M Shahadat Hossain (Dipto) is currently the Deputy Managing Director of Khan Bahadur Group. At present, he is taking care of the Finance and Banking operation of the entire group. He also looks after the policy making and operational control function for the Dhaka based business concerns of Khan Bahadur Group. Shahadat played an instrumental role in the entire business planning of Kb Foods, Sbarro, and ZTE smart phone.
What lead you to join Khan Bahadur Group?
I have worked in different industries in different work environments which helped me to enhance my adaptability and learn the pros and cons of different work cultures, leadership styles and business practices. My MBA from IBA also helped me in developing this attitude and gave me the required theoretical knowledge for running a business. I started my career in the country’s leading Telecom operator. After working there for few years, I moved to a leading bank considering my interest in finance. Later, I joined another leading non-banking financial institutions. All these organizations have had a huge impact on me.
I always wanted to do something more significant which went beyond earning money. From a mid-level position, with a fair number of peers in the same position, it was difficult for me to distinguish myself and go beyond my job description. I could have joined my father’s business, but that wouldn’t have been as challenging. I wanted to examine my capabilities in an unrestricted environment where I would have greater responsibilities. I am really grateful to our Managing Director, Mayeen Uddin Mahmud Chowdhury, for helping me fulfill this desire. He not only gave me the opportunity to take part in the operations of Khan Bahadur Group but also helped me in all aspects to overcome all the difficulties involved.
We Always Focus On The Customers’ Underlying Needs And Design Our Marketing Mix Accordingly.
What style of leadership do you incorporate in your work throughout Khan Bahadur Group?
Khan Bahadur Group has a well-diversified business portfolio. To ensure good governance and smooth operations across these unrelated businesses, we have established a centralized decision making process where the opinions of all relevant key personnel are taken into active consideration. While discussing any issue, everyone has the right to give his/her opinion and after scrutinizing all the pros and cons, a final decision is taken in the meeting. Once a decision is taken in the management meeting, the decision must be executed. This participative style of leadership helps us to ensure that the needs are rightly addressed, resources are efficiently used and operation is effectively controlled. This democratic style is often difficult to practice across the organization since effectiveness of this style requires a fair amount of operational knowledge and rational thinking ability. In absence of these skills, democratic style hinders the work progress.
A different approach we follow to avoid such impediments is that we make a detailed task plan, break down the components of the tasks and then schedule and assign those task components to the most suitable people. Next we monitor their performance continuously with constructive feedback and ensure that all the task components are accomplished as per the work schedule. This task oriented top-down approach is often very useful in getting the job done with minimum resources.
How have you contributed to the growth of your company?
When I joined Khan Bahadur Group, I found our group was severely suffering from a cash crisis due to improper cost controls and poor financial planning. To solve this, one of my first contributions was the reduction of the borrowing cost. When at first I raised the issue, I was told that this rate is normal in Bangladesh. However, having worked in syndication financing for years, I knew this wasn’t true. So, I started negotiating with the bank we borrowed from. At first the Bank was reluctant, saying their cost of fund was very high, but after several negotiations they decreased our rate of interest straight by 3%, which saved approximately Tk 45 lac per annum. I tried to reduce the interest rate of other credit facilities and was successful enough to please our board. Then they gave me the responsibilities of the company and bestowed the finance department in my hand, which probably made me the youngest person in the country to run a finance department of a group of companies.
Our insurance expense was also twenty times higher, at the time, than it is now. This is because of unnecessary insurance coverage and misuse of insurance commission. During this time, the company owners were not aware that there is a handsome amount of agency commission which, if handled by an honest person, will be returned to the company. As you can understand, a tremendous expense of one time has become negligible now. Furthermore, I started considering the ROI of every decision. This helped to rationalize costs. I started controlling all money outflows. Huge expenditures were saved on various occasions. For example, simply by changing the POS machine used for card swaps in restaurants, I was able to save a significant amount of money.
However, improving the performance of a company can’t be limited to cost saving only. I had to take active part in business planning as well. Our turnover was highest in our rice businesses but the cash collection was negligible. Our intermediaries were increasing credit day by day, whereas our suppliers’ ability to extend credit was very limited. We had a huge dependency on bank credit facilities which was again too costly. Moreover our hotel business was under construction then and financing was required to maintain the construction. After analyzing the whole business it was clear to me that we must convert our model into a cash generating model. So, we made a plan to expand our business only in those areas where we can generate immediate cash. Hence, we planned to open new outlets of Sbarro, a world renowned American franchise. Raising finance for a restaurant business was very difficult as banks in Bangladesh are not very much comfortable about financing new unconventional businesses. Things got further difficult after the Holey Artisan attack but slowly we were eventually able to raise sufficient finances for our expansion project.
Moreover, considering the growth of smartphone users, we tried to bring ZTE smartphones in Bangladesh. At first it was difficult, but after seeing our in-depth business plan, keen interest and group performance, ZTE entitled us the Exclusive Authorized National Distributorship for its entire Terminal business operation. I was in charge of handling this entire process and despite being a real struggle for me, the day when ZTE was finally launched was one of the happiest day of my life as I could finally see the fruits of my labor.
