The Arabian Publication for Family Businesses Volume 13 Jan-Mar 2012
12 40
Ahmed Seddiqi & Sons - A Family
History of Precision
60 years of passion for luxury watches.
Alserkal Group A Family Business Going Green
Profile of the Alserkal Envirol plant.
60 70
Ajegroup
The most Global Peruvian Family
A Peruvian family firm goes East.
Abdul Latif Jameel Community Initiatives
A family’s quest for job creation.
SPECIAL FEATURES: Family Businesses Driving Environmental Strategies
Asset Management Wealth Management Asset Services
Fact: families grow. Assertion: so should their investments.
Private bankers since 1805 Pictet & Cie (Representative Office) Sheikh Zayed Road Park Place, 12th Floor PO Box 125567 Dubai / United Arab Emirates Tel: +971 4 308 5858 www.pictet.com
Independent minds
tharawat magazine
The Arabian Publication for Family Businesses
The ArAbiAn PublicATion for fAmily businesses Volume 13 Jan-Mar 2012
12 40
Ahmed Seddiqi
& Sons - A Family History of Precision
60 years of passion for luxury watches.
Alserkal Group A Family Business Going Green
Publisher and Founder Dr. Hischam El Agamy
Profile of the Alserkal Envirol plant.
60 70
Ajegroup
The most Global Peruvian Family
A Peruvian family firm goes East.
Abdul Latif Jameel Community Initiatives
A family’s quest for job creation.
Editor and Manager Ramia El Agamy editor@tharawat-magazine.com
Assistant Editor Wafa Nasser Farhoud
SPECIAL FEATURES: Family Businesses Driving Environmental Strategies
wafa@tharawat-magazine.com
Editor-at-Large Farida El Agamy Creative Director Emad Khourfan emad@tharawat-magazine.com
Translation House Tarjomeh Localization Ltd., Dubai, UAE Printing House Al Ghurair Printing, Dubai, UAE Acknowledgements Many thanks go to The authors for their work and input. The advertisers for their kind contribution. The readers for their feedback on the previous issues and their continuous interest in Tharawat magazine. The Al Ghurair’s printing facilities for their excellent work.
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VOL 13 | Jan - Mar 2012 Any other use, including but not limited to, the publication, reproduction, modification, distribution, transmission, republication, display, creation of derivative works, or performance of the content, or any other use of the Content for commercial reasons, is strictly prohibited without the express written consent of Tharawat Media FZ LLC. If you wish to use content or artwork from Tharawat magazine please e-mail: info@tharawat-magazine.com To advertise in Tharawat magazine please e-mail or call: advertising@tharawat-magazine.com +971 (0)4 452 6578 www.tharawat-magazine.com ISSN-2077-3714 Tharawat magazine is printed on recycled woodfree paper. Disclaimer
Tharawat magazine is published four times a year by Tharawat Media FZ LLC, a company registered in Dubai Media City. Reproduction without permission is strictly prohibited. All content in this publication, including but not limited to all text, visual displays, images, and data (“Content”) is the property of Tharawat Media and its content suppliers or licensors and is protected by the United Arab Emirates and International copyright laws. The compilation of all content in this magazine, including but not limited to the collection, arrangement, assembly, and coordination of content, is the exclusive property of Tharawat Media and is protected by United Arab Emirates and International copyright laws. The content in this magazine may be viewed as information gathering resource. Tharawat Media FZ LLC cannot be held responsible for any unsolicited material.
Volume 13 Tharawat Magazine
1
contents
VOL 13 | January - March 2012
12
Contributors Abdulla M. Al Zamil CEO, Zamil Industrial, KSA
Abdulrahman Al Zamil Analyst, Project finance, Zamil Group, KSA
Barbara Hauser Founder of Barbara R Hauser LLC, USA
Chester King Managing Director, Stoke Park, UK
Dr. Hischam El Agamy Founder and Executive Director, Tharawat Family Business Forum and Tharawat magazine, UAE and Switzerland
Edward Nicholson Managing Partner, Mercator Partnership Limited, Consultant to Maitland Group, UK
Eng. Mohammed Y. Hakami Senior General Manager, Bab Rizq Jameel, KSA
Essa Al Ghurair
08
Vice Chairman, Al Ghurair Investment LLC, and Chairman, Al Ghurair Foods, UAE
Guillermo Salazar Owner & Managing Director, Exaudi Family Business Consulting, Venezuela
Regulars
Ibrahim M. Badawood Director, Abdul Latif Jameel Community Initiatives, KSA
Ibrahim Issa Al-Rawahy Founder, Developed office, Oman
José Carlos Lumbreras Investigation Unit Chief of Peru: The Top 10,000 Companies, Peru
Manar Al Kudies Marketing Manager, Al Serkal Group, UAE
Osama Ibrahim Seddiqi VP Admin & Finance, Ahmed Siddiqi & Sons, UAE
Prof. Samuel Fankhauser London School of Economics, UK
Salma and Michel Zayat Owners, Yabe & Yamo Boutique, Syria
2
Tharawat Magazine Volume 13
06 P ublisher’s Note
A few words by the publisher.
08 F amilyBusiness2FamilyBusiness
A case study on the innovation potential of the 3rd generation.
12 Ahmed Seddiqi & Sons - A Family History of Precision
A tale of a family’s passion for luxury watches. Including an Interview with Osama Ibrahim Seddiqi, VP Finance and Administration, Ahmed Seddiq & Sons
78 Reviews
Facts and Figures, Books and Websites.
www.tharawat-magazine.com
VOL 13 | January - March 2012 contents
46
51 44
23
26
Features 22 Q&A with Chester King, Managing Director of Stoke Park, UK
The story of the King family, its history with Stoke Park, and its career in hospitality.
26 T he Double Value of an Owners’ Council with a Constitution
A toolkit to a well-structured family business constitution and the ways an owners’ council can benefit from it.
Special Features 36 G reen Strategies of International Family Businesses
A review of the different types of green strategies that international family firms undertake.
40 A lserkal Group - A Family Business Going Green
A profile on the Alserkal Envirol grease trap waste recycling plant, UAE.
46 I nterview with Abdulla M. Al Zamil A description of the Zamil New Delhi Infrastructure project.
50 Interview with Prof. Sam Fankhauser Defining the term ‘Green Growth’ and its implications for the business community.
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Volume 13 Tharawat Magazine
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contents
VOL 13 | January - March 2012
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Spotlight 56 What’s the Rhythm of Family Businesses in Latin America
A colourful description of the different strategic priorities of family businesses in various Latin American countries.
60 AJEGROUP - The Most Global Peruvian Family
The remarkable story of the Añaños Jerí family a global family business, stretching from Peru to China.
SMEs 70 ALJCI: A Family Business Setting Standards in Job Creation
A profile on the job creation and small business loan programs of the Abdul Latif Jameel Group, KSA.
74 Yabe & Yamo - Q&A with Salma and Michel Zayat
A Syrian couple and their new design boutique located in the heart of Damascus in Syria speak of local production.
64 Establishing a Business Presence in Latin America
The various entry strategies into the vast and complex economies of Latin America detailing the steps for planning and implementation.
4
Tharawat Magazine Volume 13
www.tharawat-magazine.com
وقت التنمية. آن ُ صديقي ،النائب الرئيس للموارد البشرية ،إلى الشركة في عام انضم حسن عبد المجيد أحمد ّ ّ ،2007حيث أخذ على عاتقه تطبيق عدد من مبادرات الموارد البشرية التي أسهمت في إتاحة والجدد. فرص النمو داخل الشركة للعديد من موظفيها الحاليين ُ seddiqi.com
Publisher’s Note
Dear readers,
T
he great thing about our work as editors of a
However, our new year’s issue starts off on an altogether
family business magazine is that our subjects
more luxurious note: A family business profile of the Emirati
seem to have an endless capacity to surprise us.
Seddiqi family, describes a family’s 60 year-old passion for
Every time we think we have a fair knowledge of
Swiss luxury watches. Osama Ibrahim Seddiqi, VP Finance
what is going on in the regional family business community,
and Administration speaks to us about why he does not
we are surprised by new developments. Fact is that family
feel like an owner but rather as one of the custodians of his
businesses in the Arab world and worldwide continue to
family business. Our feature section includes the lovely story
amaze and impress. Never has this been more apparent
of clubhouse and 5-star hotel Stoke Park; an estate that takes
to us than when putting together this particular issue: The
us back to 18th century England. A Q&A with Chester King,
contributions of a 60-year old family firm in the luxury sector,
Managing Director of Stoke Park, provides insights on why it is
an English family that sets standards in hospitality, two
an advantage to be a family business in the hospitality sector.
others that show how they have integrated green strategies in their portfolio, a Peruvian family expanding so fast it will
For the second part of our Latin American Spotlight Series
make your head spin, and finally a family business that is
you might want to put on your dancing shoes: Guillermo
fighting regional unemployment with remarkable success
Salazar’s article on the rhythm of family businesses in Latin
are only some of the highlights you can find in this first issue
America gives a colourful illustration of the region’s different
of the new year 2012.
cultures and mentalities. We are also introduced to a remarkable Peruvian family named Añaños, who founded
The special feature on environmental strategies of family
the AJEgroup, which started out as a small local business
firms became a fascinating endeavour: Not only were there a
over 20 years ago and is today contemplating its expansion
surprising abundance of examples to choose from, but there
to China. And last but most definitely not least, in our SME
were also some firms that do no less than set international
section we talk about the remarkable support the Saudi-
standards in green practices. We start our section by taking
based Abdul Latif Jameel family has provided entrepreneurs
a global approach to the green strategies in family firms
and small businesses in its community, and its successful
and find in our introductory article many examples of family
quest for sustainable job creation in the Arab world.
conglomerates that are showing ingenious ways of integrating green thinking into their core business activities. We follow
We hope you enjoy this issue as much as we have putting
with two up-close cases: UAE-based Alserkal group grants us
it together and we wish all our readers a successful and
insights into its latest green endeavour, the grease trap waste
prosperous 2012.
recycling plant Alserkal Envirol. Through its collaboration with the Dubai Municipality the Alserkal group shows that it is possible for public and private sector to successfully put in place green practices to the great benefit of the community. Another example is given by the renowned Al Zamil family from Saudi Arabia: Abdulla M. Al Zamil speaks about Zamil Industrial’s new subsidiary ‘Zamil New Delhi Infrastructure Pvt Ltd’, which offers sustainable solutions to the telecom industry. We end our special feature on an academic note with Prof. Sam Fankhauser from the London School of Economics, who explains the concept of Green Growth.
6
Tharawat Magazine Volume 13
Dr. Hischam El Agamy Publisher and Founder Tharawat magazine Tharawat Publishing FZ-LLC
www.tharawat-magazine.com
It’s time to connect. Qasim Ibrahim Ahmed Seddiqi, Director, joined the company in 1995 to manage and oversee the communication between Ahmed Seddiqi & Sons’ retail stores and the direct clients. He also plays a major role in choosing the products based on his clients’ preferences. seddiqi.com
Introduction FamilyBusiness2FamilyBusiness
In this issue’s FamilyBusiness2FamilyBusiness case study we tell the story of the fictional NRAD family business chairman. NRAD decides to put his 3rd generation family members to the test and starts an idea competition between them. When the results point into an unexpected direction, NRAD faces a challenge in communicating with the family: Ibrahim Al Rawahy and Farida F. El Agamy give their solutions to dealing with unexpected treasures in the family.
Treasures in the family
D
iscussions between family business
The brothers and sisters of NRAD were quite surprised
members often extend beyond office
when he asked the junior members for their input, as he
hours and spill over into family time.
was known to show resistance to change. This had always
More often than not, when work
been reinforced by the good performance of the RAD group;
discussions are carried on at home, they
why would the family want to change anything? However, in
tend to intensify as all professional pretence is dropped
recent years NRAD had increasingly realised that the family
and everyone insists more freely on his or her opinion.
would have to become more innovative if it wanted to keep its competitive edge.
It was during one of these casual work-related discussions that the family running the RAD group, a large conglomerate
He gave the third generation a week’s time to submit
and a key regional player in retail, insurance, and the
their suggestions, which he was sure would range from
automotive sector, embarked on an interesting experience.
diversification strategies to requests for more parking space.
NRAD, chairman of the family business, decided to challenge
There was a lot of excitement in the monthly family reunion
the 3rd generation family members: he asked his sons,
and everyone was full of anticipation to see who would come
daughters, nephews, and nieces, to come up with their own
up with the most relevant suggestions.
suggestions for improvement of the RAD group. It was a busy week; NRAD was curious to see how each of
8
Most of the third generation members were in their late
the third generation members would proceed in order to
thirties and early forties and had been working with the
formulate his or her proposal. ANRAD and FARAD who
family business for more than 15 years; others were much
were directors of the operational department and who were
younger and had been working with the family for less than
considered to be leading the third generation, gathered their
five years. Then there were those who since their graduation
teams and opened the discussion on how they could improve
had been working outside the family business in industrial
the business and stimulate growth. The younger members of
multinationals and international consulting firms.
the third generation created focus groups, involving family
Tharawat Magazine Volume 13
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FamilyBusiness2FamilyBusiness Introduction
members working outside the family business. They held their
value propositions would you like to be offered by RAD in
meetings outside the work place and looked at the competition
order to make the company your preferred partner? The
performing a quick industry analysis to position RAD.
clients were thrilled by the initiative and provided interesting insights, which raised issues that had previously been ignored
NRAD was, however, most intrigued by the approach of young
by the RAD group. SNAL summarised the client input and
SNAL, the youngest son of one of his sisters: SNAL was in his
formulated them into suggestions.
late twenties and was working in the client services of the RAD insurance division. To formulate his suggestions, he contacted
NRAD received all the propositions on time and asked
15 major clients and fixed an appointment for short meetings.
three non-executive directors from the group’s board
He asked the clients one question: what kind of services or
to act as a jury. Most of the suggestions outlined how to
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Volume 13 Tharawat Magazine
9
Introduction FamilyBusiness2FamilyBusiness
improve processes, services, add new business sectors,
a lot of promise. Yet, NRAD now hesitated: Would appointing
more education for employees, hardware investments in
SNAL to lead the RAD innovation hub make the elder cousins
operations, close down less performing business, change
feel like the rule of succession had changed? At the same time
reward systems to motivate employees to compete, and
it was a fact that SNAL had come up with those suggestions
how to expand in new markets. The jury had one week to
that were most relevant to group’s sustainability.
come up with what they considered the most relevant and
The next family gathering was to be held shortly and NRAD
breakthrough suggestions.
would have to announce his decision to the family.
The RAD group had seen a great number of innovative ideas
1. Do you think NRAD should appoint SNAL for the job?
before this time but they remained fragmented and were
2. How would you advise NRAD to communicate his
not supported by the proper procedures throughout the
decision to the family assembly?
organisation. NRAD hoped that the young family members who were active in various sectors and at different levels in the group could provide ideas and guidance to sustain the business growth. Before hearing the jury’s decision he had decided that the person making the best suggestions would be nominated head of the new RAD innovation hub, which would capture new ideas and supervise their implementation. After one week of deliberation the jury presented NRAD with the results. They explained their criteria and how they had looked at the suggestions based on how great a competitive advantage they would create for the group and the amount of resources required for their implementation. They also grouped suggestions to according their similarities in order to differentiate the breakthrough ideas from the rest.
