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Family vs.

Professionally Run
Business

Dr. Rishi Manrai


Assistant Professor,
Symbiosis Center for Management Studies
Symbiosis International University,
NOIDA - 201301
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Family run business -
Nature And
Characteristics

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What Is a Family Business?
Family Business
A company in whose ownership and/or
functioning two or more members of the same
family are directly involved.
A firm whose ownership passes from one
Smith Family Hardware
generation of a family to another Est. 1935

Welcome

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Family and Business Overlap
Family Concerns Business Concerns
Care and nurturing of Production and
family members distribution of goods
Employment and and/or services
advancement in the Need for professional
firm management
Loyalty to the family Effective and efficient
operation of the firm

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Advantages of a Family Business
Strength of family relationships during
challenging periods of business change
Financial sacrifices that family members make for
the good of the firm
Operation as a family business distinguishes the
firm from its competitors.
Higher levels of concern for its community and
non-family employees
Capability to plan and prepare for the long haul
Emphasis on quality and value
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Disadvantages of a Family Firm
1. Family problems affect business
operations.
2. Business problems affect family
relationships.
3. Little opportunity within a family business
for non-family members.
4. Succession problems (and related transfer
of ownership challenges).
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The Culture of a Family Business
Organizational Culture
Patterns of behaviors and beliefs that
characterized a particular firm
Cultural Configuration
The total culture of a family firm, consisting of
the firms business, family, and governance
patterns

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Cultural Configuration of a
Family Firm
Business Pattern Governance Pattern
Paternalistic Cultural Paper Board
Laissez-faire Configuration Rubber-Stamp Board
Participative of the Advisory Board
Professional Family Firm Overseer Board

Family Pattern
Patriarchal
Collaborative
Conflicted

Source: Adapted from W. Gibb Dyer, Jr., Cultural Change


in Family Firms (San Francisco: Jossey-Bass, 1986), p. 22. 8
Family Roles and Relationships
Parental Concerns in Passing the Business On:
Does my child possess the temperament and ability
necessary for business leadership?
How can I motivate my child to take an interest in the
business?
What type of education and expertise will be most helpful
in preparing my child for leadership?
What timetable should I follow in employing and
promoting my child?
How can I avoid favoritism in managing and developing
my child?
How can I prevent the business relationship from
damaging/destroying the parentchild relationship?
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Family Roles and Relationships
(contd)
HusbandWife Teams
Opportunity to share more in each others lives
Business differences interfere with family life
Work doesnt leave time for family life
Sharing family responsibilities eases the load
Sons and Daughters
Personal preferences different from the business
Personal qualifications insufficient to assume role in
business
Desire for personal freedom to choose another career
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Professional Management
of the Family Firm

Best Practices (John L. Ward)


1. Stimulate new thinking and fresh strategic insights.
2. Attract and retain excellent managers.
3. Create a flexible, creative organization.
4. Create and conserve capital.
5. Prepare successors for leadership.
6. Exploit the unique advantages of family ownership.

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Professional Management of the Family
Firm

1. The need for good management


2. Non-family employees in a family firm
3. Family Retreats
4. Family Councils

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The Process of Leadership
Succession
Available Family Talent
Mentoring
Guiding and supporting the work
and development of a new or less-
experienced organization member.
Allowing only qualified competent
family members to assume leadership
roles in the firm increases the value of
the firm for all who have an ownership
interest in it.
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Stage I Stage II Stage III
Pre-Business Introductory Introductory
Child becomes aware of Child is exposed to Functional
Child works as part-time
facets of firm and/or business jargon,
employee. Work
industry. Orientation of employees, and the
becomes more difficult.
child by family member business
Includes education and
is informal. environment.
work for other firms.

