Entrepreneurship and Small Business: International Perspective - Essay Example

Entrepreneurship and Small Business: International Perspective Introduction Family enterprises are businesses owned or managed by family members. It has existed for long periods. The society recognises them as vital participants in the global economy. Approximately 90 percent of the firms in America are family owned. These businesses contribute to half of the country’s Gross National Product. They are preferable because they focus on long-term goals, and are committed to quality. Furthermore, they focus on needs of workers. Unique characteristics of family enterprises Family enterprises have certain characteristics that make them different from other businesses. Some of their characteristics such as family relationships, employment, management, succession, and business structure are not the same as other types of entrepreneurship (Wash 2011, p.3). Succession process is one of the exceptional features of the family businesses. It is the process of transferring the business ownership from one generation to the subsequent ones within a family. All family members play vital roles in the succession of ownership and management of the family business (Wash 2011, p.3). Sometimes the processes may involve the trusted advisers such as accountants and legal representatives who are not family members. The family business succession plans consist of two processes that encompass the management and the ownership succession. The processes can result into conflicts and poor management of the business. All family members have to agree on who should be the next person to own the business. The members should choose successors based on their skills and not age. Some family members may be older, but they lack the required skills and knowledge to manage the business. The business will fail to realise its goals when corporate members choose such individuals to manage the business. Succession enables the family business owners and managers to transfer their own values and business values to their successors. The family members are usually proud of the values. This makes them to practice them in their daily work place tasks. An additional factor that makes the family business unique is attributable to strategic plans that are based on long-term considerations. This is because the family has a big influence on the enterprise because it provides economic support. The nonfamily enterprise owners cannot influence the decision making process of the business because they have smaller shares. Additionally, they demand higher information charges. The family businesses are based on long-term decisions because the owners acquire them from the predecessors. Consequently, they aim at transferring the businesses to the next generation when they record better states than when they acquired them (Mojca & Jernej 2008, p. 188). The long-term view of the business leads to the implementation of sustainable staff policies. Studies show that the biggest family businesses in Germany increased their employees by 200,000. On the contrary, other big businesses in the state reduced their workers by 400, 000 between 2003 and 2005. This occurred because the family businesses have long-term employees’ policies (Bonn 2008, p.6). The long-term view of the business encourages the workers to forgo the immediate temporary benefits to achieve the sustainable goals. This is because they are less motivated by the temporary gains. This enables the businesses to align its resources with their expected outcomes (Norio 2010, p. 1). Furthermore, the decision-making processes take shorter periods in family businesses compared to the nonfamily ones. This is because the family members agree quicker because of the additional relationship between them. Additionally, it is possible for them to meet frequently and easily to discuss issues (Duh & Belak 2006, p 1143). Unlike other forms of businesses, family enterprises do not have specific legal forms. Other businesses are either unlimited liability or limited liability. The family businesses can only adopt legal forms because of legal business requirements such as tax requirement and employment register requirement. A firm is required to register its employees for legal purposes if its employees are the nonfamily members (Hannu, 2003, p.188). Family enterprises rely on bank loans for capital compared to other enterprises. This is because they intend to sustain their dependency. Other firms may acquire their capital by vending shares. However, family businesses avoid selling shares to the outsiders. This is because the outsiders might interfere with their business operations. The largest shareholders sometimes influence other businesses’ decision-making processes (Duh, Polona & Miroslav 2006 p. 37). The administration in the family businesses is different. The oldest member of the family manages most family businesses at the beginning. In most cases, fathers manage many of the businesses. Several family businesses are under the ownership and supervision of several family members. However, people who are not blood related manage the nonfamily enterprises (Jose, Amann, Jaussaud et al 2008 p. 318). Workers are more loyal in family firms compared to other businesses because of their good relationships. They extend this loyalty to the business because they share in the success. This increases their commitment to their tasks in the work places. This in turn increases the profitably of the business. Their loyalty to the business makes them take more than one job function. It also motivates them to fill in for the absent members. Other nonfamily workers are usually loyal to the family businesses. This is because they enjoy and appreciate the unique working environment that is less formal. Family members also treat such employees as their extended family members. This makes the employees to feel worthy and develop a strong attachment between the family members and the firm (Tassiopoulos 2008 p. 18). Family businesses also face different challenges. One of the challenges entails difficulties in determining the procedure and qualification for the family members who should perform the business activities. Additionally, the owners and managers usually face difficulties when employing members and close friends who lack familiarity. Once these inexperienced workers are hired, it is usually difficult to fire them because of their poor performances at the work place. Some family businesses have tried to avoid this phenomenon by implementing strict hiring policies (Thomas, Lau & Snape 2008 p. 263). Additional unique challenge faced by the family entrepreneurs includes the difficulty in the division of profits and payment of salaries. Businesses use huge amounts of profits to expand during the initial stages. Family members may not see the significance of investing huge profits in the business. Consequently, it may be difficult to influence them to accept such investments. The business leaders have to spend more money to hire accountants and lawyers to demonstrate to the family members the importance