Solution 1 Ibrahim Al Rawahy 2nd generation family business member, Founder Developed Offic, Oman
In summary there were plenty of excellent suggestions based on the expertise and perception of the RAD staff. However,
NRAD’s approach is an excellent one and brings many
there was very little input that came from the outside. SNAL
advantages. He might not be able to get the best out the
was leading in this category because he had engaged the
family members but he will get an idea of each member›s
most important clients in the process. By engaging them he
ability, way of thinking, and focus. Later on he can work
had also committed them to a sustainable relationship with
on developing their abilities as per their interest or the
the group and set back the competition.
areas they excel in. This will later enable him to know what position to assign to which member.
While NRAD was thrilled by the results he did not know how
10
to face the situation. SNAL was one of the youngest of the
With regards to the outcome of his experiment, I think that
third generation and had little work experience in comparison
NRAD should balance between the experience of the older
to most of his generation. On the other hand he had always
third generation members (ANRAD and FRAD) and the
distinguished himself through his great commitment to
enthusiasm and ideas of the younger generation (SNAL).
clients. SNAL’s method of approaching NRAD’s task showed
NRAD can appoint one or both of the experienced directors
Tharawat Magazine Volume 13
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FamilyBusiness2FamilyBusiness Introduction
(ANRAD and FRAD) and make sure that SNAL is a key member of the innovation hub. At the same time, NRAD should make a detailed plan to improve SNAL’s experience and skills over the next five years so that he gains enough experience and knowledge to head the innovation hub. There is no harm in announcing SNAL as the winner, and to
I think an innovation hub is a must for any group that wishes to continue and expand successfully. It will help the group into the right direction...
thank him for his effort. This will give him the confidence needed to progress in his life and take on greater responsibilities and challenges while, at the same time, setting up a detailed plan to develop his skills under the supervision of ANRAD and FRAD. The directors will feel their importance in developing the group as well as guiding the younger family members. The relation between SNAL,ANRAD and FRAD will be stronger as
the family in any decision. This means that the family has
they will have to meet regularly to discuss their ideas. SNAL,
no experience in dealing with many different ideas and
will feel that his efforts and ideas are appreciated and the plan
opinions. Even though NRAD and the board have received
made to improve his skills will lead him to his desired goals
valuable feedback and information through the family’s efforts, it now all depends on the structure they will put
I think an innovation hub is a must for any group that wishes
in place, if there is a sustainable follow up and real impact.
to continue and expand successfully. It will help the group
I would suggest that NRAD forms a task force, composed of
into the right direction that ensures continuous growth
some directors, SNAL, some other members of the young
and success. Appointing a family member to lead the hub is
generation and some junior executive managers. The goal of
another important aspect as it will ensure commitment and
the task force is to take the chosen idea of SNAL and maybe
consideration of family values in any idea or project.
two or three others and work on a detailed implementation plan. He might consider to put SNAL in charge of the Task Force, to show the appreciation for his efforts. However, I believe that it would be a better solution to have him work
Solution 2
in a team on the implementation possibilities than alone. The Task Force should be given a clear deadline and targets.
Farida F. El Agamy 2nd generation family business member, UAE and Switzerland
In order to continue the involvement of the family, every
I believe it was a very good idea of NRAD to involve the family
This way, NRAD can ensure the professionalism of the
in developing new strategies. It has certainly motivated the
strategy development through the involvment of directors
family and made them feel that they have a voice. Especially
and knowledgeable managers, but also open the gate to
for the young generation already active in the business, it
family innovation by involving SNAL and some other family
must have given a lot of empowerment.
members. Once the family and business have had a positive
report or update produced by the Task Force should be communicated to all family members.
experience with this project, they can improve the procedure However, NRAD now has to be careful: from the background
and approach other pressing issues, like succession planning
story we know that this was the first time that he involved
or governance.
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Volume 13 Tharawat Magazine
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Profiles
Ahmed Seddiqi & Sons
This family business story started with a man, who had a passion: Ahmed Qasim Seddiqi, founder of Ahmed Seddiqi & Sons started collecting Swiss watches from a young age. His collection soon became so well known that it attracted attention from other watch enthusiasts, who began to buy selected pieces. What started out so simply turned out to be the cornerstone of what was to become a very successful family business: 60 years later the Seddiqi family can look back at their great business history and look forward into a promising future. Tharawat magazine walks along a family business time line and speaks to Osama Ibrahim Seddiqi, Vice President of Finance and Administration, Ahmed Seddiqi & Sons, about what makes his family and business tick.
Ahmed Seddiqi & Sons A Family History of Precision
T
he Emirati family business Ahmed Seddiqi
locations across the UAE. Thinking back to the small
& Sons is celebrated its 60th anniversary
shop opened by Ahmed Qasim Seddiqi and his eldest son,
in 2011, and has, over the last decade,
Ibrahim, in the 50s, and comparing it to the company’s
successfully set up a holding structure
current size leaves no doubt about the family’s flair for
encompassing their businesses in retail,
business. Today Ahmed Seddiqi&Sons has a workforce
investment, real estate as well as their shares in various
of around 550 employees some of whom have been
joint ventures. However, in spite of its success in all its
with the company for nearly 40 years. The business is
activities, it is the true love for watches that has set this
currently run by family members of the 2nd, 3rd, and
family apart from others.
even 4th generation. In spite of the many changes and the expansion it went through, at heart, the Seddiqi
12
Today, the family counts over 50 luxury watch brands
family is still very much the same as it ever was: precise,
amongst its portfolio, which it represents in over 50
reflective, and so very fond of watches.
Tharawat Magazine Volume 13
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Ahmed Seddiqi & Sons
Profiles
The Seddiqi family business tells 60 years of history TOP: The Old Dubai Creek BOTTOM: The new Ahmed Seddiqi & Sons retail outlet in Dubai Mall
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Volume 13 Tharawat Magazine
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Profiles
Ahmed Seddiqi & Sons
60 YEARS OF FAMILY BUSINESS HISTORY Discover the Ahmed Seddiqi & Sons history along the three time lines
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Ahmed Seddiqi & Sons
Family
Brand
Boutiques
Profiles
1940s: Ahmed Qasim Seddiqi starts his Swiss watch collection. 1960: Ibrahim Ahmed Seddiqi joins his father in the family business. 1969: Abdulmagied Ahmed Seddiqi joins his father and elder brother in the family business. 1979: Abdul Hamied Seddiqi joins his father and two older brothers in the family business. 1989: Mohammed Ibrahim Seddiqi joins his grandfather, uncles and his father in the family business. He is the first third generation member to join the family business. 1995: Qasim Ibrahim Seddiqi joins the family 1996: Mahra Abdulmagied Seddiqi is the first Seddiqi woman to join the family business. 2000: Ahmed Seddiqi & Sons breaks ground on its first head quarters. 2002: Mohammed Abdulmagied Seddiqi joins the family business. 2005: Osama Ibrahim Seddiqi joins the family business and later becomes the VP of Finance and Administration. 2006: Hind Abdul Hamied Seddiqi joins the family business becoming the VP of Marketing and establishing the marketing department in the same year. 2007: Hassan Abdulmagied Seddiqi joins the business as the VP of HR. 2007: Muna Mohammed Seddiqi is the first member of the fourth generation to join the firm and becomes Creative Director. 2008: Ahmed Seddiqi & Sons welcomes their non-family CEO, Christophe Nicaise. 2008: Abdul Hamied Seddiqi is nominated one of the Ambassador in Fine Watchmaking by the “Fondation De La Haute Horlogerie” 2008: First Rolex Awards for Enterprise (Dubai). 2009: Ahmed Seddiqi & Sons is named the second best retailer at the Gc Worldwide Merchandising Challenge during BASELWORLD. 2010: Patek Philippe celebrates 50 years of partnership with Ahmed Seddiqi & Sons. 2010: Ahmed Abdulmagied Seddiqi joins his elder siblings at the family firm. 1950: Rolex 1960: Patek Philippe (Dubai and Northern Emirates) 1970: Gerald Genta 1972: Chopard 1980: Harry Winston, Hublot 1982: Audemars Piguet 1983: Corum 1985: Movado 1988: TAG Heuer, Concord 1990: Guy Laroche, Charles Jourdan 1992: Daniel Roth 1994: Hermes, GC & Guess 1997: de Grisogono 1998: F.P. Journe 1997: de Grisogono 1998: F.P. Journe 1999: Lange & Söhne 2000: Richard Mille, Baume & Mercier 2001: Buben 2003: Nautica 2005: Dewitt 2006: & Zörweg, Officine Panerai, Emporio Armani, Piaget Momo Design, Marc Ecko, Reuge S.A., Ferrari watches (Dubai & Northern Emirates), Van Cleef & Arpels (Abu Dhabi) 2007: Etoile, Universal Geneve, Moser 2008: Dimier, Volna, Debethune 2010: Issey Miyake, Ralph Lauren 1956: First Ahmed Seddiqi & Sons shop (Old Souk Bur Dubai) 1964: Swiss Watch Service was established providing after sales service to customers. 1965: 1st Ahmed Seddiqi & Sons watch exhibition 1969: 2nd showroom (Bur Dubai) 1970: 3rd show room (Souk Murshid) 1981: 4th showroom (Deira Tower) 1993: 1st Chopard boutique in the Middle East (Wafi Mall) 1995: 1st Guess watch boutique (Deira City Centre) 1998: 1st TAG Heuer boutique (Wafi Mall) 1999: Chopard boutique opened (Burj Al Arab Hotel) 2002: 1st Piaget boutique (Wafi Mall) 2004: The first Patek Philippe boutique in the Middle East (Wafi Mall) 2005: The first Rolex boutique (Mall of the Emirates) 2005: The first Audemars Piguet shop (Mall of the Emirates) 2006: The first Van Cleef & Arpels boutique (Abu Dhabi) 2007: Rolex boutique (Deira City Centre, Wafi Mall, and Dubai Festival City) 2007: Chopard boutique (Burjuman Mall and MOE) 2008: 1st Buben & Zörweg boutique in the region (Wafi Mall) 2008: The first Hublot boutique in the Middle East (Wafi Mall) 2008: 1st Harry Winston flagship boutique (Atlantis, Palm Jumeirah) 2008: The Chopard boutique (Atlantis, Palm Jumeirah) 2008: 1st de Grisogo boutique (Wafi Mall) 2008: Rolex boutique (Atlantis, Palm Jumeirah) 2008: Rolex boutique (Dubai Mall) 2008: 2nd Piaget store (Dubai Mall) 2008: Another Chopard store (Dubai Mall) 2008: 3rd TAG Heuer boutique (Dubai Mall) 2008: 1st Richard Mille Boutique in the region (Dubai Mall) 2008: The first Officine Panerai store (Dubai Mall) 2008: The second Baume & Mercier boutique (Dubai Mall) 2009: The largest Patek Philippe boutique in the Middle East (Dubai Mall) 2010: The first GC Boutique (Mirdif City Centre)
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Volume 13 Tharawat Magazine
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Profiles
Ahmed Seddiqi & Sons
Interview with...
Osama Ibrahim Seddiqi VP Finance and Administration Ahmed Seddiqi & Sons, UAE
Osama Ibrahim Seddiqi never intended to join the family business. However, he left the well-established bank he had been working at for over seven years to join his family’s firm in 2005. Looking back on his career, he confesses with a smile that this had not been a planned move. It was only once he had joined his father and uncles in the business that he realised that everything he had learned in his career so far had ultimately prepared him for and led him to this point. When Osama started his work with Ahmed Seddiqi & Sons, he was hired to look after the finance department. Soon it became apparent to him that the company would benefit from a clear holding structure that would take care of the family’s activities in real estate, investment, and retail. Osama explains that bringing change to the family business had been a challenge initially but adds that, fortunately, his family had a natural inclination towards innovation. Bringing in a team of lawyers Osama brought about a significant professionalisation of the business structure and administration. Today, Osama Ibrahim Seddiqi is the Vice President for Finance and Administration of Ahmed Seddiqi & Sons. He speaks to Tharawat magazine about his love for watches, his family, the business, and the next generation.
What are the core values and main characteristics of the Seddiqi family? We have fear of God, we are honest, and we provide the best possible quality in customer services and products. We have been dealing with the Swiss and their watch products for over 60 years, which has helped to instil a love for precision and perfection in us. Of course, this doesn›t mean that we don’t make mistakes, which we work towards fixing constantly. We are always striving for improvement and for new things we want to implement in the company. Innovation is one of our chief characteristics. What have been the main ingredients leading to the Seddiqi’s continuous success and growth? Patience is the number one ingredient with us! To be wise and not to do things too fast, to take our time and think before we take any step, then to take the step firmly and to look back without regrets. This is how we work. When we
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Ahmed Seddiqi & Sons
Profiles
open our shops, we don’t do it blindly; we study the why and how. Do you have a family council to help make familyrelated decisions? We have an executive committee and we meet frequently. If, for instance, one of my cousins is having difficulties in his or her department and they need an opinion from others, we call for a meeting. It is very casual; we have an executive committee meeting on a small scale on most days. It allows us to benefit from each other’s specialisations and experiences. We strongly believe that it is this strong communication that has led to our success. One of the good things in our company is that rather than just being a family-owned business, it is first and foremost a family-run business! We are not sitting on the bench and letting other people run our company for us. Naturally, we have professional people that bring in their know-how but we head the departments and we take the decisions with their help. We do not consider ourselves the owners of the company; we are its custodians. It is better to punch in and out just like everyone else, and to be accountable like everyone else. It makes us more credible in our leadership. The name Seddiqi is synonymous with the image
The first Ahmed Seddiqi & Sons shop in Old Souk Bur Dubai (1956)
We do not consider ourselves the owners of the company; we are its custodians. It is better to punch in and out just like everyone else, and to be accountable like everyone else. It makes us more credible in our leadership.
of luxury watches. The family has collaborated with and represented luxury watch brands for over 60 years. Some of your partnerships, like the one with
come to our home they are part of our family. This is one of
reputable Swiss watchmaker Pathek Phillippe, have
the great benefits of being a family business.
lasted for many decades. How would you describe your relationship with your partners?
Do you think the family’s passion for watch-making will continue throughout future generations?
It’s friendship, it›s not only business. Our relationships with our partners are very personalised. I remember, when I was
I hope so, and, to be honest, I can already see it in my children;
a little boy, my father used to bring the representatives to our
they have the love of watches. They like to wear watches and
house; we didn’t have all these nice hotels and restaurants
they are very loyal to the Seddiqi brand. They see me taking
back then so they used to come over and we all used to have
out my watch collection looking at them and cleaning them.
lunch together. We grew up knowing these people and are
My little daughters already know how to adjust the time on
on very close terms with most of them. When they come to
my watches. Being in touch with the products at an early stage
the office we speak about business and deals but when they
inspires passion in them. I myself am very passionate about
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Profiles
Ahmed Seddiqi & Sons
My recommendation to family businesses is look after your family and, especially, look after your young generation. You should prepare them, educate them for the future and deal with them in harmony.
Many young generation members of the Seddiqi family have joined the business in the last 10 years, including yourself. How do you think this has influenced the family business? Our family, compared to others, is rather small and the age differences are very big in the third generation. Many family members came into the business because they all finished Osama Ibrahim Seddiqi and his three daughters, Bodour, Fatma, and Noor (from right to left)
their studies and external experiences around the same time. Most of the company’s growth happened in the last 10 years, which is also related to the development of Dubai. The city
it: Sometimes my sisters need small repairs and adjustments
required a wider range of offers; it was time for us to come
to their watches and I take care of it with my small toolkit.
and contribute to the family. When my grandfather started
I hear the same thing from my cousin Mohammed about
the business, he didn’t start it for himself he started it for
how his children love the watches and how they talk about
his children. Every generation who comes and works in this
them. They open the newspaper or they go to shopping malls
company is a custodian that will hand it over to the next
and see the Ahmed Seddiqi brand; they know that it›s their
generation. I am not working here for myself because my
family and they are proud of it. My eldest daughter once
father before me didn’t work for himself. I am working, not
saw the Rolex brand in Paris and she asked me whether
only for my own children, but for my cousins, my nephews
that was our brand as well. I explained to her how they are
and nieces; for the whole family. I am continuing the vision
manufactured and who is manufacturing them and why the
with which my grandfather established this company.