One great aspect of Bangladesh is if the people have faith in your abilities, they will help you develop your business. We started to build a rapport with our suppliers and always kept our promises to them. This helped us to increase our credit facilities and thus improve our cash cycle. Another important part was establishing a procurement department. Earlier, the process was haphazard. This centralized procurement department helped assign clear responsibilities for everyone in the process ensuring smoother procurement, keeping purchase costs low as well as ensuring timely vendor payment. I am very lucky that my Managing Director involves me in all these key decisions. Due to this, I’ve been able to provide my input in various sectors, be it HR, marketing or admin.
To Ensure Good Governance And Smooth Operations Across These Unrelated Businesses, We Have Established A Centralized Decision Making Process Where The Opinions Of All Relevant Key Personnel Are Taken Into Active Consideration.
What is the competitive scenario you’re facing? How are you dealing with it?
As the business nature differs, the market dynamics is also different for each business. Although we face stiff competition from our competitors, one thing keeping us ahead of the competition is that we never sacrifice quality for profits.
We know that we can’t make everyone happy. So, we first analyze the market and target a specific segment that is most suitable for our product. Say for example KB Foods is targeting the health conscious segment of our society. Same thing goes with our restaurant business – Sbarro. The majority of our ingredients are imported directly from renowned US brands and some, if purchased locally, are selected from the finest possible sources. Here the target is not only those who love New York Style pizza, but also those who want to enjoy quality food. In case of our hotel business, we mostly focus on maintaining strong relationships with different companies and ensure the finest guest services to ensure their stay is a comfortable and relaxing one.
We try to keep the prices of our products as low as possible to ensure their affordability for our target groups, but we can’t promise that our price will be the lowest in the market. We neither focus on profit nor on market share, rather, we strongly focus on our promise which is to offer the best quality at affordable prices. Our goal is simple. We want to be the most respected local conglomerate with well managed diversified businesses. Our concern for our customers helps us retaining our existing customers and growing exponentially with the help of word of mouth.
What are the challenges regarding keeping the cycle of innovation rolling especially when you have so many different concerns under the Khan Bahadur umbrella?
Innovation is a continuous process, and it requires time and effort to make something innovative. In the real sense, it is hardly possible to have a similar pattern of innovation in all the concerns of Khan Bahadur Group. We prefer to be customer need driven. We always focus on the customers’ underlying needs and design our marketing mix accordingly. To do this, sometimes we have to go beyond what is asked for by the customers. For example, traditionally rice was sold in a 50 kg bag, and people were accustomed to this but how convenient is it to buy a 50 kg pack? Moreover, think about the people who live from hand to mouth. With the money they earn every day, it is not possible for them to buy a 50 kg pack. So how do they manage? They buy from the open market where products are often hazardous for health. So, we introduced 1 kg, 2kg, 5kg packs of rice and distributed those across the country. This makes things more convenient and more importantly, now even a rickshaw puller or day labor can think of buying a whole packet of rice.
Similarly, in the case of Sbarro, we have introduced different types of pizza and set meal menus. We are always trying to come up with new food ideas, so people don’t get bored with our existing menu. This is sometimes difficult as we have to take approval for each new menu directly from Sbarro, USA, but we are never afraid of facing any difficulty to offer the best for our customers.
When I Joined Khan Bahadur Group, I Found Our Group Was Severely Suffering From A Cash Crisis Due To Improper Cost Controls And Poor Financial Planning. To Solve This, One Of My First Contributions Was The Reduction Of The Borrowing Cost.
What are your future plans for Khan Bahadur Group?
Unlike other businesses in our country, we are not merely a profit-seeking business. Our plan is to expand our horizon as much as possible by positively impacting the lives of our customers and employees through quality offerings, value creation, employment generation, etc.
As you know, we have introduced our rice in the retail market under the umbrella of KB Foods, and we are receiving tremendous responses from the masses. Still, we couldn’t reach our true potential. Our plan is to deliver chemical-free quality rice to every corner of the country and if possible export rice to different countries particularly where we have a good number of emigrants. We believe our Bangladeshi rice have all the elements to capture the hearts of international markets as well.
This year we have introduced ZTE branded mobile handsets in the country. Initially, we were focusing on Dhaka and major cities only, but we believe the benefit of smartphone technology can enlighten the lives of millions who live far away from the city. We are currently strengthening our distribution channel to offer the benefits of ZTE smartphone to this untapped market.
Although the restaurant business is booming in the country, the lack of quality food is still prevalent. We are already on the verge of opening eight new outlets of Sbarro. Our strategy of maintaining the international Sbarro standard while keeping the price affordable for the majority will give a new experience to the food lovers of Dhaka city. We are also involved in some government projects. We firmly believe we will be able to complete all these projects on time as per our commitment to the government. In a nutshell, I would say that our goal is to become one of most respected local conglomerates operating globally with the maximum amount of reach to the customers and we are not far away from that goal.