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The Vega Food Company

I. INTRODUCTION
The Vega Food Company is a family business that was founded by Francisco Valle Sr with its value limited to
certain members of the family to the beginning. In fact as displayed in the case, the Valle family had a message
that was built by Francisco Valle Sr. while the organization was in its early foundation: carry wealth and
nurture the family and grown up as Spanish meat-producing firm that produces hams, sausages, and other
goods for domestic and export markets as its main production process. The Vega Food Company was the $100
million company, owned and managed by the Valle family, had a Randall reputation for quality products in the
marketplace and had a potential generating $104.8 million per year. There are also, two kinds of shares issued
to the family, A meant voting shares while B meant non-voting dividend bearing shares. The shares were
distributed accordingly: the Valle family was comprised of Isabel; Francisco Sr. widowed wife, Rosa,
Francisco Jr., Ana, Maria, Tere, and Mari among which Only Francisco Jr. and Tere were involved, to some
extent, in the family business.
It was determined that upon Francisco Sr.s death, Francisco Jr. held 50 percent of the voting A shares and 20
percent of the nonvoting dividend-bearing B shares. Each of his five sisters owned 15 percent of the B shares,
and Isabel retained 5 percent of the B shares and the remaining 50 percent of the voting shares. Voting control,
therefore, rested in the hands of the founders surviving spouse and Francisco Jr., the successor president.
And the ownership structure of Vega Foods included two classes of stock, responding to Francisco's
concern with the possible loss control of the enterprise in his absence. However, the problems started
appearing after the sons take over following to his fathers miserable car accident death in 1994.

II. INVESTIGATION OF THE PROBLEMS


The leadership and/or governance of the Vega Foods company were challenging in multi aspects, but
Francisco Sr. was more concerned with the ongoing family conflicts that arouse from his daughters and son.
Thus, the problems started appearing after the sons take over. And Mari, the youngest daughter, noticed the
transparency and lack of convergence between the family and the business. Since, Francisco was more
invested in his governmental position in the city than he was in the company; Francisco sponsored the first
family meeting addressing issues due to his fathers passing. Up on which the main issues that were set in the
agenda are;

The lack of clarity and organization ownership


The lack of well-organized family forum.
Furthermore, Mari was not fully trustful of her brother after the takeover. She was concerned about the
survivability of the company and the amount of money Francisco was receiving and lack of effort in the
company since he spent most of his time in his political council position.
In general, the Vega Company was missing in:

1. Building corporate governance with cohesiveness (Unity Vs Governance)


- No Clear Vision & Mission where the firms will it be gone in the future had been stated.
- Though Sales is continued to increase but the profits had fall dividend distributions had
been cut. As far, Majority of the voting (non-bearing) shares (50%) is held by Francisco Jr.
and the remaining 50% of the voting shares is held by the existing wife, Isabel, therefore
voting control rested upon the two (2) family members only.
- The Board of Directors consists of only family members and most board meetings were
only per records/papers based communication.
- No long term personal and professional goals of family members (professional practicing
were missed too).
2. Strongly Leading for uncertainty and future direction (Ownership & Mgt)
- There was no clear strategy for the company. Franciscos concern was only the thriving of
the company, but it was not clear due to his vague interactions with the company and the
family.
- the focus on internal/family issue instead of strategic plan, company liquidity, company
valuation, during the board meetings
- Lacked transparency on the current financial statements/reports of the Company (it is only
through Francisco Jr. where financial reports can be obtained).
3. Strong family relationship rather leads to Family unrest/conflicts.
- Due to the lack of information available to the family members and their right in the
company ownership, the family felt separated and uneducated.
- Moreover, the lack of education through meetings and family council did not provide an in
depth analysis of where the company is headed.
- Although Francisco Jr. tried to keep the safety of control over the company through the A
and B stocks, the family was not even aware of their part of the company.
- There was no clear succession plan
- No clear and well-defined family council structure and a family constitution, or clear
agreement, policies and/or rules that the family should apply and follow
- There was no a call for greater transparency of ownership structure, estate plan, and
financial fortunes of the company going forward.
- etc.
III. SWOT ANALYSIS
This part of the case deals with the critical and systematic analysis of the internal key success source
& shortfalls (strengths and weakness) and the macro level driven/ external plausible & unpleasant
factors (Opportunities and threats) of the Vega Foods Company that can have a direct or indirect
impacts for the companys success.