Rolex agency in Dubai is different from the one in Paris. Now she understands. The young generation have questions that
Are there conditions to be fulfilled by young family
we have to answer in a way that they can absorb, so we have
business members in order to join the company?
to know how to talk to them. At the end of the day, however,
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it is human to be different from one another. Maybe some of
We have a family protocol; it is not finalised but it is in the final
our young generation members won’t like watches or real
stages. Of course you can›t have every family member work
state or anything else we do; maybe they will want to do
for you; there are limitations. You pick and choose who is the
something else. We have to support them if they want to start
best person for the job. When I joined the finance department,
out their own projects.
I was selected because I had the right experience. Our family
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Profiles
The Seddiqi Family Business Members
protocol will assign for instance my successor, if I decide to
been working with us for the last 40 years. They have become
retire. I am one of the members working on the protocol and it
part of the family.
is very tough. We don’t want anyone to just come in here and feel entitled because he or she has the family name. Business
The world continues to change at a fast pace: What are
is changing every day and we need to be swift in adapting to
your recommendations for Arab family businesses?
it and make sure we have the right people on board. If you look at our region you will find that there is an When you hire a non-family member how do you
exceptionally high percentage of family businesses. The good
transmit the company and family culture to them?
thing about our culture is that we encourage large families, which enables us to find in each generation people who
When I recruit someone I look for a person that is professional
want to carry on the family business. My recommendation
with the right background and experience. Once I find the
to family businesses is look after your family and, especially,
right person, I take my time. I sit with the new employees
look after your young generation. You should prepare them
every day for the first 2 weeks. I tell them what I like and
and educate them for the future, deal with them in harmony,
don’t like, how things should run, and then I leave them to
make them love what you do, and explain the business to
discover the company. In addition, I hold weekly meetings
them. It is so important to encourage them to work hard
with the finance director, the operations director, and a
and study hard so that, one day, they can join the business.
weekly meeting with the IT team. It is a great way to keep
I strongly believe that family business owners should always
on top of things and to make sure that our employees
think of themselves as the custodians of the business they
understand our decisions. We have employees who have
want to pass on to the next generation.
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FEATURE
FEATURES 22
Q&A with Chester King, Managing Director of Stoke Park, UK
The story of the King family, its history with Stoke Park, and its career in hospitality.
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26 The Double Value of an
Owners’ Council with a Constitution A toolkit to a well-structured family business constitution and the ways an owners’ council can benefit from it.
Volume 13 Tharawat Magazine
21
FEATURE
A Family Business in Hospitality
A Family Business in Hospitality
Q&A with Chester King Managing Director of Stoke Park, UK
R
oy King, was a famous British
Little did the family know that this was only the
Jeweller in the 1950s. His son,
beginning of their journey with this charming white
Roger King, inherited his father’s
building. In 1993, Roger King bought Stoke Park in its
entrepreneurial spirit and set up the
entirety where after the family made a considerable
International Group of Companies in
investment into renovating the old structure to its
1964. The group is involved in hospital construction
former glory. The success was notable: Today, Stoke
and management, property development, sports
Park has historical status and is not only a sought after
marketing, packaging and leisure operations. Roger
clubhouse, but also a 5-star hotel. It has served as the
King has three sons: Hertford, Witney, and Chester
film set of James Bond movies as well as comedies
1795
(all named after towns in England!).
such as ‘Bridget Jones’ Diary’ and is a ‘Grade I listed’
year
building with historical status. An interesting chapter of the King’s family business story began in 1987, when they decided to rent the
It seems that in the case of Stoke Park, all it took was
top two floors of the Stoke Park clubhouse, a Palladian
a family business to take care of it.
mansion designed by James Wyatt, architect to George
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III, in 1789. The Kings set out by using the space for
Chester King and his brothers have taken the role of
their offices, having outgrown their previous setting.
Stoke Park’s Managing Director in turns for nearly two
Tharawat Magazine Volume 13
we acquired the Stoke Park estate in 1993 because my father loves old buildings (The Mansion was built in 1795 and is a Grade I listed building).
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A Family Business in Hospitality
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FEATURE
Volume 13 Tharawat Magazine
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FEATURE
A Family Business in Hospitality
decades. From 2006 onwards, Chester has retained
Over the last 18 years we have been approached by a
the MD position and is also a Director in all the family’s
large number of individuals from various countries,
other companies. His group focus is marketing and
so we decided to set up a consultancy business helping
HR. Chester King, speaks to Tharawat magazine about
people create their own Stoke Park (We work with
what it is like to manage a historical estate and about
them mainly on a “white-label” basis). There is a huge
the success factor that the family can be in hospitality.
benefit in having a club and a hotel resort concept due to the guaranteed revenues from the memberships.
Stoke Park has once been described by the King family as a ‘family hobby’. Today your family has
What do you believe are the main advantages
recovered it to its former glory; has its strategic
of family businesses working in the hospitality
priority in your family business changed?
sector?
Yes, we acquired the Stoke Park estate in 1993
Trust
because my father loves old buildings (The Mansion
Passion
was built in 1795 and is a Grade I listed building).
Shared vision and knowledge (which can easily be
We initially had a completely different vision for the
passed down from generation to generation).
estate. However, once we fully researched its history
The ability to make quick decisions and act on them.
(it was the first country club in 1908), importance, and potential, it was clear it was going to become a
Can you tell us more about the way you and
core business within our family companies. By the end
your brothers Hertford and Witney rotate
of 2011 the annual revenue had increased by 2,000%
responsibilities regularly and why?
since 1993. We all have very different skill sets and management I was very excited when my father bought Stoke
styles and so when the businesses were developing
Park; being a huge James Bond fan I loved the fact
it was good (in our opinion) to try them out to see
that we owned the golf club from the famous movie
what style suited which company. This happened
“Goldfinger” with Sean Connery and Oddjob’s
for the first 15 years – but as we have become more
flying hat! My father always raised us with the
established and our contacts have become stronger,
understanding that we would manage and take over
we now have decided to stay put!
the family businesses one day. We consistently communicate as a family. We speak Your family is active in various industries. What
and see each other almost every day. We have regular
makes the hospitality sector special to the
board meetings and discuss the results and ongoing
Kings?
issues. There would always be a hand-over period of a few weeks, but if there is information needed we
We have been very lucky with Stoke Park, as its success
just pick up the phone!
has allowed us to build incredibly strong relationships
24
in Britain’s hospitality and sports industry. We now
Do you believe that the fact that you
work for Wembley Stadium running their VIP Club,
are a family business contributed to the
Lord’s Cricket ground and most of the main sporting
success Stoke Park has seen under your
governing bodies.
management?
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A Family Business in Hospitality
I feel there is more success if you “hunt in a pack” as opposed to trying to do everything on your own. Because we all have a different viewpoint we can bounce ideas off each other.
FEATURE
to the varied interests and hobbies of our family we have a great cross section of clientele. We are also an unusual English family in hospitality as two facts make us stand out: None of us drink alcohol and since our names represent three English towns people always remember us. What recommendations can you make to other business families in hospitality? Listen to your family!
Yes! I feel there is more success if you “hunt in a pack”
Each member of the family has a particular skill set
as opposed to trying to do everything on your own.
– you need to capitalise on them.
Because we all have a different viewpoint we can
Try to create a united vision (once agreed with your
bounce ideas off each other. Then whoever is in charge
family) and then communicate it to all your staff.
(of that business at the time) makes the final decision.
Be consistent on your delivery of service and facilities
We are fortunate to have been able to build a great
Talk to other family businesses – most people are
network of guests and suppliers over the years. Due
happy to share information.
– irrespective of who is in charge at the time.
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FEATURE
The Double Value of an Owners’ Council with a Constitution
The Double Value of an Owners’ Council with a Constitution Businesses, families and family businesses can benefit from creating a formal group of “owners”. They can also benefit from creating a formal “constitution”. By combining these two concepts, family businesses with an owners’ council that creates its own constitution multiply their benefits. They have a formal structure to address issues pro-actively and they have an agreed process to follow when making those decisions. Barbara Hauser, Founder of Barbara R Hauser LLC, USA, formulates the questions a family should ask itself when shaping its constitution and underlines the importance of regular family council meetings.
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The Double Value of an Owners’ Council with a Constitution
I
FEATURE
n the Gulf Region the importance of family
family members, even though “best practices”
businesses for the over-all economy is
suggest that there should be a minimum of three
crucial. Estimates are that more than 95%
completely independent Directors. The owners are
of the region’s revenue comes from family-
named shareholders and there is usually another
owned businesses. The current critical
legal requirement stipulating that there must be a
challenge is how to perpetuate those successes
formal shareholders’ meeting at least once a year.
for the next generation. The global statistic that is
In practice, this seldom takes place. This means that
widely accepted is that only six out of 100 family
unhappy shareholders have no opportunity to voice
businesses survive to the third generation. One
their complaints.
solution to avoid the predicted demise is to take the business public while it is still successful. The
In the Gulf region many family businesses operate
other solution is to be proactive and adopt the
in the form of a general partnerships. From a legal
best possible practices to support the long-term
point of view, this means that each family member
continuation of the family-owned business.
has an equal vote and has the ability to veto any decision. They seldom have formal meetings with
A recent study conducted by Ernst & Young at the
all partners. This means that unhappy partners
request of the Bahrain Family Business Association
have no possibility to voice their complaints. This
found that very few of the region’s family businesses
has resulted in a number of lawsuits among second
have an interest in going public. While some 39%
generation family members.
reported that they recognised the financial benefits of going public, only 21% reported that they would
The pro-active solution is to provide a formal
consider it as a financing option. This highlights
meeting at which everyone’s opinions can be
the need for effective pro-active strategies and
heard and differences can be resolved. The first
processes.
step towards putting the necessary systems in place is to create an active “owners’ council”. In family
6
Family out of 100 family businesses survive to the third generation
The Owners’ Councils
businesses, the word “owner” is a helpful word
In many family businesses the management style is
(better than “shareholder” or “partner”) because it
rather informal. This works well for the founding
reflects the emotional commitment to the business.
generation members who often say that it is more
The business belongs to the owners. Some families
important for them to spend their time growing the
consider encouraging family members to think of
business than to participate in meetings. This is true
themselves as owners to be of such great value that
even when the legal form of the business requires
they even refer to the young generation members
certain meetings.
as the “future owners”.
For example, a company or corporation is required to have a Board of Directors, which is required to
Using the word “owner” creates an interest group
meet a certain number of times each year; very
that can hold regular gatherings. Many families call
few family-owned businesses do this. Sometimes,
this an “owners’ council”. The owners’ group takes
while they may have named members of the Board
the place of having a shareholders’ meeting or a
of Directors, these Boards seldom hold formal
partners’ meeting. It will not matter what legal form
meetings. In the cases where there is a Board that
the business has, the emphasis will be on the reality
has regular meetings the Board members are usually
of who the actual owners (or future owners) are.
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FEATURE
The Double Value of an Owners’ Council with a Constitution
The Family Constitution The importance of having families create their own “constitution” cannot be stressed enough. Why is this? A constitution sets out the rules for decision-making in the group of owners. It will usually business
39%
21%
reported that they recognised the financial benefits of going public
reported that they would consider IPO as a financing option
Constitution address the following issues: Who are the people taking decisions? What kinds of decisions can they take? Do votes have to be unanimous or by a majority? What are the big issues that should be agreed on by the whole family? How often should the owners’ council meet? Where should the owners’ council meet? Is there a minimum number of participants required for a meeting to take place? Can someone assign their vote to someone else if
Are there other issues that the family wants to
they cannot attend the meeting?
address?
Should the meetings follow formal agendas and be documented in written reports?
There are two additional parts of a family
Should the group form different committees?
constitution that families are encouraged to
Should the group members have limited terms?
include. The first is to begin with a “preamble”
How are successors selected?
of why they are doing this and what they want
How are different branches voted on; individually
to achieve with it (such as family closeness and
or collectively?
harmony). The second part is a section at the end
What is the penalty for not following up on a
of the document about how the constitution can be
decision?
changed at any point in the future.
95 Percent
of the region’s revenue comes from family-owned businesses
Should there be an ‘exit strategy’ for unhappy
28
owners?
The process of working out the issues surrounding
Should the family sponsor annual family
a family constitution is itself very valuable. It is a
gatherings?
“hands-on” exercise for the family to learn how to
Should a written history of the family be
make decisions together. When they all participate
produced?
in creating the rules they agree to follow, they
Should the family have rules about using shared
create their own tailored governance system.
resources for family time?
In addition, working together to agree on a family
Should the owners formalise the donations to
constitution provides a respectful setting to allow the
community charity by the business?
senior and junior generations to raise difficult issues,
Should requirements for a family member to join
and to allow siblings to ask questions of each other.
the family business be documented?
One chosen successor commented that the family
How will a successor be chosen to lead the family
constitution process enabled his siblings to speak up,
business?
and that they often had ideas he had not considered.
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FEATURE
especially in the Gulf region, do not have formally written partnership agreements. Informal methods of decision-making work best with the founders generation. They work less well in the second generation and usually fail to work at all in the third generation. Without a formal governance system that has been created by those who are affected by it, there is often disagreement, which may lead to conflicts. It is recommended that the owners’ council is founded and then have the owners’ council work on creating its own constitution. Many of the issues
Informal methods of decisionmaking work best with the founders generation. They work less well in the second generation and usually fail to work at all in the third generation.
listed in the family constitution section of this article should be addressed. There are likely to be additional issues due to the nature of the particular business (corporate market strategy, forming a holding company, creating non-voting interests, adopting a succession plan, etc.). Some of the issues that seem too family focused might not be included. As with other constitutions, an essential provision is that it should be amendable. This is very important
Combining an Owners’ Council with a Constitution
for two reasons: The first is that conditions change,
If there is value in having an owners’ council and
a new situation. The second reason is that when
there is value in having a constitution, then there is
the next generation joins (the family council or the
double value if the owners’ council creates its own
owners’ council) they need to be able to make the
constitution.
changes they want to make, in order to feel that
and the constitution should be flexible to adapt to
it is truly their constitution and not one that was From a legal point of view, if the business is a
handed down and imposed on them.
company then it will have (at least as a legally required item) articles or by-laws that address many
The value of having a formal Owners’ Council that
of the governance issues. In reality, however, it is
has created its own Constitution is the best possible
the lawyers who write the required documents and
pro-active step to achieve the successful continuation
the family members seldom refer to them in detail.
of the family business for many generations.
If the business is a partnership then many of the
Author Barbara R Hauser, Founder of Barbara R Hauser LLC, USA
governance issues would be addressed in a written partnership agreement. Many partnerships,
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www.Arabian-Nextgen.org
Arabian NextGen
Internship Program Tharawat Family Business Forum and Arabian NextGen have launched an exclusive internship program for members of the MENA family business community.
As young family members are facing many challenges and questions relating to their role in their family’s companies, getting targeted experience outside the family business can be of great help in gaining new perspectives.