of the investments to the firm’s future. Additionally, the owners should use the business guidelines of each job description during the payment of salaries to ensure fair payment of salaries (Erdem & Erdem 2011 p. 177). Value of family ventures in the global economy Family enterprises are valuable segments in the global economy. Studies show that they contribute to above 75 percent of the Gross Domestic Products (GDP) in many countries globally. Most people around the world are employed by the family businesses. Research outcomes show that about 85 percent of the working individuals work for the enterprises. They provide half of the job opportunities in the United States. In Germany, it contributes to about 75 percent of employment opportunities and about 66 percent of GDP (Norio 2007, p.2). Additionally, the number of the working individuals in the family corporate in Great Britain is about 50 percent of the personnel. Such businesses also play a vital part in the employment sectors and the GDP in the Southern Asia countries especially Malaysia and Taiwan. Members of the family businesses value their business. Consequently, they concentrate on the quality of products in order to make the consumers value their brands. The increase in quality of the family business products results into the increase in their sales. Researches show that these businesses have increased their sales by around 65 percent for the past two years. The sales increases have been mostly experienced in East Europe and Middle East. The higher sales indicate the increase in the country’s revenues and the improvement of the financial systems of different countries (Inmyxai & Takahashi 2011 p. 460). Family firms also boost the market worth in many countries. Studies also show that family firms contribute to the increase in market value by about 10 percent between 1992 and 1999 in United States (Howe 2006 p. 192). This proved that the family firms perform better than other firms in the country do. This implies that the benefits of the family often overshadow its costs. It is clear that the family businesses are the key engines of financial development (Howe 2006 p. 191). In Europe, the family ventures outperformed the nonfamily firms by about 16 percent between 2001 and 2006. Apart from this outperformance, the businesses also play a major part in the creation of venture in the country. The rich families in the corporate world provide the capital and funds to large population in the entrepreneurial sectors. In the mid 1990s, about 286 million businesspersons in the world launched new ventures. However, only 19,000 of them got financial support from the venture capital firms that could only raise 59billion dollars. The rest of the entrepreneurships were funded by the family businesses (Ruenrom 2009 p. 329). Ford Motor Company Ford Motor Company a global family businesses that started in 1903. It is one of the largest vehicle firms. Effective succession management has enhanced the sustainable growth of the company. For instance, Edsel Bryan took over the management of the company 1957 (Chelst, Sidelko, Przebienda, et al 2001 p. 91). His creativity led to the production of a new model of a car. The company experienced conflicts like other family businesses after the production of this model. The conflicts occurred due to the naming of the new car. The directors of the company wanted to name the car after Edel. However, his father and grandfather opposed the idea (Anastakis 2004). The company values its brand that is recognised throughout the world. As a result, it focuses on the quality of its products. For instance, the company focused on providing its consumers with the high quality artisanship in Los Angeles in 2011 (Chelst, Sidelko, Przebienda, et al 2001). The production of superior merchandise and services has increased the company’s competency. Additionally, its consumers valued its products since they want be identified with the company (PR Newswire 2001). Like other family business, the company is valuable in the global economy. It has various branches in many countries. This has increased revenue in those countries. Ford Motor Company has funded many non-profit organisations in various areas such as innovation, community progress, and safety learning. For example, it contributed approximately 1 million dollars to support education in Atlanta. It has contributed a total of 23 million dollars in Atlanta since 2000 to help the charitable organisations. This helps in the maximisation of available resources, which in turn improves the country’s economy (Pack & Permberton 2008, p 92). The company has also played a great part in the economic growth of many countries by creating employment opportunities to their citizens (Chelst, Sidelko, Przebienda, et al 2001 p. 103). The firm values the workforce diversity. Consequently, its workforces consist of workers from diverse cultural backgrounds. It is a premier American Employer because it attracts many employees around the world. It also offers reasonable payments to its workers. This has helped in improving the living standards of many individuals. Moreover, this has contributed to poverty reduction in developing countries where it has established its sub-branches. Ford has engaged about 213,000 people from different places in the world. About 87,000 workers are in the United States (Chelst, Sidelko, Przebienda, et al 2001, p 102). The company has also shown its value to the world economy by reducing the energy used and reducing the carbon emission of its vehicles. For instance, it condensed the motor vehicles fuel use by about 40 percent. This has helped the consumers to reduce their expenses on fuel. Additionally, the introduction of the hybrid vehicles helped in reducing the carbon emission. This lessens the negatives effects cause by carbon in the natural environment. The hybrid vehicles reduce the government expenses used in reducing the effects of global warming (Greehalgh 2000 p. 48). Conclusion Family enterprises have unique characteristics because they contribute to the expansion of the worldwide fiscal system. One of the unique characteristics of the family firm encompasses succession. This involves the transmittal of ownership and administration amid family members. Another characteristic that makes the family business to perform better than the other businesses includes its long-term goals. The family businesses focus on the implementation of long-term goals. This is because the business owners’ focus on transferring the businesses to the subsequent generation in better conditions. The family businesses contribute to the improvement of the global economy because they help in creating job opportunities. Furthermore, they help in increasing the GDP of many countries. Ford Motor Company is one of the family businesses that have also contributed to the growth of economy in many countries. Reference List Anastakis, D 2004, From independence to integration: The corporate evolution of the ford motor company of Canada, 1904-2004. Business History Review, 78(2), 213-253. 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