A. STRENGTH:
Patient and healthy financial resource position and obligated and striving suppliers
Fransisca Jr.s educational background can be the good success resource being he was
Agribusiness graduated.
The demand for the products is positive and this gives the Business be growing.
Production of good quality products with Profitable business investment.
Knowledge of ruling parties being part of political interest and good relationship with the
government.
B. WEAKNESS:

It was clear that the Valle family was characterized by unhealthy one; tainted by secrecy,
lacks information, low levels of emotional intelligence, and lack of knowledge by most of
the family members.
Created a sense an autocratic leadership system,
Impact of zero-sum dynamics creation by and within the family members.
The lack of a trust hindered the development of the emotional intelligence in the family.
Lack of a steady information sharing between the family and the organization
Lack of clarity and organization in the ownership structure, clear direction, vision and
mission.
No Long term strategic plan
C. OPPORTUNITY:

Availability of loyal suppliers and rich resource capacity


Growing business opportunities of the agricultural sector.
The credibly growing demand of food consumption at both local and foreign markets.
The company - government relationship another affection which may give raise the
company to professionalized business structure to go global and to breading it competent
by providing financial and technical subsides.
Rich market resources which may help to get educated and experienced staffs out of the
family to prosper the business.

D. THREATS:

Increasingly varied customer preference due to the low switching costs.


Rapid eradication of technological innovations.
Media disguise effect of the Broken down family harmony (relationship) and Family
dispute may slow the business growth being losing of their name and fame.
If no successor plan, family business might need to be handled by external members of
family.
The firm may loss its good wills.
High competition in agriculture business lead to low supply delivery and the
stiff/unbending competition of the food market.
IV. SWOT STRATEGY (ACTION PLAN)
A. Strength - Opportunity linkage Strategies
Francisco Jr. as a leader having its current state of internal qualities such as, Patient
and healthy financial resource position and obligated and striving suppliers, his educational
background, Production of good quality products with Profitable business investment and
Knowledge of ruling parties being part of political interest and good relationship with the
government can give it for him to exploit Rich market resource and the company -
government relationship advantages at large and:
He can work with the independent board members to be able to develop plans that are made
by an outsiders perspective and even from experiences outside the family business.
Inclusion of potential staffs in the management, people who have more experience in the
industry and may have been pirated from other strong agribusiness- companies. And still
can have Growing or preserving chance of the value of the business (Expansion) or product
Diversification.
Backtrack to zero sum dynamics effect of the business.
B. Weakness - Opportunity linkage Strategies
Backtrack to zero sum dynamics effect of the business and mark out the financial records
that are lacking; completing the data that the needs in order to track the progress of the
company.
The Creation of family strategic plan, a mission statement or dogma that defines why it is
committed to the business with the help of independent outsiders. By sharing priorities,
strengths and weaknesses, and the contribution each member can make to the business, the
family will begin to create a unified vision of the firm. This vision will include personal
goals and career objectives.

Family council meetings can address dispute between family members

C. Strength Threat linkage Strategies


Product expansion and product diversification to grow the business & building good
wills would enabled the company easily to handle the Increasingly varied customer
preference due to the low switching costs and High competition in agriculture business lead
to low supply delivery and the stiff/unbending competition of the food market
Whereas family functional secrecy and adaptability of changes can address the Rapid
eradication of technological innovations.
While the Media disguise affect of the Broken down family harmony and the fear of loss its
good wills would be breading over via Family council meetings.
D. Weakness Threat linkage Strategies
Since conflicts are normal to family businesses an evitable by nature, the way to address this
may be to ensure regular family council meetings and coming up with action plans.