The Arabian NextGen Internship Programs are open for members of
the young generation who‌
ant to gather experience outside of the family business; w want to innovate; want to learn more about a specific trade, industry or profession; want to learn about family businesses and other companies inside and out of the Middle East; want to start establishing their own professional network. ADVERTORIAL 30
Tharawat Magazine Volume 13
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There are two types of internships available‌
1: Professional Internship
2: Experience Internship
The Professional Internship Programs are tailor-made for candidates with specific professional experience, who are seeking new exposure and insight through working in other organizations.
The Experience Internships focus on young graduates, who are looking for general experience in reputable organizations. Be it to get international exposure, refine management skills or acquire new knowledge, the Experience Internships open many opportunities.
Internships can be found in the areas of Law Finance Accounting Engineering
Engineering
Accounting
Law
You can participate in Arabian NextGen Internship program if you are: A member of a business-owning family from the Arabian Gulf, the Levant or North Africa. A holder of a bachelor degree. 20-35 years old. Finance
Arabian Gulf, the Levant or N. Africa.
Bachelor degree
20-35
The Internships
I nternship of 3-12 months Possibility to shortlist preferred location and company Tharawat support throughout the internship Mentoring* Remuneration* Official Certificate of Completion
3-12 months
Shortlist preferred location and company
Tharawat support throughout the internship
Mentoring*
Official Certificate of Completion
*Subject to company policies
If you want to know more about the Arabian NextGen internship program, please visit www.tharawat.org/youngprograms.php or send us an email to nextgen@tharawat.org
Remuneration*
For companies If you are interested to host a family business member in your company, please contact us at nextgen@tharawat.org or info@tharawat.org
About Arabian NextGen Arabian NextGen was founded by the Tharawat Family Business Forum in 2011, as a platform dedicated to future family business leaders, to exchange ideas and experiences with their peers. Through Arabian NextGen, Tharawat caters more specifically to the needs of the young family business generation and offers workshops, training programs and coaching sessions
ADVErTORIAL
Arabian NextGen internship PROGRAM
Q&A Abdulrahman K. Al Zamil Financial Analyst, Zamil Group, KSA
Arabian NextGen (ANG): Abdulrahman, you graduated in 2008 from the King Fahd University of Petroleum and Minerals and you could have joined the family business right afterwards. Why did you decide for a work experience outside the family? Abdulrahman K. Al Zamil (AKZ): After graduating with a degree in finance, I felt that I needed to work in the field I studied in. As it is part of our family policy for family members to work between one to three years outside the family business before joining the group, I was looking for an experience that would not only enhance my financial knowledge, but also give me good exposure to other businesses. I strongly believe that working outside the family business enables the family member to gain essential experience and to get non-emotional feedback on his or her performance. I also believe it refines your personality and of course increases the work place exposure. ANG: Why did you choose HSBC for your work experience?
reasons for me to choose this bank as my “outside the family business” experience. ANG: What were your expectations, when you started work after your university years? AKZ: I had high expectations and was looking to gain the maximal professional exposure that would both benefit my personal career and, later on, my family business. Since I was a fresh graduate employee, when joining the bank, I didn’t expect any position higher than “trainee analyst”. Of course, I was also very excited to move to another country and city for my work: As I was working from the Dubai headquarters of HSBC, I was able to experience Dubai’s unique style, life and yet be in a location, only one hour from my home city Alkhobar ANG: What area did you work in at the bank? AKZ: I joined HSBC as an analyst from the first day of my one-year work experience. Throughout that period I worked in two departments, in investment banking and project finance. Before joining, I already knew that I mainly wanted to learn about two broad areas: Firstly, the sectors that my family was already operating in, and secondly the sectors that the family was considering to expand into in the near future. I wanted to learn about both, gain experience and knowledge about the best practices, and to know the key players. ANG: Were you mentored and supported?
AKZ: Even though my family has a long relationship with HSBC, it was its reputable name in the banking industry and its global presence that were the main 32
Tharawat Magazine Volume 13
AKZ: My direct manager supported me as a trainee. But I received the same treatment any regular
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Arabian NextGen internship PROGRAM ADVErTORIAL
newly appointed analyst at the bank would receive. I received regular feedback on my performance, I was able to find support when facing content matters and we participated in in-house training sessions. From my family’s side, throughout my work experience, I was mentored by my father and one of my uncles, who is responsible for the finance and investment activities at our group. ANG: Were you assigned certain responsibilities in your job or were you only shadowing superiors? AKZ: I was assigned the same responsibilities and duties any other newly appointed analyst would get, and I was expected to perform like them. My responsibilities included analyzing financial statements of companies, and the preparation of reports to target new clients. ANG: Did the experience fulfil your expectations? AKZ: In terms of learning and getting exposure to the different business sectors that my department was covering, the experience did fulfil my expectations. Overall, I am also satisfied with the new skills that
My work experience at HSBC in Dubai After graduating from King Fahd University of Petroleum and Minerals in Saudi Arabia, Abdulrahman Khalid Al Zamil decided to join HSBC to gain work experience before joining his family’s industrial conglomerate, the Al Zamil Group Holding. Arabian NextGen caught up with Abdulrahman, who today works as Financial Analyst at the Zamil Group Holding, to ask about his motivations and experience during that time, and find out what he would advise other family business nextgens when selecting their career paths after graduation.
www.Arabian-Nextgen.org
I acquired during my one-year experience at the bank. ANG: What were the best elements of this work experience? AKZ: First of all, the exposure to the global banking industry was very helpful and increased my insight into the industry and the economy overall. I also enjoyed living in a different city and interacting with different people from all parts of the world and learn from their diverse backgrounds and experiences. ANG: After coming back home from your work experience, did you present your experience to your family? AKZ: Yes, I held a presentation outlining the both work and life experiences I had. My family was very appreciative of the experience and I received very nice feedback. ANG: What would you advise young family business members, who want to embark on such an experience? AKZ: I would highly encourage them to do so. The exposure is not only great for your career development, but also for your personal development. You will be able to come back to your family business with more knowledge and insight, which will allow you to help to grow your business, to become stronger, and to sustain throughout many generations. Arabian NextGen is launching the first Internship Program for family business members in the MENA to offer them similar work experiences and exposure to new surroundings. For more information, registration and questions, please contact us at nextgen@tharawat.org.
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36 Green Strategies of International Family Businesses A review of the different types of green strategies that international family firms undertake.
40 Alserkal Group - A Family Business Going Green
“Going green”, “environmentalism”, “environmental sustainability” – terms, which started to appear in our vocabulary about a decade ago. However, as much as we use them, they remain hard to define and can represent individual philosophies, point to ethical considerations and ideologies of social movements, but are also increasingly used to describe new business models and investment opportunities. Getting a better understanding of the concepts underlying green strategies, however, requires, firstly, a look back at the history of industrialisation, secondly, recognising the real effects of human behaviour on the environment, and, thirdly, navigating through the complex web of environmental initiatives and policies that are being developed. We discover the extraordinary aptitude of family-owned conglomerates to design and execute green strategies and learn more about the meaning of Green Growth.
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A profile on the Alserkal Envirol grease trap waste recycling plant, UAE.
46 Interview with Abdulla M. Al Zamil A description of the Zamil New Delhi Infrastructure project.
50 Interview with Prof. Sam Fankhauser Defining the term ‘Green Growth’ and its implications for the business community.
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Green strategies
Green strategies of international family businesses
What does it mean to “go green”?
behaviour on the natural environment, and governments
Without a doubt humanity started having a strong,
often have individual ministries looking after national
defining impact on its natural environment with the
environmental priorities. However, there remains much
industrial revolution in 19th century Europe; it not only
scepticism, debate and misunderstanding regarding the
led to resource-heavy production but also supported the
impact of human civilisation on nature. In fact, “going green”
start of technology-driven mass consumer behaviour.
includes several axes of complexity:
Coupled with the global growth of the human population,
Humanity is affected in different ways: The effects of
this impact has exponentially grown ever since. Early
environmental challenges such as water shortages, scarcity
environmental initiatives were mainly conservation-focused
of natural resources, pollution and more affect individuals,
and concentrated on setting up natural reserves or protecting
communities, and countries as much as private corporations,
endangered species. However, over the past decades, “going
albeit to different degrees and in different ways.
green” has broadly been used as referring to an overall
There is disagreement as to the focus areas: determining
realisation that certain resources are scarce and that in order
the most important and most urgent challenges to tackle
to sustain life for future generations there has to be a new
always depends on the priorities of affected communities
way of using resources, minimising the human footprint on
and individuals.
nature and reducing wasteful behaviour.
There is no recipe: Environmental initiatives and policymaking ranges from simple improvements in waste
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International organisations such as the UN have bodies
management to multi-million dollar R&D investments to
dedicated to regulating and studying the impact of human
develop new, environmentally friendly technologies.
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Green strategies
Why are family businesses good at “going green”? Many times family-owned companies have been compared to non-family or public companies and their characteristics have been researched and studied extensively. These characteristics include elements like long-term visions, a clear commitment to and interaction with their immediate social environment, and the challenge of taking business decisions whilst dealing with the emotional bonds of a family. Interestingly, several of those peculiar characteristics make family-owned companies potential leaders in the field of environmental sustainability: Family-owned corporations are often forward thinking and future-oriented organisations, due to their aim to sustain the business for generations to come. In order to ensure sustainability and continuity they start taking into account the strain on global natural resources, and their long-term strategies now often include how to innovate on the usage of primary resources.
principles of respectful interaction with the environment
Family businesses are deeply embedded in their
and the careful use of resources – be it out of real concern for
communities, often linked through history and synergic
nature or out of economical thinking. Hence, ever since the
relationships. Through their strong and regular
rise of industrialised nations, several of the leading family
interaction with their social and natural environment,
businesses have successfully embarked on green strategies.
family business leaders have direct understanding of their
Be it by increasing efficiency in their production lines, by
community’s challenges and witness the transformation
installing solar panels on their headquarters or through
of their natural environment.
involving their stakeholders by launching “green” products
Family businesses as businesses also tend to have strong
– innovation, it seems, has never been a problem. So, when
relationships with their stakeholders, most importantly
family businesses “go green”, they often do so either
their customers, and have long realised the marketing
through integrating environmental policies in their
potential of environmental engagement.
businesses or using “green” business models as an
Many leaders have realised that in certain industries
investment opportunity;
environmentally friendly practices offer a distinct
through CSR activities or charitable donations to their own
competitive advantage and that areas like renewable
foundations or other organizations;
energy can be interesting investment opportunities. The unique combination of motivating factors that exist
by participating in governmental schemes to tackle challenges facing their communities.
within family businesses creates the basis for them to develop into innovative and active players in the green sector.
Many families, who have environmentally challenging industries as core businesses, such as the automobile, the oil
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Green initiatives in family firms
and mining sector and other heavy industries, often recognise
History shows that even a century or so ago it was the
these issues early on and have taken the lead in addressing
founders of successful family businesses that laid down
them. For example, family-controlled Italian car giant Fiat:
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SPECIAL FEATUREs
environmental performance of cities worldwide. The A.P. Moller - Maersk Group, the Danish familycontrolled conglomerate, one of the world’s largest sea and land transporters, is also a leading drilling and oil producing company. The Marsk Group has appointed a sustainability council that directly reports to the executive board of the group. The main focus areas of the group are reducing CO2 emissions, fighting pollution, protecting biodiversity, and managing equipment lifecycles. They monitor their progress in a yearly sustainability report.. The Tata Consultancy Services, a subsidiary of Indian family conglomerate Tata Group, was ranked number seven on the Newsweek’s “green rankings” in 2011. The company puts a lot of emphasis on environmental sustainability, considering climate change to be the “greatest threat affecting economic stability, vulnerable communities and the society at large.” Next to investing in new technologies to reduce carbon
Their approach is two-pronged: on the one hand supporting
emissions, the company has developed applications that
their clients to improve their sustainability through their
allows drivers to monitor their driving behaviour and reduce
products and solutions, and on the other hand continuously
their fuel use. Family-owned American car manufacturer
increasing the company’s own environmental performance
Ford, on the other hand, declares its dedication to climate
following detailed action plans.
stabilisation and focuses a lot on the development of efficient hybrid cars, to reduce overall carbon emissions. A specialised
Whatever the reason for their commitments (a deep-rooted
senior executive committee, which includes the vice president
belief that environmental challenges have to be addressed or
and executive stakeholders of the company guides the
strategic business considerations), it is clear that the world’s
strategic product development in line with the company’s
large family-owned conglomerates have stepped up to the
climate change goals.
challenge and openly address the issues at hand.
Family-controlled industrial multinational Siemens has gone
Green as a business opportunity
a step further and has integrated environmental technologies
The many examples of green strategies by family businesses
in its business portfolio: It tackles environmental challenges
give a good insight into the diversity of the topic: From
by developing new energy supply systems and through
philosphical conviction to downright business opportunities,
innovation in their products. The German technology
the awareness that our environment is fragile may be a
giant has invested important resources to spearhead new
challenge, but certainly also bears many opportunities.
technologies and to provide their customers with more
Families, as drivers and often as innovators of regional
resource efficient solutions. Their goal is to generate at
economies can take the lead and set standards that benefit
least 40 billion Euros from their environmental portfolio
their businesses, their stakeholders, and have a positive
in the year 2014. As a community program, Siemens has
impact on the environment, which, in the end, nurtures and
also launched the “green city index”, which rates the
enables all human ambitions.
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AlSerkal Group
Alserkal Group A Family Business Going Green
For family businesses one of the most important factors for survival is the embededness in their community and environment. The community’s well-being and the environment’s sustainability, therefore, constitute priorities even after business families internationalise and diversify widely. In the Emirate of Dubai, in Deira to be exact, there thrives a family business that has always taken this responsibility seriously: Throughout three generations the Alserkal family members have brought innovation to their community and have pioneered in new areas of business. True to this tradition, it is no surprise to find that the Alserkal Group has been busy with ‘Going Green’ for a considerable amount of time and started even before the issue achieved priority in the regional business community. For more than 12 years now, the Alserkal group has discussed and collaborated with the Dubai Municipality on how to address one of the most significant threats to the well-being and cleanliness of Dubai and its inhabitants: the disposal of edible oil waste. The urgency of the matter became apparent to the family, when it observed the growth of the city and understood how large and significant tourism and hospitality would become for their Emirate. While others focused on the glamorous front-end of this sector, the Alserkal Group has busied itself with ‘how to clean up after it’. Hence the family established the edible oil waste recycling plant, Alserkal Envirol, using the highest level of technology, and carrying it to success with the usual family flair.
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It is estimated that edible oil dumping causes...
70% of all sewer plant blockages
30% of pump station failures
Reports state that the UAE is one of the world’s largest producer of waste per capita.
The Waste Problem
With UAE’s tourism and hospitality sector having grown
The percentage of oil and grease in wastewater is a globally
exponentially over the last few decades, the number of food
recognised, pressing problem. The regulation of the
service owners has risen dramatically to match the demand.
responsible disposal of edible oil waste has been prioritised
With this came the problem of accumulated edible oil waste.
by municipalities all over the world. Communities try to
In spite of the early installation of grease traps that capture the
avoid the negative impact on health, environment, and
fats and oils going down the sinks, the problem of where to
the economy that negligent waste dumping can lead to.
dispose of the trap contents remains. Many dispose of grease
An estimated 70% of all sewer plant blockages and 30%
waste by simply dumping it in the desert or by washing it down
of pump station failures can be attributed to people either
the drain. Few know that the consequences can be disastrous
dumping edible oil waste into drains or mixing it with sewage
for public infrastructure, the environment, and health.
water. Reports state that the UAE is one of the world’s largest
Blocked drains and pipes as well as the malfunction of pumps
producer of waste per capita.
can cause stand-stills for businesses and the community at
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AlSerkal Group
large. Fixing these problems can lead to considerable costs
These traps capture FOG from the drain line and have to be
for individuals and municipalities.
emptied regularly.
