“ Family Enterprise versus Individual Enterprise"

 Management Case1- “ Family Enterprise versus Individual Enterprise" Munish Alagh-PDF IIM-A and Formerly Assistant Professor AMSOM, Ahmedabad University. 20-2-2013.

 

Shikha Uberoi is a 65 year old lady who lost her husband a year ago, since the last ten years she runs a canteen in a school in Nagpur along with her married daughter. Her son, who also is married, but lives in the same house runs a Paratha shop and a small banquet hall in Nagpur.

 

The Canteen is not subsidized by the school, but the prices are fixed low by the school, even the power, water and other infrastructural expenses are borne by Shikha herself. It is a clear case of the school taking advantage of Shikha’s limited power in a market which has many other potential caterers available to replace her.

 

Shikha has as many as ten employees required to run the canteen, plus the school expects highest quality ingredients to be used in the canteen, Shikha also has a reputation to protect so even with very low margins cannot afford to compromise on quality. She has to reach school every morning at 6:30 to get things ready.

 

Yet Shikha is happy, it’s a risk free venture, keeps her occupied and does not at her age involve undue changes and unknown variables. However her son is offering her an alternative.: Invest much less time, money, effort with only three employees a much smaller space, a far more limited menu and get an assured market with a much larger margin. Just help run an extention of the Paratha restaurant in the adjoining shop which is presently lying vacant and where he has built a small cubicle for himself, however the rest of the space is unused and just stores some inventory and restaurant raw material like chairs which can easily be organized, shifted elsewhere and some disposed off.

 

This alternative has much lesser costs and more assured returns. There is no fixed sunk cost in the Canteen as her son a graduate in Economics argues. The only factors stopping Shikha from making the change are two fold-she maybe exploited by the scool authorities, but she loves the students and alumni including parents and has a long standing relation of respect with the Director of the School since ten long years. But the biggest problem is Inertia for Change-at her age, any effort at something even slightly different is anathema.

 

What would you suggest for her?