The Harillela EnterpriseAn Indian Family Business in Hong Kong

Post-MICA Report

Ali DhanjiDjalal Lougev

Galina SavitskayaHaithem 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

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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 ResponsibilityAli, Djalal, Galina,

Haithem

Ice-breaker presentation 1. Explain instructions

of ‘pass the parcel’

2. Conduct the

activity, making

sure of a clear

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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

advisor, report head.

1. Document full

process.

2. Identify strengths

and weaknesses of

all groups and

individuals.

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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.

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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.

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FAMILY ISSUES:

Family Issue 1 Issue 2 Issue 3

Green Disagreements within family, too many children, one main decision maker (Hari). R: Concentrate on one family business instead of diversifying so much.

No equal shares/interests in the group. Potential problem amongst brothers’ wants/direction. R: Annual meeting to evaluate brothers’ performance, redistribute shares.

Informal set of rules to maintain relationships – could potentially lose control over members.R: Establish ground rules to gain respect of boundaries.

Yellow No clear succession plan

R: Clear specification of positioning

No defined formal and informal rules

R: Written set of rules

Inefficient decision making process

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 split to advance into 2nd generation.R: Currently live all together, 2nd

Generation needs space.

Decision making methods (please elaborate)R: Hari made mistakes must consult brothers and consultants before making decisions.

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BUSINESS ISSUES:

Business Issue 1 Issue 2 Issue 3

Green Hari reallocated funds to full-hotel concentration, despite disagreements with brothers / borrowing funds and the selling of Imperial hotel. R: Shifting business sectors (from tailoring to hotels) in a period of growth for the former.

Family members losing focus on core business, and shifting to smaller personal ventures, i.e. Thomson (merchandising), import/export, etc.R: Periodic meetings to update members, and discuss core competence to give it importance.

Should the company go public? Can this cause frictions?R: Go public due to lack of funds, and to expand into new markets.

Yellow Business concentration: the risk is not spread

R: The focus should be shifted to the other businesses. Investments in real estate

Non-family partners are not involved

R: To include non-family members with voting rights. External help

Lack of future strategy

R: Elaboration of the future strategy. Revision of franchising, going public and the board structure.

Gold Should the group go public? Should they cut costs or prices? R: They should go public to gain access to capital markets. Focus on hotel business where ‘synergies’ exist.

Current management system – maintain it or change it? R: Change to a franchise system for global standards. More suitable for second generation.

Should the board structure be maintained for the future? R: Board structure should change, to maintain harmony and relations in next generations.

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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.

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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.

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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 Performance1. 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.

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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.

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