The establishment of a trust catalyst to act as a triangulation point for the family and the
steady form of information sharing between the family and the organization would solve its
weaknesses and at least to harmonize the threats too.

The call for greater transparency of ownership structure, estate plan, and financial fortunes
of the company going forwards lots of releases.
V. OBJECTIVE
To establish and maintain a harmonious and united relationship among the family members
through creating a well-defined family council structure and crafting/drafting a family
constitution (as expressly agreed by all of the family members).

To make a clear separation between the family and the business by creating a family
constitution.

To ensure the profitability of the business, higher dividends and more reinvestment for long-
term growth and liquidity of shareholdings for the shareholders.

VI. ALTERNATIVE 1
The core values of any family business revolve around the System Theory: Family,
Management, and ownership. Hence, a harmonious relationship among the family members,
Management and Ownership must be established and sustained. This can be achieved through
building trust, mutual respect; constant open communication and transparency among and
between the three overlapping, interacting and interdependent sub Systems.

A. Building corporate governance with cohesiveness (Unity Vs Governance)


- By setting clear Vision & Mission where the firms will it be gone in the future should be
stated.
- The profits generated from the continual increase of sales need not to fall dividend
distributions cuts rather for farther investment.
- The voting control which was rested upon the two (2) family members only needs to be
dispersed.
- The Board of Directors should consist of independent outsiders board meetings must be
continued periodically. and Long term personal and professional goals of family members
need to be stated
B. Strongly Leading for uncertainty and future direction (Ownership & Mgt)
- It is very important for Francis Jr. to be transparent on the financials of the Company to
prove his good leadership and gain more the trust and confidence of the other family
members, which in turn enhances the harmonious relationship of the family and the
sustainability of the Company.
- There need to have clear strategy for the company. Since, Franciscos concern was only the
thriving of the company, but it was not clear due to his vague interactions with the
company and the family.
- the focus on should be given to issue of strategic plan, company liquidity, company
valuation, during the board meetings
C. Strong family relationship rather leads to Family unrest/conflicts.
The whole family must be unified towards achieving the goals of the business. This can be more
specifically achieved through the following:

- Create a well-defined and structured family council.


- Create & Define Family Values, beliefs, principles and culture
- Code of Conduct, Policies for regulating the relationship between the family and the
business.
- Create well define family policy: Performance Policies, Retirement policy, Dismissal
policy, Stock redemption policies/Shareholders Agreement, Successor policies,
Compensation policies.
- etc.
VII. ALTERNATIVE 2
Build management team

Open this option in the family council to start opening the voting shares to non-family members
specifically to members of the senior managers of the business. The family can still retain 51% of the
voting shares to keep control of the company while 49% of the shares could be distributed to non-
family members. This will open up the company to inputs from people who know the business. The
ideal effect of this is that, people that run the business should be empowered as well to have strategic
inputs on where the company is going.
VIII. RECOMENDATION
Our group recommends all the alternatives about to have a good relationship among the family
members that will make the company become successful. Especially the underline sub systems of the
systems theory are expected to bearing harmonious relationship among the family members,
Management and Ownership and must be established and sustained for successes of the family
business operation.

And we recall also Isabile to conduct family get together or family event that will draw together her
children and make each of them spend more time together.

Professionalize the business by having a clear organizational structure, well-defined job roles and
responsibilities and transparent financial reporting and Francisco should involve families to reduce
the lack of transparency and make it possible for the family to be more involved in the decision
making process and the succession plan of future generations.

If this was applied by the family, Francisco Jr. would have been able to realize what he was
compromising earlier and would have been able to reconstruct the company earlier.

Thank you