Alserkal Envirol
2. Food service owners hire contractors that pick up the grease
The Alserkal Group started searching for solutions to the
trap waste on a regular basis and deliver it to the recycling plant.
problem of edible oil waste over a decade ago. Always in close collaboration with Dubai’s municipality, the family
3. The recycling plant processes the waste and separates it
business set out to find the best grease trap waste recycling
into reusable components.
technology available. After many years of searching, the Alserkal Group decided to use systems from northern Europe
4. The resulting components are vegetable oil, which is
and to invest into R&D in order to develop its own customised
used for the production of soap, bio diesel and oil burners;
technology. The years of preparation and research finally
bio-solids, which is used as a fertiliser; and water used for
led to a joint venture with the Dubai municipality and the
irrigation purposes.
birth of ‘Envirol’, a facility dedicated to the recycling of grease trap waste. The technology used in the factory was developed by and belongs to the Alserkal Group: it enables the separation of a maximal percentage of FOG (Fat, Oil, and Grease) from the grease trap waste and the recycling into useable components. Alserkal Envirol is subject to a BOT between the Alserkal group and the municipality, and while the plant is currently under Alserkal management, it will transfer into the municipality’s ownership within the next 15 years. To the Alserkal family, establishing Alserkal Envirol was but the first step of many that it intends to take into the direction of their holding-wide green strategy implementation. As a result of these efforts, the face of the family business has transformed dramatically over the past ten years; while remaining true to the family values and the way business is conducted, the group’s vision and mission as well as its marketing approach is aimed at shaping a green future.
How it Works The recycling plant is only one part of a green value chain that Alserkal Envirol proposes. The steps that lead to the safe disposal of edible oil waste involves various actors but is really rather simple in the end: 1. All food service owners are required to install grease traps to process their kitchen wastewater by the municipality.
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Regulations / Environmental Issues (Issued by Dubai Municipality) Grease Traps Grease traps, also known as grease interceptors, separate fats, cooking oil, and grease from wastewater before it enters the sewer system. Collectively referred to as FOG, fats, oil and greases can clog systems, causing them to back up. Laws Regulating grease traps primarily pertain to commercial establishments. Facilities such as laundries, restaurants and coffee shops must use grease traps and maintain them properly. Cleaning Grease Traps Is a Requirement All food establishments are required to clean their grease traps at least 2 times per month and notify the Municipality and recycling plant that such cleaning has been completed. All food operations systems must comply with the grease trap cleaning requirement. While this cleaning is required, it is also a benefit to both your food operation and to the Municipality as a whole. Clean grease traps prevent sewer back-ups that can put companies out of business for days. Such back ups can be costly to repair. “Grease traps of a design approved by the city Municipality shall be installed by the property owner for every sewer connection into which food waste is discharged from any business, commercial, or institutional food, service, preparation, or disposal operation. Any such properties not currently equipped with an approved grease trap shall be installed. Proof of cleaning shall be certified to the city Municipality on forms provided with the bill for sewer service. Kitchen wastewater processed through a grease trap-commonly called effluent--must be sent to a recycling plant. The grease trap removes the FOG from the drain line, and residual oils and greases remain in the grease trap and need further processing of the effluent through a recycling plant to recycle the hazardous waste.
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AlSerkal Group
Pick up the grease trap waste and deliver it to the recycling plant
SPECIAL FEATUREs
2
3 Recycling plant processes the waste and separates it into reusable components
1 Install grease traps
4
Components used for other industries
vegetable oil
soap
bio diesel
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oil burners
bio-solids
water
fertiliser
irrigation
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AlSerkal Group
inside Alserkal Envirol, established by the Alserkal Group for grease trap waste recycling
Alserkal Envirol provides services throughout the whole
regulations. This may be due to the fact that grease trap
cycle from the installation of the grease traps, the safe
waste recycling is perceived to be linked to additional effort
delivery of the waste to the plant as well as the distribution
and cost. Following are the three major challenges that
of the components that are separated from the waste.
Alserkal Envirol faces:
Through its collaboration with the municipality, Alserkal Envirol assisted in the formulation of rules and regulations
A) Costs:
that would ensure that these steps are carried out properly.
Recycling plants, such as Alserkal Envirol, have to charge clients per gallon of waste delivered due to the considerable
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Challenges and Reinforcing Measures
fix costs attached to running the facility. This constitutes
If recycling is such a good thing then how come there are
one of the reasons why some food service owners try and
still so many people not doing it? While the reasoning in
find cheaper ways of disposing of their waste and resort to
favour of recycling is simple and straightforward, it is still
illegal dumping, to the great detriment of the environment.
a considerable challenge to make everyone adhere to the
Ironically, often the damages that blocked pipes and pumps
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time. Additionally, valves will be installed to assure that the tanks containing the grease can only be opened once the trucks arrive at the recycling plant and not before. C) Lack of Awareness: One of the greatest obstacles in disposing of edible oil waste is the lack of awareness of consumers and business owners. Many think that by emptying the grease traps into the garbage bag they have taken care of the problem and often
Alserkal Envirol provides services from the installation of the grease traps, the safe delivery of the waste to the plant as well as the distribution of the components that are separated from the waste.
do no understand the extent of damage this behaviour can cause. Raising awareness can be one of the most difficult parts of the recycling process. Alserkal Envirol consciously includes hygiene trainings and eco-practice trainings as a part of their services and the company bestows many hours to these activities. However, behaviours are hard to modify and consciousness is often difficult to instill, which is why the regulations by the municipality play a crucial role in managing grease trap waste disposal.
What Happens Next Alserkal Envirol, today, counts names such as McDonald’s and Meydan Hotel amongst its clientele to mention but a few. can cause end up costing business owners much more than
What does the future hold in store? The Alserkal group plans
it would to adhere to recycling regulations. To encourage
on replicating the Envirol model in various other countries
recycling behaviour governments might want to consider
in the region. It will retain its model of collaboration with
offering the subsidisation of recycling for small food business
municipalities in order to make sure that the right rules and
owners, which would simultaneously increase the demand
regulations are put in place to ensure the integrity of the
for state-of-the-art waste recycling plants.
recycling value chain. In countries where such regulations are already in place, Alserkal Envirol plans on competing in
B) Contractors:
the private sector with other recycling plants, counting on the
The challenge does not always lie with the food service
uniqueness of its technology and continuous development
owner; depending on the contractor that is hired to dispose
of its methods for a competitive advantage.
of the grease trap waste things can go wrong. Some contractors are known to dump the waste in the desert or
The success of the Alserkal family in establishing Envirol
into the drains causing the municipality soaring high costs
reinforces the belief that family businesses are optimally
in blockages and contamination. In collaboration with the
positioned both in the community and the private sector to
municipality, Alserkal Envirol has developed some enforcing
set trends in sustainability and green practices. The green
measures in order to prevent illegal dumping: GPS tracking
vision of the Alserkal group’s future outlines itself clearly and
devices are to be installed in the trucks that are used by
succinctly as the family moves on and continues to collaborate
licensed contractors to pick up the grease trap waste. This
with private businesses, councils, and NPOs with the ultimate
will enable control over their whereabouts during delivery
goal of creating a reputation for environmental excellence.
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Interview with Abdulla M. Al Zamil
Zamil New Delhi Infrastructure Private Ltd.
An Interview with Abdulla M. Al Zamil The Al Zamil family business began its story in Saudi Arabia a little over 80 years ago. The family name has since spread throughout the region and across the globe as standing for one of the region’s major industrial conglomerates. Today, Zamil Group Holding Company has globalised into over 60 countries across more than 60 industries. Early on, the group has invested efforts into developing and implementing environmental best-practices in the construction industry. One of the family’s most successful business units is Zamil Industrial Investment Company (Zamil Industrial), which was established in 1998 as a Closed Joint Stock Company. In 2002, Zamil Industrial was successfully listed on the Saudi stock market and six years later, the company founded Zamil New Delhi Infrastructure Private Ltd. (ZNDIPL) further deepening its green footprint. ZNDIPL provides energy management and telemetry solutions to telecom players across the globe. With a strong focus on innovation and Research & Development, the company has developed a range of products that include site management, site build, tower operating centres, and a host of other energy-efficient and integrated infrastructure solutions for telecom operators and tower companies. ZNDIPL today has operations in India, Nepal, Bangladesh, Dubai, and Mauritius. The major projects include telecom engineering, procurement and construction (EPC) for Bharti, Idea, Aircel and TVI, as well as solar developing and EPC in Rajasthan, Haryana and Gujarat-India.
Abdulla M. Al Zamil, CEO of Zamil Industrial since 2009 speaks to Tharawat magazine about the idea behind ZNDIPL, the ‘green thinking’ of the Zamil family group, and the responsibility of family businesses in environmental practices.
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Interview with Abdulla M. Al Zamil
Haiti
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Poland Czech Rep. Uzbekistan Romania South Korea Spain Turkey Pakistan China Japan Greece Kuwait Nipal Qatar Bahrain Bangladesh Algeria UAE Egypt India Myanmar KSA Philippines Oman Sudan Vietnam Thailand Yemen Sierra leone Campodia Nigeria Ethiopia Sri lanka Malaysia Singapore Tanzania Indonesia
Zamil Group Zamil New Delhi
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The Al Zamil family business began its story in Saudi Arabia a little over 80 years ago
South Africa
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Zamil Group Holding Company has globalised into over 60 countries across more than 60 industries
1998 2002 2008
Zamil Industrial was established in 1998 as a Closed Joint Stock Company
What is the story behind the ZNDIPL venture?
Zamil Industrial was successfully listed on the Saudi stock market
Zamil New Delhi Infrastructure Private Ltd. (ZNDIPL) was established in August 2008
existing Zamil PEB factory located in Pune, India, as well as the Zamil-affiliated air conditioning facility of Himachal
We established Zamil New Delhi Infrastructure Private Ltd.
Pradesh in Northern India and various Zamil Industrial
(ZNDIPL) in August 2008. The mission of the company is to
facilities in Saudi Arabia. The approach we have taken here
supply passive telecom infrastructures, including galvanized
is new to us, since it is the first Zamil Industrial venture to
telecom towers, shelters with sandwich panels and air
which we have dedicated an entirely new business entity.
conditioning equipment to expanding companies engaged holds a 51% stake in the company.
What is meant by the term ‘ZND (Zamil New Delhi) process’?
With ZNDIPL we are catering to the growing demand for
By the ZND process we mean that our business principles
both active and passive infrastructure solutions for the fast
have always guided our actions. The interests of our
growing telecom industry in India. Today, the company has
customers, partners, investors and other stakeholders are
achieved a unique position by being able to meet current and
at the centre of our strategies and decisions. We share their
future needs of the infrastructure industry as a turnkey EPC
expectations for excellent return on their investments and
player and as an integrated solution provider.
we deal with them with fairness and respect.
The company combines the resources of New Delhi Tele-
Our mission is to deliver quality, innovative and price-sensitive
Towers Private Ltd. with the production capacity of the
products, services, and investment opportunities. We intend to
in the growing global telecom industry. Zamil Industrial
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workforce and the adaptation of leading technologies.
How did Zamil Industrial go about finding the right partners for ZNDIPL?
It also means that we are highly involved in the markets
We partnered with two veterans from the Indian telecom
we serve: we enhance our client relationships through
industry, in order to become an active participant in the
aftermarket services. This direct involvement with our clients
telecom business in India from the beginning, as the
refines our ability to anticipate and meet their evolving needs
possibilities for growth and innovation were endless. The
and expectations.
partners’ vast experience, excellent track record, and deep
achieve this through a commitment to excellence, a dedicated
relationships, represented an advantage for us to establish
Because we work where we live, we are mindful of the fact that every factory we open, every new product line we initiate, and every product we ship affects the quality of the air, water, and land that surrounds the homes of our families and communities.
new business and opportunities in the industry.
After this promising result in India, does Zamil Industrial intend to undertake more ‘Green Ventures’ aimed at other industries? This is not our first green venture: Zamil Industrial businesses implement the essential elements of ’green thinking’ in every aspect of the construction industry that we serve. We began with the Research and Development that led to energy efficient air conditioning systems, and over the years have directed our resources into the development of insulation
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materials, glass, and concrete products that substantially
our top priorities, and we do this by sharing knowledge,
increase the energy efficiency of a broad range of structures.
technology and resources. We also offer environmental education and support in our ventures abroad to help
We also focus on initiatives that minimise any adverse
preserve the environment for future generations wherever
environmental impacts of all company-owned and operated
we conduct operations.
facilities. We evaluate every opportunity for the expansion of our ‘green potential’ applied to the overall building and construction industry.
Are family businesses in the region doing enough to raise awareness about environmental issues?
What do you recommend to family businesses that are interested in ‘going green’? Going green is the right thing to do – just be sure you are actually implementing a relevant green solution. Family businesses need to understand the problem before they can come up with solutions that make sense, and they need to
Most family businesses in the region are leaders in raising
measure our current ecological impact on the environment
awareness when it comes to environmental issues. Because
to understand what to focus on.
we work where we live, we are mindful of the fact that every factory we open, every new product line we initiate, and every
Environmental solutions will result in better health, a better
product we ship affects the quality of the air, water, and land
environment, and in many cases save money too. It would
that surrounds the homes of our families and communities.
be beneficial if businesses going forward invest in green energy generation so as to achieve economies of scale in
Encouraging other businesses to follow our lead is one of
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their industries.
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Interview with Prof. Sam Fankhauser
Interview with
Prof. Sam Fankhauser, London School of Economics Prof. Samuel Fankhauser is Co-Director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. In an interview with Tharawat magazine he defines the term ‘Green Growth’ and details its implications for the business community and policy-makers globally.
What does ‘Green Growth’ encompass?
are no longer avoidable. So green growth means being prepared for more floods, droughts and other extreme
Green growth is the idea that we can increase human
events, for example.
prosperity in a way that is not harmful to the environment.
Bio-diverse: This means protecting the natural
Some of the attributes we associate with green growth are
environment and halting the rate at which we lose valuable ecosystems, valuable because they provide both tangible
50
Low-carbon: Reducing our dependence on fossil fuels
and intangible services to us (think of clean air, clean water
in energy whereby transport and industry is perhaps the
or the spiritual value of nature).
most prominent aspect of the green growth strategy, but
Sustainable: This means not overusing natural resources,
not the only one.
for example, in the management of fish stock, many of
Climate-resilient: This covers the notion that we need
which are currently overfished, or reducing the rate of
to adapt to some residual aspects of climate change that
deforestation.
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Interview with Prof. Sam Fankhauser
When we say growth, we also mean growth in measures
manufacturing firms producing wind turbines or solar panels.
of prosperity that may well be broader than GDP. Most economists will tell you that GDP is not a good measure of
HSBC, the bank, estimated a few years ago that the green
prosperity. So the concept is actually quite broad.
economy was already as big as the global aeronautics and defence industry. That is several hundred million dollars in
What possibilities does Green Growth hold for private business strategies?
annual revenues. Firms also have to watch their costs and their reputations.