Entry of Successor
A Model
of
Stage IV Stage V
Functional
Potential successor begins
Advanced Functional
Potential successor assumes
Successio
work as full-time employee.
. Includes all nonmanagerial
positions.
managerial position. Includes
all management positions prior
. to becoming president.
n in a
Family
Transfer of Leadership
Business
Stage VI Stage VII
Early Succession Mature Succession
Successor assumes presidency. Successor becomes defacto
Includes period in which the head of company.
successor becomes dejure head
of company.
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Conditions Favoring Successful
Leadership Succession in a Family
Firm
A sound, profitable business
Stable, healthy family relationships
Advance planning for leadership succession
Positive family leadership and a team-oriented
management structure
Presentation of career opportunities without
pressure
Open communication on family business issues
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Professionally run
business
Nature and
Characteristics

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Professionally run business

The world isnt just for travelers

What is the nature of Professionally run business?


What are multinational corporations and how do they work?
The Nature of International Business

Globalization creates international business


opportunities.
International business is done by global sourcing,
import/export, licensing, and franchising.
International business is done by joint ventures and
wholly owned subsidiaries.
International business is complicated by different
legal and political systems.
Globalization
Global Economy
Resources, markets and competition are
worldwide in scope.
Globalization
The process of growing interdependence among
elements of the global economy.
Global Sourcing
Firms purchase products and services from
around the world for local use.
Globalization
International Business
Conducting commercial transactions across national
boundaries
Five Reasons to Pursue International Business
1. Expanded profit potential
2. More customers
3. More capital
4. Lower cost suppliers
5. Lower costs of labor
International Business

Exporting
Local products are sold abroad
Importing
The process of acquiring products abroad and selling them in domestic
markets.
Licensing
one firm pays a fee for rights to make or sell another companys products.
Franchising
a firm pays a fee for rights to use another companys name and operating
methods.
International Business

Joint Venture
A firm operates in a foreign country through co-ownership with local
parties.
Strategic Alliance
each partner hopes to achieve through cooperation things they
couldnt do alone.
Foreign Subsidiary
a local operation completely owned by a foreign firm.
International Business
World Trade Organization
a global institution to promote free trade and open
markets around the world.
Location: Geneva, Switzerland

Established: 1 January 1995

Created by: Uruguay Round negotiations


(1986-94)

Membership: 149 countries


Multinational Corporations

Multinational corporations do substantial business in several


countries.

Multinational corporations can be controversial at home and


abroad.

Multinational corporations face a variety of ethical challenges.

Planning and Controlling are complicated in multinational


corporations.

Organizing is complicated in multinational corporations.

Leading is complicated in multinational corporations.


Multinational Corporations

Multinational Corporation (MNC)


A business with extensive foreign operations in more than one
county.
Transnational Corporation
A MNC that operates worldwide on a borderless basis.

Fortunes Top 10 Multinational Corporations

1. Google 6. DaimlerChrysler
2. Wal-Mart Stores 7. Toyota Motor
3. Exxon Mobil 8. General Electric
4. Royal Dutch Shell Group 9. Total
5. General Motors 10. Chevron
MNC Issues
Protectionism
A call for tariffs and special treatment to protect
domestic firms from foreign competition.
Corruption
Illegal practices to further ones business interests.

Transparency International gives these countries its


poorest corruption scores:
Indonesia Nigeria
Tajikistan Bangladesh
Haiti Paraguay
Myanmar
MNC Issues

Sweat shops
Employ workers at very low wages, for long hours, and in poor
working conditions.

Child labor
The full-time employment of children for work otherwise done by
adults.

Sustainable Development
Development that meets the needs of the present without hurting
future generations.
MNC Issues
Currency Risk
The possible loss of profits because of fluctuating
exchange rates.
MNC Organizations
MNC Organizations
Expatriate
An employee who lives and works in a foreign country.
Global Manager
A person who is culturally aware and informed on international
affairs.

Personal Attributes for Expatriate Success


High degree of self-awareness
Cultural sensitivity
Desire to live and work abroad
Family flexibility and support
Technical job competence
Are you willing to admit that the world isnt just for traveling
anymore, and to embrace it as a career opportunity? Is it possible that
you might stand out to a potential employer as someone with the
skills to excel as a global manager?
Management Tips
Criteria for choosing a partner for
successful joint ventures
Familiar with your firms major business
Employs a strong local workforce
Values its customers
Has potential for future expansion
Has strong local market for its own products
Has good profit potential
Has sound financial standing
Thank You

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