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Many Forms of Businesses - Report Example

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This report "Many Forms of Businesses" tries to understand the dynamics of family businesses and why they are likely to succeed compared to other businesses. A family business can be described as a company or any other business which is owned, operated, and controlled by family members…
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Many Forms of Businesses
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FAMILY BUSINESS Introduction There are many forms of businesses. A business can be sole proprietorship, a company, or with other forms of ownerships. A family business can be described as a company or any other business which is owned, operated and controlled by family members. The family here can be one family or several families it can be a nuclear family or an extended family. 1A family business can be defined as a business the is governed and managed on a sustainable and potentially cross generational bases in order to ensure that the business achieved a formal or implicit vision that has been held by the family member. 2This means that a family business is based on a vision that is held by all the family members. History has it that many of the current successful company. Many of these companies were started by a family but later were sold to the public. In a family business the level of outside employees is limited and the family members are involved in the running of the business. Even in place where the external members are involved, the top positions of running the business are allocated to the family members. Some of the most successful family business includes Cargill, Ford Motor Company, Koch Industries, Mills Fleet Farm, Tetra Park, and others. 3It has been shown that a business that is started and run by the family always succeed due to some basic elements that are attached to such business. There have been several researches that have been carried out on family businesses. This research will try to look at some of the findings of these researches in order to understand the dynamics of family businesses and why they are likely to succeed compared to other business. Management of a family business 4Management of a family business present one of the most complex business organization compared to others. This is because the business is driven by linkages in the family members which are often emotion. It presents a problem in managing the emotional family ownership and rational needs of the business. This creates a fertile ground that nurtures conflict at many levels in the running of the business. 5This is mostly presented in times of generational shifts where there are uncertainties on the interest an leadership competence of the inheriting generation family members makes the running and management of the business more vulnerable. Though most of these businesses succeed, they are usually faced with problems like any other business in the course of their operation. It has been shown that a family business may come with some of the worst business crisis especially in issues relating to succession. Planning a succession in a family business has been shown as a unique problem that most of these businesses face in the course of their operation. 6The interests of diverse family members always conflict one another not only on the issues of succession but also on other issues like hiring of another members. For example it has been shown that there is allows a conflicts when family members have to decide the ones who will be hired for running managerial jobs and sometime favours in the family may make the family to hire a member who is less competent than others which leads to underperforming of the business. Sometime conflicts in family business have been shown even to end up in courts. But unlike in other business where the magnitude of the conflict may lead to underperformance of the businesses, the conflict in a family businesses has been shown to be successfully controlled from inside before it bursts to the lime light of the law courts. There are usually means to try and resolve the conflict in a family set up before it is taken to the courts. One of the great problems that are encountered in running of family business conflict has been the difficult that is encountered especially by parents in resolving the conflicts with their sons. The parents are sometimes torn between the love of their children and the interest of the families. One example is given of Stew Leonard's Supermarket located in Connecticut. Apparently the son of the owner was working in the business but was under a supervisor not from the family. The supervisor reported the son to the father that he was not performing to the expectation of the supervisor. The father then decided to call the some and talk on the issue in a hot tub. When they were in the hot tub, the father decided to wear 'boss' hat and started questioning the son on his performance in performance in the business and immediately fired the son. Then the father put on a 'father hat' and apologized to the son for having lost his job. This in one of the case that illustrates the difficulties that family business usually undergoes in an effort to manage the crisis within their business. But how can a family business use a strategic management process in running the business Strategic management process of a family business As we defined earlier, a family business is led by a vision that is shared by all the family members. 7This is very crucial in strategic management because it means that there is already a vision and goals that are inculcated in the business culture of the family. However it does not mean that because this is a unique form of business that the strategic management process will be different from the rest. It will have to follow the same management process like other business. 8The process must be formulated, implemented and controlled following the goals that have been set and pursued by the family members. The performance of the business must also be evaluated following the achieving of the set goals. The only in which it differs from other business in the strategic management process is in the process and the participants in the process. 