Some people see the move to a green economy as the next
Energy and carbon-intensive inputs such as steel may become
industrial revolution. Like other revolutions before it – from
more expensive, and businesses that do not embrace the
the steam engine to the internet – it will produce a lot of
green economy may be punished in the market place. Their
winners but also some losers. So it is important for businesses
clients will go elsewhere.
to position themselves right and be in the former camp. There are massive opportunities for businesses that can provide
How does Green Growth impact global economies?
the environmental goods and services the green economy
52
demands. For example, engineering firms developing more
I believe the green economy will be a global economy, just as
efficient products and production processes, architects devising
our current, modern economy is. The green economy puts a
environmentally friendly homes, construction firms offering
premium on innovation, efficiency and clever new ideas. The
flood protection, banks investing in the green economy and
global market is good at stimulating and disseminating these,
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Interview with Prof. Sam Fankhauser
Innovation is absolutely critical for the green economy. (...)We need innovation to bring down the cost of renewable energy.
SPECIAL FEATUREs
what economists call externalities. Goods like clean water or a stable climate. It is the role of policy to put a price on these products, or correct the externality. For example we need policies to put a price on carbon (maybe a carbon tax) or reward the development of clean technologies. So good public policy is very important for the green economy. Politicians are beginning to realise this, although
so the free flow of goods, capital and, with more restrictions,
we cannot honestly say that all the policies we currently see
people is part of the story.
are very good. Many countries still subsidise coal and other forms of energy, for example.
Of course, trade can exacerbate environmental issues, as we see with the export of unsustainable timber. But the root cause of these problems is often domestic. The solution
What do you think Green Growth priorities should be for countries in the Middle East?
is to address these domestic issues, rather than reducing trade. If timber companies can be properly incentivised,
The Middle East is in an interesting situation. Many countries
regulated and policed, trade in timber products would not
of the region rely heavily on oil export as a source of wealth.
be a problem. It would be part of the solution.
That revenue base may suffer, and it is, therefore, important that the region diversifies economically.
How does Green Growth interact with Innovation?
Gas, which is also abundant in the region, will continue to be important. It is only about half as polluting as coal and,
Innovation is absolutely critical for the green economy.
therefore, a good short-term alternative to coal. Eventually
Many of the new technologies and production processes
even gas will become to carbon-intensive as decarbonisation
we need are still under development. We need innovation
plans progress. The UK is now approaching this point. Middle
to bring down the cost of renewable energy. We need better
Eastern countries, therefore, have an interest in developing
batteries that extend the range for electric cars. We need
carbon capture and storage technology, which turns coal
a new generation of sustainable biofuels, more efficient
and gas into cleaner fuels. This would extend the lifetime
production processes in industry and perhaps alternatives
and value of the region’s hydrocarbon resources.
to carbon-intensive products like steel and cement. But the Middle East is also rich in renewable resources, The winners in the green economy will be innovators and firms
especially solar. North Africa has ambitious plans for big solar
that are quick to adopt new technologies. This is an opportunity
energy parks that would export electricity to Europe. The
for newcomers, but incumbent firms, for example in the car
Middle East has the same potential, although its electricity
industry, are also investing heavily into the green economy.
would be for domestic consumption. With the development of these technologies comes know-how and experience that
How will Green Growth impact economic policies?
will be in high demand in a green economy.
Many of the goods and services that the green economy
Prof. Sam Fankhauser. London School of Economics, UK
promotes do not have an automatic market price. They are
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Author
Volume 13 Tharawat Magazine
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LATIN AMERICAN FAMILY BUSINESSES
SPOTLIGHT
SPOTLIGHT ON
LATIN AMERICA AND ITS FAMILY BUSINESSES PART 2
56
60
64
What’s the Rhythm of Family Businesses in Latin America
AJEGROUP - The Most Global Peruvian Family
Establishing a Business Presence in Latin America
The remarkable story of the Añaños Jerí family and the path it took to becoming a global family business, stretching from Peru to China.
The various entry strategies into the vast and complex economies of Latin America detailing the steps for planning and implementation.
A colourful description of the different strategic priorities of family businesses in various Latin American countries.
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SPOTLIGHT the Rhythm of Family Businesses in LATIN AMERICA
What’s the Rhythm of Family Businesses in
LATIN AMERICA How can the Mambo, the Salsa, and the Tango explain the influence of context on strategic decision-making in family businesses? Exaudi Research together with distinguished academic institutions, business associations and consulting firms from different Latin American countries, headed a study of 750 family businesses in Argentina, Colombia, Costa Rica, Mexico, Peru, Uruguay and Venezuela. Guillermo Salazar, Owner and Managing Director of Exaudi Family Business Consulting, Venezuela, makes feet tap and heads nod to the rhythm of Latin American family businesses and the way they prioritise internal and external strategic challenges.
E
xaudi Research, together with distinguished academic institutions, business associations and consulting firms from different Latin American
750
a study of 750 family businesses in Argentina, Colombia, Costa Rica, Mexico, Peru, Uruguay and Venezuela.
countries, conducted a study of 750
family businesses in Argentina, Colombia, Costa Rica, Mexico, Peru, Uruguay and Venezuela. The main objective of the study was to determine the demographic traits of the countries studied and their impact on the managerial and strategic decision-making of family businesses in the region. As a result of this study, we found that 85.2% of the privately owned companies in Latin America are defined as family businesses. On average, these are companies which were founded during the last two decades. They have between 11 and 50 employees, with gross annual sales of approximately US$ 3,000,000. Only 12.38% generate over US$ 23,000,000 in annual sales.
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85.2% of the privately owned companies in Latin America are defined as family businesses.
11-50
firms have between 11 and 50 employees.
US$ 3,000,000 with gross annual sales of approximately US$ 3,000,000. Only 12.38% generate over US$ 23,000,000 in annual sales.
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the Rhythm of Family Businesses in LATIN AMERICA
SPOTLIGHT
Succession Plan In Latin America, 47.28% of the companies are managed by founding generation members, 28.82% are run by the second generation (mostly composed of siblings), and in 14.17% of the cases, the management is jointly handled by the founding and second generation. Only 9.73% of the companies are led by the third or fourth generation (consortia made up by cousins). 72.73% of the family businesses surveyed admit that they do not have a succession plan and a mere 8.93% claim to already have one in place. The remaining 18.34% are in the process of creating the succession plan or have it, but find that it does not work. In general, the companies evaluated lack a No
Yes
Process
defined policy according to which the knowledge and required
72.73%
9.93%
18.43%
skills, necessary for the continuity of the organisation, may be
admit that they do not have a succession plan
claim to already have a succession plan in place
are creating a succession plan or have one that is not working
companies are managed by founding generation members
47.28%
run by the second generation management is jointly handled by the founding and second generation led by the third or fourth generation
70.7%
of the family businesses declare they do not have a council in place
28.82% 14.17%
handed down to an appointed successor.
74.01% of the surveyed companies have not formally established a Family Protocol, to which we may add those who declare they have one (7.24%), but without it fulfilling its purpose.
9.73% Family Council and Family Shareholder Agreement The Family Council is the organism, which regulates the
74.01% have not formally established a Family Protocol
relationships between the family and the company. In Latin America, 70.7% of the family businesses declare they do not have a council in place. However, the Family Protocol (a document which registers the rules pertaining to the relationship of the family with its companies and patrimony) is a common practice in Latin American family businesses, due to the high level of verbal agreements that would otherwise remain unfulfilled and must, therefore, be put down in writing. 74.01% of the surveyed companies have not formally established a Family Protocol, to which we may add those who declare they have one (7.24%), but without it fulfilling its purpose.
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SPOTLIGHT the Rhythm of Family Businesses in LATIN AMERICA
Study of the Environment and Country Situation We have classified each country based on the social, political and economic factors that have an impact on the companies and families. This enables a better understanding of the conditions under which companies operate and how their internal strategies and decision-making regarding family topics are influenced:
The Mambo Rhythm
The Salsa Rhythm
Costa Rica Peru Uruguay
Venezuela Mexico
The countries classified under “Mambo” (Costa Rica, Peru
The family businesses in Venezuela and northern Mexico live
and Uruguay), are defined by a constant energy and work
in an environment which is analogue to the “salsa rhythm”;
economy, with more order and better-established economic
a mix in which apparently there are no rules, a rhythm in
rules than the rest of the sample examined. Companies are
which “anything goes”. These are companies that are highly
mainly concerned with economic policies of local governments
concerned with personal safety, especially kidnappings
(16.29%), the lack of qualified labour (10.64%), and taxes
(16.2%), legal instability of the country (15.6%) and the
(10.3%). These firms are younger and smaller with a more
frequent changes in economic policies of local governments
professional administration. The people surveyed in these
(15.28%). The families that own companies in these regions
countries have a higher level of satisfaction with regards to
are primarily interested in creating Succession Plans
the performance of the directors of their businesses (31.7%
(35.34%), Family Protocols (29.95%), or Family Councils
claim to agree with the way companies are managed).
(25.9%). However, the constant worries they face prevent them from dedicating time to matters concerning the internal organisation of their companies and families. Despite this
31.7% claim to agree with the way companies are managed.
Companies are concerned with economic policies of local governments, the lack of qualified labour, and taxes.
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Tharawat Magazine Volume 13
volatile context, a high percentage of the people surveyed (59%) stated their unwillingness to sell their companies.
59%
stated their unwillingness to sell their companies.
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the Rhythm of Family Businesses in LATIN AMERICA
SPOTLIGHT
Conclusion Latin America cannot be viewed as homogeneous . The situation of each country has an impact on the decisions the families make regarding their business strategies and it affects them in their structure and the way they compete.
The Tango Rhythm Our research concluded that in Latin America, in general, the founder of the family business exercises multiple roles within his organisation. Most companies are run by a father figure who has multiple roles involving decision-making and maintaining control
Argentina Colombia
and power. The founder solves all conflicts that arise involving the business, the family, or both. Most family businesses have not defined a succession
In this classification, the “Tango” countries are Argentina
plan nor do they have governmental organs such as
and Colombia. In these countries, the family businesses are
Family Protocols and Family Councils, which could
more concerned with internal family conflicts (15.68%),
contribute to solving the disputes, which can arise.
the economic policies of local governments (12.65%), the
Given these facts, we can deduce that in the coming
lack of qualified labour (9.63%) and the possibility of an
years, a considerable number of family businesses
unexpected death of one of the company´s owners (9.31%).
may close down if they do not prioritise best practices
These businesses perform in highly competitive local
in management, or, in other words, if they do not find
markets. It is in these countries that we observe the highest
their own ‘rhythm’.
percentage of family-owned businesses (92.6%) and many of them in the hands of the second generation (36.9%). Both, Argentina and Colombia, have a long tradition of companies managed by private owners, with families dedicated to their duties from an organisational point of view (24.6% of those surveyed claim to be currently working on the creation of their Family Council).
24.6% of those surveyed claim to be currently working on the creation of their Family Council.
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These businesses perform in highly competitive local markets.
Research Contributors by country Argentina: ADEN Business School, Niethardt & Asociados and Instituto de la Empresa Familiar. Colombia: Suárez & Asociados and Universidad Javeriana. Costa Rica: Universidad Latinoamericana de Ciencia y Tecnología, Cámara Costarricense de Empresas Familiares and Consultoría de Empresas Familiares. Peru: Peru Top Publications and FG Consulting. México: Universidad de Monterrey, Coparmex and Álvarez, Carmona & Asociados. Uruguay: Escuela de Negocios de la Universidad de Montevideo and Delucchi, Labandera, Cianciarulo, Rachetti & Asociados. Venezuela: Universidad del Zulia, Universidad Metropolitana, Universidad de Carabobo, Ceproca and The Family Business Wiki.org.
Volume 13 Tharawat Magazine
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SPOTLIGHT Ajegroup, PERU
AjeGROUP the most global Peruvian family
In the late 1980s in the Peruvian city Ayacucho the Añaños family embarked on a business adventure that would take their name across oceans. With its core business in the soft drink industry, today, the Ajegroup is Peru’s most globalised family business with a presence in over 20 countries stretching from America to Asia. What started out with an idea of a father and his sons is today a multinational enterprise that employs 20’000 people at 22 factories and 120 fulfillment centers. Ambition drives the business further into Asia and it is said that in the near future two thirds of the world’s population will have access to the products of this Peruvian family business.
A
jegroup is the international name of the
the Eduardo and Mirtha Añaños foundation, which focuses
business group created by the Peruvian
on supporting entrepreneurship, fostering local production,
family Añaños Jerí. This multinational
and providing social aid in Peru.
Peruvian company thrives on its core business in the soft drinks industry with
The group’s most global brand is Big Cola, the official sponsor of
sales of 3bn liters or approximately US$ 1.5bn up until the year
F.C. Barcelona in Latin America and the English Football league
2011, holds second or third place in terms of market share in 16
in the Asian market. In addition, the group produces 15 other
countries in America and Asia, including Mexico, the largest
brands in different categories: soft drinks, juices, re-hydrators,
soft drinks consumer in the world after the USA. This family
water, beer, bottled tea, soy milk, and energizing drinks.
business, currently managed by the second generation, is also
60
the most globalised Peruvian company and by 2020 plans to
The business adventure of the Añaños family began in
become one of the main 20 multinational companies in the
1988 when Jorge, the eldest of six brothers, and his father
world, a goal which the family hopes to achieve by increasing
Eduardo, obtained a loan and used the money from their
their consumer base in the Asian market. Throughout the
savings in order to install a small bottling plant for soft drinks
years Añaños family’s values have been preserved as is
in their house in the city of Ayacucho. Their initial capital
demonstrated by its great philanthropic engagement through
was a mere US$ 30’000.
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Ajegroup, PERU
SPOTLIGHT
COLOMBIA ECUADOR
3
Bagua 1993
BRAZIL
4 Lima 1997
Huancayo 2 1991 1
Ayacucho 1988 BOLIVIA
pacific ocean
TOP: The Añaños family, 1974, Mirtha, Vicky, Eduardo, Carlos,Jorge, Arturo, Ángel, Álvaro. LEFT: The first plant in Ayacucho. RIGHT: The business expansion within Peru.
Ayacucho is a city located in the mountains of Peru, 2.746 meters above sea level and over 500 km from the city of Lima. In the eighties, the social and political violence created by the subversive group Sendero Luminoso reached its most critical point, affecting the supply of products to the different provinces of Peru. This situation was even more aggravated by the attacks that the delivery trucks from large companies such as Coca
The family enterprise was more successful than expected, and in 1991, the other five Añaños brothers entered the business.
Cola, Pepsi or the Peruvian company Inca Kola suffered. In the face of this crisis, Jorge Añaños convinced his father to open a company in order to supply the internal demand of soft drinks
Carlos, Vicky and Alvaro) entered the business, through a
in Ayacucho, with an initial production of 48 crates per day.
drinks factory in Huancayo, a city with a lot of commercial
The business strategy, from the formula of the drinks to the
activity in the centre of Peru. Two years later they opened
distribution method, was devised by the Añaños family alone.
another factory in the city of Bagua, in the northern part of the country. The positive reception in these first markets gave
The family enterprise was more successful than expected,
the family the necessary push to take the risk of entering
and in 1991, the other five Añaños brothers (Angel, Arturo,
Lima in 1997, which is the capital and, therefore, the main
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SPOTLIGHT Ajegroup, PERU
Geographical Expansion over Time 2011
Brazil
2010
Vietnam, Indonesia and India
2009 2008
70%
of the demand for Big Cola will come from Asia, after penetrating China (possibly during 2012).
