, we concluded that choosing a winning team was impossible for 2 reasons: 1) Each team won 1 debate issue. 2) Too many individuals made good points, which were not included in the report, which we could not give credit to the teams for. Overall, the debate was very well controlled and conducted. Our team was very impressed with the performance of all groups, and their individuals. The only major problem we noted was that the reports submitted were too short, which a mistake was made by us, as we only asked for 2 pages maximum, as opposed to the conventional 3. 13

Post Mica Report Harillela Entreprise

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Post Mica Report Harillela Entreprise — Document Transcript