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1.

Introduction

The family business component is a very crucial segment in the Small Business Category,
due to many reasons. They may be, convenience of starting, more coherence between the
family members (employees), ability to find initial capital easily, easy to make collective
decisions etc. This category, in many countries adds a greater value to their countrys GNP.
The worlds top businesses include many family businesses. These companies now in their
3rd or 4th generation and their share holding been diluted due to increase in business volumes.

Company Country Name of Year Revenue No. of % Share


the Owners of USD Bn. Employees holding of the
Est. family
Wall-Mart U.S.A Sam Walton 1962 476.3 2,200,000 50%
family
Volkswagen Germany Porsche 1937 261.6 572,800 32.2%
Family
Berkshire U.S.A Warren 1960 182.2 34.5%
Hathaway Buffet
Family
Exor Italy Agnelli 1927 151.1 301,441 51.4%
Family
Ford U.S.A Ford Family 1903 146.9 181,000 40%
Source : www.worldfinance.com

On the local scenario, there are so many family businesses which we come across on daily
basis. As most of the times they were all carrying out their business without going for a
public issue of shares, their facts and figures are kept for themselves. Some of them are;

1. Harshchandra Mills 2. Siddhalepa 3. Maliban 4. Jinasena Ltd.

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1.1 The Family Business

This would be a very good proposition to start a small business, but as per the statistics only
6% of family businesses survive beyond the third generation. This is basically a business
runs by members of family and would be passed onto next generation. There could be three
main parts identified in a family business.

a. Family members

These are the family business members, some may be attached to the business others may
not.

b. The business

The business model, initiated by the family, should have a different entity from the owners.

c. Business ownership

When the business comes to its 2nd,3rd generation, with the growth & expansion of the
company, more paid employees would be there in the company, than family members. Later,
with expansion, if it may go for a public share issue, the owner ship would be diluted.

1.2 Pros and Cons of a family business


1.2.1 Pros
Stability The leader would be the same for many years. Sometimes till his death,
retirement or illness.
Commitment As the family members and the business are more or less bonded, the
family members needs are at stake if the business does not perform. Hence the
family members commitment is far greater than non-family businesses.
Flexibility In order to do well and sustain, the members would accept and perform
any task for betterment of the business, though may be not in their Job Description.
Long term outlook The family businesses, knowing they are working under greater
risk, naturally, have a longer term view than other businesses.

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1.2.2 Cons
Family conflicts In family businesses almost all decisions, relationships are based
on mutual trust and understanding. Once something made this trust been tarnished,
may occur conflicts between family members in the business.
Unstructured governance Internal rules and regulations are loosely administered.
Succession planning Many family businesses, after the leader/ promoter dies or
retires find it difficult to sustain, due to not grooming the 2nd layer.

2. Factors affecting the performance of a family business

2.1 The culture of the family

For any business culture makes a big impact. When the intensity of the coherence is stronger
the impact is much greater. In a family business, as the business rally round the family
members, their cultures are very important. The core values, behaviors, ethics and tacit
knowledge of the leader make a big impact to the company. Some leaders are paternalistic
while some may be authoritative.

2.2 Family roles and relationships

The successful performance of the family company depends on the leaders relationships
with the company personnel as well as inter-family relationships. When there are members of
the family in various levels in the business, the relationships with these members and other
employees is vital for improved performance. Further, the business inheritance would make a
turnaround point for the positive side or for the negative side.

3. Lexro Leisureway Company (Pvt) Limited

3.1 Owners of the company


Mr.
Mrs.

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3.2 Nature of business

This company is engaged in tourism industry, as a service provider to find the best matched
tourist destination, with the aspirations of the tourist. They mainly cater to the foreign up-
scaled market. These are super luxury travel destinations and available only for the
Honeymooners and Anniversary celebrities, catering, to a niche market.

3.3 Business proposition

The owners of the company had identified the need among honeymooners and anniversary
celebrities to find exclusive tourist destinations to celebrate their sentimental event. As per
them, the tour operators in Sri Lanka would only provide foreign tourists with
accommodation in hotels and other excursions. But there is no such segmentation done as per
uniqueness of tourists demand, such as honeymooners and anniversary celebrities. The
company had found this category would spend lavishly if they have been offered with the
type of facilities as per their expectations or dreams. The company believes they are selling
Experiences for the tourists on their special occasions, not just hotel accommodations.
These experiences vary from one tourist to another. Some may like adventurous tours in wild
safaris or surfing while some may like peaceful, romantic surroundings without any
disturbance. Accordingly, the company have array of destination and accommodation
options, the tourist could select. So, the total itinerary would be selected by the tourist
himself as per his or her desire, not like other tour operators whom arrange a Tour package
with several pre-decided destinations.

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3.4 Business process

The company is a web based one, and their website is www.lexroleisureway.com. The
business process could be indicated as below.

Enquiries www.lexroleisureway.com Enquiries

Enquiries Enquiries
Feedback &Suggestions

Selection of the experience/ hotels

Agreement with the


customer

Bookings with the


hotels

Effect payment by
the customer

Arrival of the customer;greeting


&proceed the tour with a guide

Customer stays in
the hotel

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Any person who wants to celebrate his/ her honeymoon or anniversary could login to
www.lexroleisureway.comand make an enquiry by way of an email. Such emails would be
greeted by the company and replied within 24 hours by providing the suitable tour options.
This would be a more customer oriented interaction, and finally a tour itinerary would be
agreed with the customer. Later, the hotel bookings would be done by the company and the
respective payments be done by the customer to the company.

On the day of the arrival the company would greet the customer, accompany them to the pre-
agreed hotels with a dedicated tour guide. The company has their own tour guides, whom are
relatives of the owners of the company.

3.5 Future prospects


The company which accommodates few hotels at present would enter into
agreements with new hotels with different Experiences
The company would extend to agreements with hotels in Maldives

3.6 Positive factors


Cater only to a selected market segment: Honeymooners and anniversary
celebrities: This would help the company to concentrate on selective
customers with very good options.
Ability to control the business: The company employees are relatives of
the company owners and therefore the agility of the workforce is much
flexible.
Minimum operating cost: As this is a cyber company, operating costs like
office space, furniture, office equipment costs are irrelevant.
Tourism industrys boom in the country: After the war in the country there
is a tremendous

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3.7 Areas for improvement
Implement an online payment system: The payment system the company
using at present, is by sending a wire transfer of a bank draft, which are
costly to the customer and also inconvenient. A payment gateway to be
implemented into their web page, in order to settle the payments using
credit cards.
Add another category of markets: A feasibility could be done to add few
other sectors (niches). A good option would be to add retired segment,
who are naturally love to travel and be a sizable market
Agreements with leading local tour promoters: There are many recognized
local tour operators like Jetwing, Aitken Spence etc, operating in multi-
segmented tourists. There would be an opportunity to promote the
companys segment, through these tour operators, may be on commission
basis.
4. Conclusion

Family business is a very good business model for beginners to enter into the business world.
It starts with concentrating to a small captive market, then could be improved and progressed
into a bigger clientele. Family businesses could be started with a comparatively low capital
and it could be sourced by family members and relatives. Family businesss success depends
on leaders capabilities, relationships, company culture, willingness to delegate and ability to
pass-on to the next generation.

References

Athwal, R. (2015). The Advantages and Disadvantages of a Family Business. Retrieved from
Vistage: http://blog.vistage.co.uk/advantages-disadvantages-of-a-family-business

Small Business Management study note