2007
Colombia
2006
Thailand, EL Salvador, Belgium, Spain
2005
Guatemala, Nicaragua, Honduras
2004
Cost Rica
2003 2002 2001
Mexico
2000
Ecuador Venezuela
1999 1999
The next step in their global expansion was to be even more ambitious: The Ajegroup set out to capture the Asian market.
1997
Lima (Peru)
1996 1995 1993
Sullana (Peru) Bagua (Peru)
1992
Huancayo (Peru)
1994
1991 1990 1989 1988
Ayacucho (Peru)
market of Peru with almost a third of the national population
company: The Ajegroup set out to capture the Asian market.
inhabiting it. Once this goal was successfully achieved, the
In 2005, the group inaugurated its first factory in Thailand,
next step became clear: Internationalisation.
followed a few years later by Vietnam, Indonesia, and India.
Venezuela was the first step in the internationalisation path of
The strategy employed to achieve this exponential growth
the Añaños family and was initially chosen because of its hot
in little over two decades remains clear: to approach
climate, a higher consumption per capita than that of Peru,
markets with an unsatisfied demand due to high prices of
and an almost exclusive use of glass containers, which gave
competitors, and to maintain a low cost policy in order to
the family a competitive advantage by penetrating the market
be competitive by delivering quality products but in larger
with non-returnable PET containers. Once again they were
containers. Ajegroup was known to invest only moderately in
successful, which encouraged them to penetrate more markets
advertising until they acquired the rights to use the images of
in the region: Ecuador, Mexico, Costa Rica, Guatemala,
F.C. Barcelona and English Football League players in 2010.
Nicaragua, Honduras and El Salvador followed. Brazil is the latest market added to their Latin American strategy.
The global financial crisis has not presented an impediment for the company´s plans, since their target has always been
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However, the next step in their global expansion was to be
markets with low resources and, therefore, their products are
even more ambitious and quite unprecedented for a Peruvian
in higher demand than ever.
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Ajegroup, PERU
SPOTLIGHT
LEFT: The Añaños. Arturo, Eduardo, Jorge, Mirtha, Ángel, Álvaro, Vicky and Jorge in Lima,1995.
The steep growth has led the family to professionalise its
and son, is now consolidated as the company with the
structure by hiring managers for their many branches (The
largest global footprint in Peru. Indeed the Ajegroup has
group was never listed on the stock market). However, the
spread vaster than large corporations that have been in
decision-making of the divisions remains with the Añaños
the market for over 100 years. All of this thanks to a solid
brothers: the group President is Angel Añaños, and his
family nucleus, a clear vision of target markets, and well
brothers are in charge of the South American markets (led by
defined strategies. In the year 2013 it is expected that
Alvaro Añaños), North and Central America (led by Arturo
70% of the demand for Big Cola will come from Asia, after
Añaños) and Asia (run by Carlos Añaños).
penetrating China (possibly during 2012). This would mean that the Añaños family would capture a market of
Currently, Ajegroup´s finances are managed from an office
4bn consumers: almost 60% of the world population will
in Spain, which allows them to adapt to the time zone in Asia
be supplied with a product manufactured by a Peruvian
(morning) and Latin America (afternoon); the marketing
family business.
division is located in Bangkok (Thailand) and the new products or production lines are usually tested first in Peru before they are introduced into other markets. What began as a small family enterprise between father
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Author: José Carlos Lumbreras, Investigation Unit Chief of Peru: The Top 10,000 Companies, Peru
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SPOTLIGHT ESTABLISHING A BUSINESS PRESENCE IN LATIN AMERICA
ESTABLISHING A BUSINESS PRESENCE
IN LATIN AMERICA Latin America holds great diversity socially and economically. Entering such a vast new market holds many opportunities but also many challenges. Edward Nicholson, Managing Partner at Mercator Partnership Limited, and Consultant to Maitland Group, offers insights to businesses looking to establish a presence in Latin America for the first time and considers two distinct phases in the process – Planning and Implementation.
F
ortunately for today’s investors there is a wealth
Having a clear vision of why one is entering the market gives
of information available that they can exploit
focus to the research. This vision will be specific to each
before setting foot on the American continent.
investor and may range from simple geographic expansion
The challenge consists in how to filter this
(same business new market) to full diversification (new
information to answer three key questions:
business new market) but may also contemplate other
what business, where and how? Addressing each of these
considerations such as access to low-cost production,
is critical if a competitive and sustainable business platform
diversification of political risk, or access to scarce resources
is to be established.
(mining/ agriculture). The answers to the ‘What business’ question should become clear once the objectives and
Planning: Homework Does Matter
rationale for entering the market have been evaluated.
Time taken to plan the approach to Latin America carefully
64
is time well spent given the region’s diversity and rapidly
One mistake that is often made by foreign companies entering
evolving economic and political landscape. It is a region
Latin America, and especially Brazil, is that the vision for
with significant growth potential and the building of strong
the business needs to be commensurate with the scale of
foundations at the outset will bring rewards later.
the market. There are numerous examples of businesses,
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ESTABLISHING A BUSINESS PRESENCE IN LATIN AMERICA
SPOTLIGHT
which have entered on a sub-scale basis, underperformed
and other shareholders: The Indian Group, India United
(because they are not relevant in their sector) and have then
Phosphorus Ltd recently acquired 51% of DVA Agro do
been forced to withdraw because their boards lost patience.
Brasil, an agro-chemicals producer, for US$150mn. Acquisition of 100% of a private business: GSK’S
The following are illustrative of some recent investment flows and demonstrate the various approaches to deal structures: Minority stake in a listed business: The Qatar Investment Authority made a sizeable investment ($2.7bn) in Banco Santander, Brazil, in which the Botin family from Spain is a significant shareholder. Controlling stake in a private business: At the other end of the scale, the UK Group, G4S, made a 51% investment in a Brazilian Group, Plantech Engenheria, a security systems integrator, with the option to increase its stake over time.
One mistake that is often made by foreign companies entering Latin America, and especially Brazil, is that the vision for the business needs to be commensurate with the scale of the market.
Controlling stake in a business from a German Group
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SPOTLIGHT ESTABLISHING A BUSINESS PRESENCE IN LATIN AMERICA
The point of entry
proximity to clients and markets
predictability of the legal system
availability of skilled labour
state incentives
logistics
sophistication of capital markets
Commercial
tax rates and exemptions
currency convertibility and stability criteria governing the payment of dividends and repatriation of capital
Legal and Financial
acquisition of Laboratorios Phoenix, an Argentine
a regulated industry – typically these include public services
pharmaceutical business for $253mn.
such as energy and water or strategic industries such as air-transport, newspapers and broadcasting and recently
The point of entry (country and/or city) may be determined
agriculture (in some countries) as well as healthcare or
by the nature of the business activity to be undertaken
banking. Foreign demand for farmland has prompted a
particularly if this relates to natural resources, the need for a
review of ownership criteria in Brazil and Argentina.
port or a scarcity of potential business targets. If not, the choice of location may be determined with the help of two filters:
In practice, while the choice of location will often be
Commercial – considering factors such as proximity to
determined by one or two key considerations specific to the
clients and markets, logistics, availability of skilled labour
business, the issues raised above still need to be considered.
and the sophistication of the capital markets. While English is widely spoken in business, it is not universal, and therefore knowledge of Spanish or Portuguese (Brazil) would be an advantage. Access to education for expatriate staff can be critical. Legal and Financial – including predictability of the legal system, tax rates and exemptions, state incentives, currency convertibility and stability as well as the criteria governing the payment of dividends and repatriation of capital.
The point of entry may be determined by the nature of the activity to be undertaken particularly if this relates to natural resources, the need for a port or scarcity of business targets.
Regulatory considerations will also be important if entering
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ESTABLISHING A BUSINESS PRESENCE IN LATIN AMERICA
Implementation: Concentrate on the Objectives and their Feasibility Sizeable “Greenfield” investments are comparatively few and are usually subject to special criteria. The focus will therefore be on acquisitions and alliances relating to existing businesses or small start-ups.
SPOTLIGHT
Be prepared to walk away if the price becomes uneconomic or if there are substantive questions, which are not being answered.
The use of quality professional advisors is essential for legal (structuring, contracts and due diligence) and taxation issues and the use of a specialist intermediary (bank, broker or consultant) for an acquisition or alliance can add real value
stake, ensure that there are enforceable exit provisions
– they may have better information on and access to potential
giving fair value.
targets, particularly when sounding out a target’s interest. They can also be useful at key points in the negotiations by
Lastly, be prepared to walk away if the price becomes
acting as a filter.
uneconomic or if there are substantive questions, which are not being answered.
In Latin America, personal relationships are valued highly and therefore getting to know your partner and/or target is a good
Alliances and Joint Ventures: Possibly an Excellent
investment. Business families like to cooperate with other
Method of Market Entry
families and like to deal on a principal–to-principal basis.
Many companies initially enter the Latin American market through an alliance or joint venture, which can have a
Experience has shown that it is invariably beneficial to have
number of advantages for both parties. One should note,
at least one well-connected local person involved with the
however, that the majority of alliances end within seven
business on an ongoing basis. This can help avoid and resolve
years with one party acquiring the other. Understanding the
potential issues with officialdom – and there will be some!
relative value added by each party and how this might change over time is critical. Strategic alliances and joint ventures
The implementation process is substantially similar to that
can be complicated and considerable care is required with
in any developed market but it is worth commenting on:
their structuring and documentation. It may be helpful to
Target identification: Where this is not obvious, as in the
look at these in terms of their commercial rationale – the
case of a competitor, use an advisor to source or validate
contributions of the parties and need for IP protections and
potential targets.
their legal, financial and operational provisions - such as
Price: Reaching agreement on price may require patience
governance, exit and value sharing arrangements.
– optimism on prices is standard. Consider using a formula to future performance to bridge any material gaps.
Latin America is a region potentially offering excellent
Due Diligence: Use the best available lawyers, accountants
rewards for those with a carefully considered strategy and
and industry professionals and build a comprehensive
who embrace its challenges.
knowledge base on any family, which may become a partner – if they are well known this should not be difficult. Governance: Be sure that the governance structure post acquisition or in an alliance really works and has sufficient redundancy in it to operate as intended. If taking a minority
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Author: Edward Nicholson, Managing Partner, Mercator Partnership Limited, Consultant to Maitland Group, edward@mercatorpartnership.com
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67
MIRACULOUS, UNFORGETTABLE FULL OF EXPECTATION
BUT FOR MILLIONS OF CHILDREN, IT’S ALL THEY GET. Every year 3.1 million babies die in their first month of life. EVERY ONE leaves a heartbroken family. EVERY ONE of us can stop children dying. To find out more about the campaign and how you can help, go to www.everyone.org
Registered charity England and Wales 1076822.
Anna Kari
The fIrST day Of LIfe...
SMEs
Family Business
SMEs 70
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ALJCI: A Family Business Setting Standards in Job Creation
Yabe & Yamo - Q&A with Salma and Michel Zayat
A profile on the job creation and small business loan programs of the Abdul Latif Jameel Group, KSA.
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A Syrian couple and their new design boutique located in the heart of Damascus in Syria speak of local production.
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SMEs
The Abdul Latif Jameel Community Initiatives
Abdul Latif Jameel Group is known for many things - It is known for its founder, Sheikh Abdul Latif Jameel and his entrepreneurial spirit. It is known for Toyota, the car brand it has represented for half a century in Saudi Arabia. But the Jameel family is also known for its exemplary approach to realising its social responsibility: from poverty alleviation to culture and art programs, Abdul Latif Jameel Community Initiatives (ALJCI), the CSR organisation set up by the Jameel family, covers a large spectrum of community needs. Its greatest emphasis has, however, remained on providing people with the skills to pursue their chosen profession and the financial support of small businesses and entrepreneurs. Today, the family invariably replicates its successful job creation and small business support programs wherever it expands its business activities to. In 2011 the ALJCI has created over 50’000 job opportunities.
The Abdul Latif Jameel Community Initiatives
A family business setting standards in job creation The Idea and the History...
community into his family’s business model, he
The Abdul Latif Jameel Group has always supported
started out with a small project: Instead of just
its community through philanthropic activities
selling cars, the company would place cars at the
and charity. Founded in 1945 by the late Sheikh
disposal of members of the community, allowing
Abdul Latif Jameel, the group became the sole
them to put the vehicles to use and set up their
distributor of Toyota ten years after its inception.
own businesses, for instance as taxi drivers. They
Over the years, the family business has maintained
could then pay back the company for the car
and expanded its presence in the automobile
without interest. The first ten jobs were created
sector while adding real estate, consumer finance,
in this way and Mohamed Abdul Latif Jameel
and general trading activities to its portfolio.
understood that he had found a successful model. The next step was to increase the number of jobs
Mohamed Abdul Latif Jameel, President of the
created: 100 jobs was the new target in 2003.
Abdul Latif Jameel Group and eldest son of the
But the family ended up exceeding its goal by far.
late founder, has always been an ardent agent of
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social responsibility and especially of job creation.
Soon the Jameel group found that there was just
To integrate his vision of a more sustainable
as much need to provide people with the right
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The Abdul Latif Jameel Community Initiatives
1945 2004
SMEs
Abdul Latif Jameel Group
(ALJCI)
Abdul Latif Jameel Community Initiatives
2007
Bab Rizq Jameel (BRJ)
skills to pursue their chosen profession as there
Collaborations with many educational institutions
was of providing them with equipment. A fund for
were established that now provide people with
vocational training was established. The initiatives
training and diplomas. Other activities such as SME
for job creation did not stop there; in 2004,
support, productive families’ program (GRAMEEN
recognising another way to create employment, the
program-by Dr. Muhammad Yunus, Nobel Prize
family business established a fund that was aimed
winner) were added. The BRJ model is aimed at
at providing entrepreneurs and small businesses
covering multiple ways of bringing people into the
with interest-free loans.
labour market successfully. The efforts are directed to men and women equally. In fact, BRJ has recently
Together with its other initiatives, such as a program
set up the Jameel Bazar, which is a commercial
to support orphans, the building of hospitals, and
incubator space that allows female entrepreneurs
road safety programs, the Jameel Group now had
to open their small shops and offices.
a considerable portfolio of social responsibility activities. In 2004 the family officially established
Today...
Abdul Latif Jameel Community Initiatives (ALJCI),
Today, BRJ gives loans from 10’000 up to 150’000
which was to serve as a hub to all its community
Riyals for small businesses and allows four to five
engagement activities. In 2007 a separate brand
years to collect the sums back. In order to obtain
was created under ALJCI, which was to be
such a loan, entrepreneurs and small businesses
dedicated entirely to the job creation programs. It
have to submit their business plans and feasibility
was called Bab Rizq Jameel (BRJ), named after its
studies to a committee within BRJ. The committee
purpose as the ‘beautiful gate to prosperity’.
reviews the business idea and judges its potential, awarding it with a loan if deemed realistic. But
In BRJ the job creation programs expanded to
BRJ’s involvement does not stop at mere financing
include training programs ending in employment.
for entrepreneurs and small businesses. Follow-up
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SMEs
The Abdul Latif Jameel Community Initiatives
Amnia Fitaihi, Direct Recruitment Program, Sawani Shop, Jeddah
Amer Al-Ghamdi, Small Business Program, The Coffee Shop, Madina
Mohammed Alwafi, Training Program, Rulako Company, Jeddah
Mohammed Masere, Franchise, Remax Project, Mecca
Hadi Al Qahtani, The Taxi Project,
Halah AlOmar, Small Business Program, Flower Shop, Jeddah
Al Khoubar
systems are in place that allow monitoring of an
the business. Finally, there are those that cannot
entrepreneur’s progress after receiving a loan. This
continue because the licenses for their business
way loans can sometimes be increased according to
are too difficult to acquire. Here BRJ’s follow up
individual needs.
system and accompaniment is essential for the sustainability of the business creation process.