9The owner of the business has a lot of influence in every step in the process of implementing the strategy. In the strategic process family influence will appear at various stages following the facts that the goal will be formulated following family interests. This means that the formalization of the goal, the strategy, the implementation and the evaluation of the strategy will be controlled by the interests of the family. The formulation process will be based on the family goals. 10The formulation of the strategy will be influenced by issues like the succession in the family since it may be a long term strategy. The implementation of the strategy will be affected by the management process which will be led by factor like family business culture, inclusion of the family members, integration of all the family members and the relationship between the children in the family. In all this process the family culture and the involvement of family and not family members will be important in determining the success of the strategy. Let us look at the process closely. Setting goals and objectives 11Due to the nature of the business, the formulation of goals and objectives are likely to be different from the one of non-family business, this is because the process is likely to incorporate well defined goals of the family which in most cases are defined by the owner of the business. Though these businesses may not look like monolithic units, we cannot ignore the role that is played by the head of the family in making the decisions for the business. In this regard the head of the family is likely to make decision of to formulate goals which will help in meeting the immediate needs of the family. In this regard these goals are likely to serve the needs of the family rather than the needs of the business. 12The reliance on the business for the family can also be point of conflict in the businesses and hence the owner may make goals for the business which are likely to lead to resolving of these conflicts where the goals will be geared toward maintaining family harmony. This shows that the process of setting goals and objectives for a family business can be complicated and may be torn between family issue the business issue. It is the way in which the owner of the business balances between all the needs for the family and business in formulating goals and objectives that determine how the overall strategy will succeeds. Formulation of the strategy 13For a family business to remain success, it has to formulate its strategies in a dynamic process that will rejuvenate its operation. This must provide way for the strategy to incorporate new members joining the family business and at the same time it must lay a clear foundation on how succession in the business can take place. 14It must provide for autonomy of the family members in a way which will help in reducing pressure on the existing family businesses by coming up with various growth strategies. This will in way of setting up new operations which are likely to work as a part of the business chain. This has been the strategy that has been taken by most successful business. As was mentioned in the beginning, the mere fact that most of the family members will be relying on the business can be a source of conflict and therefore it is good to plan for example of the business as the family grows in order to cater for the needs and interest of the different members. Implementation of the strategy 15One the formulation process has been completed, the implementing of the strategy is the next big thing that determines the failure or success of the business. In this regard, family members must be well incorporated in the implementation of the strategy and there are a number of issues that needs to be taken care of if the strategy will be well implemented. In the implementation phase, there must be effective control of the relationship between the family members and the non family professional manager who the business may hire in order to continue with its operation. 16In this regard, the family must come up with an agreement in the way the strategy will be implemented so as to successfully accommodate working with the non family members in case they need such help. It has been shown the for family business strategy to achieve its goals, there is need to hire outside board members who are likely to run the business professionally. There must be a plan that will assist the external board members to be integrated to the family business culture and perform their work in line with the culture. In order to plan for succession, there must be inclusion of the family member in the management of the strategy. Therefore there must be a way of including the family members in the running of the business in order to give them time of understand it. Evaluation and control of the strategy The evaluation of the strategy must be based on the performance of the business. This means that the family business should not be exempted from the normal evaluation process. In this regard, the strategy should be evaluated not on the way it has met the needs of the family but on the way it has helped the business to achieve its goals. Therefore at the evaluation phase it is advisable to separate the needs of the business from the needs of the family. Reference Bork, D 2003, Family Business, Risky Business, Bork Institute Brown, F 2001, Reweaving the family Tapestry: A new approach to family business, Norton, New York Handler, 1999, Studying family business, Family Business Review, Issue 3, p. 8 Harris, D. & Ward, L 1994, Is strategy different for the family owned business Family Business Review, Issue 7, p. 157 Hennerkes, B 2005, Family Business, New York Hoffman, 2001, Foundation of Family therapy, Basic Books, New York, p. 89 Holland, P 2002, Examination of stages of development of family business, Business Horizons, Vol. 2, Issue 3, p. 4 Hoover, C 1999, Getting along in Family Businesses, Routledge, New York Jaffe, D 2001, Working with ones you love: Successful family Business, Conari, Berkeley Jones, D 2002, Planning small firms, Journal of small Businesses Management, Vol. 20, p. 20 Kaye, K 2004, Workplace wars and how to end them, AMACOM, New York Lansberg, I 1999, Succeeding generation, Harvard Business School press Lanseberg, L 2004, Managing family resource in family firms, Organizational Dynamics, 12, p. 5 Post, 2003, The psycho political dynamics of family business, Family Business Review, Issue 4, p. 58 Schwass, J 2005, Wise Growth Strategies in Leading Family Business, Macmillan, London Zata, P, 2006, Family Business, Manchester Business School, p. 1 Read More
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