ASSIGNMENT TITLE- WRITES A PAPER ON FAMILY BUSINESS. OUTLINE STRATEGIC CONCERN OF FAMILY BUSINESS.

WHAT ARE THE THREE TYPES OF STRATEGIC INTENTS IN FAMILY BUSINESS?

FAMILY BUSINESS:
A family business is defined in a term of:     Ownership control by member of a family or consortium of family. Strategic influence of a family in the management of a farm. Concern for family relationships. The dream of continuity across generation.

At the preliminary level in this business, family maintains voting control over the strategic direction of the firm. Family may also be directly involved in day-to-day operation. Further, multiple generation of family members could be involved in such operation. Family businesses can have owners who are not family members. Family businesses may also be managed by individuals who are not members of the family. However, family members are often involved in the operations of their family business in some capacity and, in smaller companies, usually one or more family members are the senior officers and managers. The popular perception holds that the family business is essentially an early point on a graph of corporate evaluation. A successful family firm is expected to grow beyond the ability of the family to manage and finance it. The owner would then decide to employ professional managers, and take the firm public to raise capital from the stock market. The modern economies are seen as dominated by large corporation listed on stock exchange, and owned by an army of dispersed investors, either directly or indirectly through mutual and pension funds. Family participation as managers and/or owners of a business can strengthen the company because family members are often loyal and dedicated to the family enterprise. However, family participation as managers and/or owners of a business can present unique problems because the dynamics of the family system and the dynamics of the business systems are often not in balance.

STRATEGIC CONCERN OF FAMILY BUSINESS:

A family business must address two sets of major strategic concern: (a) the succession, (b) the competitive advantages. By definition, a family business oriented towards sustaining its competitive advantages across generation. Toward this purpose, the family business must have cultural system and organizational linkages in place for transporting augmenting its competitive advantages across succession generation.

(1) Culture system: The inheritance system limits capitalaccumulation within a single family business, thereby the dissipating the familys business capital, and weakening the competitive edge. Many family firms experience a downsizing effect when the family firm is broken down into separate business unit, each headed by a son or a nephew. (2) Family system: In family business, parents- children conflict, sibling conflict,and in law-conflict are quite common. The founder do not wish to surrender their power; even after retiring, they continue to influence the decision-making-process. They are worried about the about the lack of patience, integrity, and resoluteness of the next generation. Consequently, the successor gets limited opportunity to cultivate and practice leadership skills. Moreover, as the founder frequently overrules the successors decision, the credibility of the successor among the sibling is reduced, and the cooperation among the sibling is weakened. The sibling distrust accentuates after marriage, as in-laws complain about favoritism, and undermine the power of the successor. (3) Business system: Family business assesses the employees in term of the level of trust and loyalty, rather than efficiency and job performance. Important management posts are assigned to the family membersand even other assignment are based on personal relationship, not qualification or performance. As result, the successors are pushed to prove their capability through drastic reforms, without proper planning, and without gaining cooperation, commitment, and advocacy of the employees. Consequently, these reforms initiatives tend to generate distrust among the family members, and are prone to failure. STRETEGIC INTENTS IN FAMILY BUSINESS: With the thrust towards the development of world-class capabilities, the family businesses need to shift away from a mindestfocused on opportunistic resource accumulation and trading that prevailed traditionally as the basis for the unrelated diversification strategy. Gurcharan Das(1999)describes three types of capability focused strategic intents as follows(1) Cost Leadership: Traditionally, family businesses in India competed on the basis of factor accumulation, using financial ethnic and political connections to opportunistically acquire domestic and foreign resources at low cost. Gurcharan Das identifies seven distinctive tactica for becoming cost leaders,based on the experiences of the successful Indian family businesses:

I.

Develop competence in a cost area:

Many Indian family businesses have developed capabilities for delivering worldclass products.The examples include Arvind Mills, Ranbaxy etc.

II.

Leverage pre-eminent position in the domestic market:

The Indian market offers a large volume basefor number of products, giving the businesses the advantage of scale. III. Leverage the low-cost leadership to gain share in the world market:

Tata Consultancy Services have leveraged the cost leadership positions in the domestic market to become major players in computer software and polished diamonds respectively.

IV.

Leverage the large size of the Indian market to set up world-class/worldscale plants, thereby creating the conditions for entry into the global market.

V.

Forge alliances and subcontracting relationships with Multinational Corporationto gain access to the world-scale market. Lower financing cost by raising capital offshore. Employ world class consultants to help improve strategies, cost, organizational design and performance.

VI. VII.

2) Service leadership: The traditional trading business families were not cost leadersindeed they sought to keep the business within their community, if not family, so they may not be undercut. Many larger family businesses are rediscovering the secrets of service leadership. The key to service leadership is to generate high value added, by delivering superior service through trained knowledge workers. 3) Technology leadership: A typical approach used by most Indian family businesses to move towards technology leadership is to form diverse joint ventures with the foreign multinationals. The family firm typically lacks priority on rapid growth, so that its distribution network, human capital, and government contact come to be perceived by the multinational partner as limiting and weak.