Until now the payback rate is at 97% for loans issued to small businesses and at 99% for the Productive
Only in Saudi Arabia, BRJ includes over 26 job
Family Program. The success can be attributed to the
creation centers with more than 500 employees.
fact that the Jameel family here has leveraged on its
The Jameel family business found its community
35 years of experience in financial services and has
involvement under ALJCI and BRJ to flourish
clearly applied a feasible and realistic payment plan.
and consequently replicates the model wherever its business expanded to. For instance, when the
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Another measure of success is the fact that based
family bought the Toyota brand in Istanbul it was
on a study in 2009, 83% of the 17,000 small
part of its strategy to have a community initiative
businesses that BRJ supported are still operating.
alongside it. Next to being implemented in
BRJ has, however, also seen entrepreneurs go out
Turkey, the model has also been applied in Egypt,
of business: For some competition gets to steep
Syria, Morocco and is currently being set up in
and they quit, others find governmental jobs with
Algeria. For the successful internationalisation of
higher job security. Again others stop because they
the job creation programs and other community
do not have the required management skills to grow
projects, in each country ALJCI appoints local
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SMEs
26
Only in Saudi Arabia, BRJ includes over 26 job creation centers with more than...
97% 99% the payback rate for loans issued to Small businesses.
the payback rate for loans in the Productive Family Program.
83%
...500
of the 17,000 small businesses that BRJ supported are still operating.
employees
300’000 SR
50’000
The next step for BRJ is to expand its support to more complex sectors by increasing their loans to up to 300’000 Riyals for small businesses.
In 2011 ALJCI’s BRJ created over 50’000 job opportunities.
members of the community in order to make
created a competition for small businesses in
sure that the necessary adaptations to national
Saudi Arabia and on a larger scale has partnered
contexts are made. In 2011 ALJCI’s BRJ created
with MIT for the MIT Enterprise Forum Arab
over 50’000 job opportunities.
Business Plan Competition. The winners receive loans to support the realisation of their dreams.
The Future... Despite the impressive success till date, job
The innovative and future-oriented programs and
creation remains a daunting task in the Arab
schemes set up by the Jameel family has not only
world and ALJCI is thinking ahead: Until now
created opportunities for thousands of people,
their support was lent to the more traditional
it has also propelled the Jameel family onto
sectors of the economy. The next step for BRJ is
the forefront of CSR proponents in the Middle
to expand its support to more complex sectors by
East. It has set an example, which shows that
increasing their loans to up to 300’000 Riyals for
family businesses can find successful models to
small businesses. The organisation is also starting
contribute to their communities while remaining
to consider entering into joint ventures with some
perfectly aligned with their own business interests.
of the more interesting entrepreneurs as a new
The family’s continuous personal involvement
model to support their sustainability.
with its community initiatives and its dedication to fight unemployment has further improved its
To encourage the submission of ideas and to
reputation with its stakeholders, and has inspired
promote the cause of job creation ALJCI has also
others to imitate them.
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SMEs
Yabe & Yamo, Syria
Interview with the Owners of Yabe & Yamo, Syria
Salma and Michel Zayat Located in the heart of the old city of Damascus thrives the little design boutique Yabe & Yamo. With its traditional Syrian name (the equivalent to ‘Mum and Dad’ in Syrian dialect) and unique designs, Yabe & Yamo offers a unique experience for design lovers and ambitious artists both locally and internationally. The boutique items range from furniture designs to lighting and accessories as well as boutique’s own collection. Michel and Salam Zayat, the founders and owners of the boutique, speak to Tharawat magazine about their locally made collection and their collaboration with designers and entrepreneurs from different parts of the World.
When and why did you start design
of them, and we did not think that the market
boutique Yabe & Yamo?
could handle more. So, we thought of focusing on design. Michel thought that by introducing
We started our design boutique in February 2010.
“design” as a concept we could open a window
We came up with the idea in 2009 and felt that the
towards creating a space where people understand
concept of our little boutique would be interesting
that paintings or sculptures are not the only ways
to Syrians and non-Syrians alike.
to talk about “culture”, and that the world of design holds much more than is already known.
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We wanted to do something related to arts and
Michel, a practicing architect since 1999, and
culture. Starting a classical art gallery was out of
myself a previous banker and a lover of art and
the question because there are already so many
design, searched for companies working in this
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Yabe & Yamo, Syria
SMEs
The Yabe & Yamo boutique in The Khan in the heart of Damascus, Syria.
specific field and designers full of ideas. Then we
Are there advantages to working as a couple?
found a space in The Khan to start with, and here we are.
Working as a couple is hard, yet, funny; interactive but it needs awareness and extra energy, because we
We are not an art gallery, not a furniture store nor
talk about business all the time. It is definitely not
a gift shop, which are all already available in the
like working with a friend or a complete stranger.
Syrian market. We represent a space where all of
We both enjoy the attention and encouragement
the above are combined. We believe that in an
that one of us receives; any positive reaction one
unpredictable market like Syria, new concepts can
gets is a push for both of us. We enjoy it a lot. We
fit but must be introduced in an inventive manner
did not think of it at first, but people seem to get
for them to succeed.
more interested in looking at what we do after
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SMEs
Yabe & Yamo, Syria
LEFT: Salma and Michel Zayat
knowing that we are a couple. They get even more
We also take the prices into consideration. What’s on
interested when Michel and I publically have
the shelves has to be affordable or, at least adapted
different opinions about designs.
to the local market.
How do you choose the products you
What are the challenges and advantages of
display?
local production?
For our designs, we mainly focus on their potential
We face the following challenges: Firstly, there are
to be transformed into reality and accordingly the
limited sources of materials in the local market. The
availability of the proposed materials in the local
second challenge is the reduced number of specialised
market. All our designs are made locally using
traditional craftsmen due to the “modernisation of
locally available materials. However, uniqueness,
the market�.
functionality, and aesthetics are very important. In other words, we have tried to present products that
Thirdly, It is hard to convince available craftsmanship,
are handy, funky, smart, and pretty; a product that
to apply new methods; reasons are the mentality and
holds a conceptual value in thinking and making.
the lack of proper machinery. In short, it is hard to convince them to try new methods and techniques,
As for the selection of the international designs
but it is possible.
that we import, in addition to the previous, many
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elements are taken into consideration: We look for
There are advantages of local production: We incur
award winning designs, and the message behind
lower costs compared to neighboring markets,
the design itself.
especially as we produce only limited quantities. In
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Yabe & Yamo, Syria
As for Syrians, I think that it is starting to become a trend to use local materials and/or methods, but not in a modern sense. I think you can only do so if you are a good technician as well as a designer...
SMEs
a proper store. Besides, when you have enough funds, marketing and HR are not a big issue, you only need to be aware that it is a must. What is also needed are enterprises that could provide some guidance for talented designers who cannot make it by themselves after graduation. Those enterprises could provide advice, supervision, funding and marketing. What are the challenges SMEs and
addition, making rapid last minute modifications
Entrepreneurs face in Syria?
when necessary is possible and not costly, as people are kind and helpful.
The majority of our enterprises are small, some are medium-sized, and only very few are big. In all cases
It feels good to revive the endangered traditional
the number one challenge is the prices of properties,
materials and professions, and help shape them
which are extremely high for both renting and buying.
into modern ways. Moreover, I think that what we
This leaves barely any profit margin. Therefore, the
are producing locally, whether it is traditional or
number of businesses specialised in any “artistic”
not, creates a debate, a challenge and maybe job
activity is very limited compared to other more
opportunities.
lucrative sectors.
Some Arab entrepreneurs, especially designers,
Most Syrian consumers tend to fall in love with
from neighboring countries execute their designs
anything “imported”. They are willing to pay a lot for
in Syria. Others buy the local materials but
high-end brands, only because it is well known, and
manufacture abroad in their own countries or in
refuse to pay less than half the price for local products,
India and China.
which cannot compete with international brands no matter how smart, divine and delicate the product
As for Syrians, I think that it is starting to become
proves to be.
a trend to use local materials and/or methods, but not in a modern sense. I think you can only do so
What does the future hold for Yabe & Yamo?
if you are a good technician as well as a designer and know the necessary detailing for production.
A future plan for Yabe & Yamo brand would be to test
Yet, in general, the preference for imported goods
the market further by launching new items in 2012 and
is still much stronger amongst our Syrian clientele.
trying to display them in neighbouring markets. On the long run, we will try to commercialise the products by
What is the greatest need for development
introducing them to bigger manufacturing companies.
of entrepreneurs in design?
As a first step in the near future, Yabe & Yabe designs will be displayed and available in Beirut at a new design
The number one need is financing, especially,
venue. The idea is to give the concept more exposure
when it comes to production and displaying in
and try another market, which is more open.
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Facts and Figures
reviews
Facts and Figures
Job Creation in Arab Economies Navigating Through Difficult Waters
A
s part of the Human Development series of the United National Development Programme (UNDP) Professor Jad Chaaban from the American University of Beirut published an overview on job creation in the Arab world. The human development reports were launched to examine the link between national economic growth and the expansion of individual human choices.
Professor Chaaban published his report in 2010 and hence was not able to capture the changed Arab landscape of 2011. However, it gives a great insight and understanding of the overall situation, which might at most have become more complex over the last months. At the outset, Chaaban identifies one major problem with unemployment rates: the mismatch in the Arab labour
markets, when it comes to geography, employability and expectations. The report sees the main challenges in the facts that… • Jobs are created in geographical areas, not accessible by job seekers • The skills of the many new labour market entrants do not match the market’s requirements • A large number of individuals are voluntarily unemployed, not willing to accept jobs at the prevailing wages.
The Arab Economies in Employment Categories Arab economies are very diverse and the Gross National Income per person varies from almost 64,000 US$ in Qatar to 281 US$ in Somalia. These differences depend largely on three factors: 1. Size of the hydrocarbon exports 2. Expat share of the labour force 3. Whether the countries are under conflict or political instability. Arab countries can be meaningfully analysed by grouping them into 6 economic categories*
Oil rich and labour importing countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates Oil rich and labour abundant countries: Libya and Algeria
50 N
40 N
Syria
Tunisia Lebanon West Bank & Gaza
Morocco
20 N
Bahrain Qatar UAE
Djibouti 10 N
Oman
Conflict-stricken countries: Somalia, West Bank and Gaza, Iraq
Sudan Yemen
Somalia
*Please note that these categories were established in 2010 and have not yet been revised for 2011.
0
50 E
40 E
30 E
Tharawat Magazine Volume 13
20 E
78
10 E
0
Equator
Poor countries: Comoros, Djibouti, Mauritania, Sudan and Yemen
Kuwait
Egypt
Saudi Arabia Mauritania
Labour exporting economies: Jordan, Lebanon, Morocco, Syria and Tunisia
Iraq Jordan
Algeria Libya
Oil-poor but labour abundant: Egypt
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Facts and Figures
reviews
Arab Unemployment in Numbers (2010) Algeria Bahrain Djibouti Egypt Iraq Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Qatar Saudi Arabia Somalia Sudan Syria Tunisia UAE West Bank & Gaza
45.6% 20.7% 37.8% 25.8% 45.3% 38.9% 23.3% 21.3% 27.3% 44.3% 15.7% 19.6% 17% 25.9% 43.4% 41.2%
| | | | | | | | | | | | | | | |
10% 5% 41% 8% 30% 11% 3% 12% 7% 16% 10% 7% 1% 5% 33% 21%
19.8% | 21% 26.5% | 14% 6.3% | 2%
Poor Countries Labor importing, resource rich
44% | 21% 19% | 4%
Labor exporting
23% | 14%
Labor Abundant, resource rich
36% | 10%
Labor Abundant, resource poor
26% | 8%
conflict countries
45% | 31%
Youth (15-24) unemployment Overall unemployment
33.1% | 25%
The Employment Situation in the Arab World
What Next?
Key factors of the current employment situation in the Arab world:
Chaaban concludes with the following suggestions that Arab economies should address in order to reduce unemployment: 1. Focusing on youth in national policy-making. 2. Increasing the overall competitiveness of the Arab markets by focusing on market specific requirements. 3. Establishing linkages between unemployment and job creation in terms of location, in relation to employability of local talent, and expectations of job seekers. 4. Increasing women’s employment incentives. 5. Revisiting the costs and benefits of emigration. 6. Providing more social protection for the poor and unemployed.
The region needs approx. 80 million jobs between 2000 and 2020 to absorb new entrants to the labour force. Youth aged 15-24 make up 30% of the region’s working age population, and a quarter of them are unemployed (compared to 14% internationally). ne third of the average working age population is part of the labour O force that is actually participating in the Arab world’s economy. Low participation is partially due to low employment rates amongst women. The agricultural sector is the major employer in poor Arab countries, where 50% of the workers are involved in agricultural and fishing activities. Approx. 29% of total employment in the Arab World is filled by the public sector. Approx. 38% of current government expenditures is labour related. Global average is between 15-20% of government expenditure. Approx. 60% of Arab workers are employees. Approx. 15% of the working population are employers. Approx. 10% of employment is in the informal sector.
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reviews
Book Review
alexander osterwalder & yves pigneur
Business Model Generation inspiring handbook for anyone striving to generate a business model
H
aving a sound business model, it is agreed amongst the most successful business people, is paramount to run a sustainable business. Since the business model of any company is the core of its strategy, many scholars have professed their theories and opinions on the subject. However, most of this advice difficulties found to be hardly applicable in the real world. The book “Business Model Generation” puts itself apart from its peers on the bookshelves by offering a guide to innovation and reinvention of the way we view business models. Addressed to new-comers to the business world as well as established business-owners this book is for anyone who is looking for an unorthodox approach to business modelling. The first major difference that sets “The Business Model Generation” apart from other management books is that fact that it is co-authored by 470 people from 45 countries contrarily to celebrating the opinion of only one expert which is usually the case. All contributors are members of the business model innovation hub –an online community platform where business practitioners and researchers meet to discuss and learn about the evolving field
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Synopsis Business Model Generation provides an A to Z guideline for innovators, entrepreneurs and established managers that seek to outline and visualise business models that lead to success.
of business model innovation. The members contributed to the book with their experiences, examples and comments, which adds an aspect of practicality to it. Another feature that attracts attention is the book’s appealing design from cover to cover. Design is a core subject throughout this guide to business modelling according to the authors and true to their word they have practiced as they preached using colours, illustrations, pictures with a child-like enthusiasm creating a unique visual experience.
“Business Model Generation” takes the readers on a journey to discover, or rediscover, how to create a business model that is adapted to modern thinking. The book is divided into 5 sections providing a full description and exploration of the concept. It starts by defining the elements that provide the basis for designing a ‘business model canvas’ which is applied throughout the book with consistency. This is followed by an inspiring section where strategies of major companies are used to define business model patterns. The writers introduce the notions of the ‘Empathy map’ along with the process of ‘Ideation’ underlining the importance of creating customer-oriented business models in the section dedicated to design. After a generic overview on strategy, the last section provides the reader with the possibility of connecting the dots: a sort of recapitulation with an emphasis on implementation is provided underlining the practicability of each phase towards defining a business model. ‘Business Model Generation’ sets new standards, not so much in what it says, but in the way it communicates content creating an effortless learning experience for practitioners.
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