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SECTION THREE: PROCESS

Until now, there is a various study on strategic management in family business but in different
aspect, places and people. Thus, there is still a lack of study that touch about strategic
management process in family business. However, article entitle Strategic Management of
the Family Business: Past Research and Future Challenges, by Sharma P., et al. (1997), the
researcher had discuss on the strategy management process.

In strategic management concept, family business relates to the planning. Planning is a


systematic valuation of firms mission, objectives, strategy against its capabilities or resources
and the environment. It is a process and not a document. Plus, planning step of strategic
management in family business including continuous and periodic scheduled. Family business
need to plan in order to anticipate and respond to dynamic, turbulent and unpredictable
environment. Plus, it also allows assessment of the past, present and the future.

Figure 1: The Strategic Management Process

According to the article that mentioned above, the authors review the literature of
strategic management framework based on a simplified model of the strategic management
process (Andrews, 1971; Hofer and Schendel, 1978; Schendel and Hofer, 1979). Figure 1
showed the process of strategic management in family business where the process is dynamic
and interactive. Goals must be selected, strategies formulated to achieve those goals, and the
chosen strategy must be implemented into the organization. Furthermore, at all stages it is
necessary to select and evaluate alternatives, make decisions, and ensure that effective control
processes are in place in order to make adjustments where needed. How well an organization
accomplishes these tasks in light of the opportunities and threats in its environment, the
resources it possesses or can procure, and the values and noneconomic responsibilities held by
its managers, determine its performance.

Based on this framework, there is a difference between family business and non-
family businesses because the controlling familys influence, interests, and values have
overriding importance. How this concentration of control, influence, and values affects the
strategic decisions and performance of family firms should be of great interest to family firms,
but has not yet been adequately explored. The authors used this model to set the agenda which
they see it for future research and the future researcher also need to improve family business
management. It is because, family business management help managers do more accurately
define problems and opportunities concerning the environment or organizational capability,
refine goals and objectives, generate better strategic decisions, improve the implementation of
strategies, policies, procedures, and tasks; or facilitate the evaluation and control process.

Hollander and Elman (1988) stated that who recognize the importance of both
subsystems and seek ways to effectively integrate them. What we most want to accomplish
with this approach is to connect studies of family businesses with the achievement of their
goals and objectives, whether those goals be family-oriented or business-oriented.
Strategy Formulation

At this stages, need to focus on strategy formulation process and the content of strategy in
family businesses. The interaction of family and business makes strategy formulation a
dynamic process, not amenable to simple or across-the-board solutions. For instance, family
firms need to remain successful; they must generate a new strategy for every generation that
joins the business (Post, 1993). This also provides autonomy for the newly joining family
members, thereby aiding the maintenance of good work relationships. Strategies
recommended include starting a new venture or division of the business (Barach, 1984),
internationalizing (Gallo and Sveen, 1991), and helping successors acquire skills that other
family members do not possess (Wong, 1993). On the other hand, research on non-family
businesses suggests that corporate entrepreneurship (Biggadike, 1979), first diversification
(Hofer and Chrisman, 1989), and strategic change in general (Hannan and Freeman, 1989)
can be risky. Family-business researchers have not yet come to grips with the problem of how
a family should deal, simultaneously, with the possibly conflicting strategic needs of the
family and the business. From a strategic management perspective, families are both a
resource and a constraint. The literature is silent on the appropriate business strategies for
different family configurations and dynamics, as well as for different business situations.

For Strategic planning process, family-business researchers who have focused on the
strategic planning process espouse the benefits of strategic planning. However, since the
benefits of planning are by no means proven, research in this area would be valuable. There is
lack of information about how family firms scan their environments, assess their capabilities,
or search for and evaluate alternative strategies; how the strategy formulation process is
influenced by family considerations and interests; whether the alternatives considered are
many or few, or better or worse than those generated by non-family firms; how the dynamics
and politics of decision making are different in the family business; and which types of family
influences are advantageous and which deleterious to the process.
Strategy Implementation

Horton (1986) stated that for successful strategy implementation, family businesses need to
effectively those among family members and those between family members and professional
managers. The emphasis here has been on the nature of these relationships and how to handle
them. There needs to be some emphasis on connecting these observations with the
performance of the family business.

In term of corporate governance, the family and the business are so entangled that
emotions are unavoidable (Alderfer, 1988). Consequently, family firms are often advised to
appoint outside board members. For family firms that are not large enough to attract outside
board members, family councils (Lansberg, 1988; Ward, 1987), review councils (Jonovic,
1989), or advisory councils (Tillman, 1988) are recommended. Proponents argue that outside
board members bring fresh perspectives and new directions (Jain, 1980); monitor the progress
of the family business and act as arbitrators (Lane, 1989; Mace, 1971); help reduce the
loneliness of the owner-manager (Gumpert and Boyd, 1984; Mathile, 1988); help in the
succession process by providing support for the newly elected leader (Harris, 1989) and
analyze perceived strengths and weaknesses more objectively (Mathile, 1988)

For family business culture perspective, Dyer (1988) identified four types of family-
firm cultures that provide a framework for analyzing relationships between family members
and non-members. Dyers classification of paternalistic, laissez-faire, participative, and
professional cultures is based on different assumptions about human nature, relationships, and
the environment. What is still needed, however, is research that identifies the cultures
associated with superior performance in different situations, how to recognize when a firms
current culture is inappropriate, and the best mechanisms available to family businesses for
moving from one type of culture to another.