Family Business Overview

Currently, business family is becoming more influential and simpler to manage. This type of business is mainly owned by people with close relation to other forms of business internationally (Aguila and Briozzo, 2020 pp 49). Therefore, a family business can be defined as a business type in which two or more family members or related people form a cartel, thus operating as one firm. In most cases, the business’s complete control lies within the family members since they have common objectives to achieve. According to the research, the family business is recognized as one of the international forms of business contributing to the growth and development of most countries’ economies. Nowadays, the family business is believed as the engine of industrialization in most countries since they have contributed significantly to revenues and tax provision, especially to the governments (Ahmad and Yaseen 2018 pp 345). For any country to achieve its Gross Domestic Product (GDP), micro-business, such as family business and other small operating businesses, should provide taxes and revenues to the government.

Even though family business is categorized as micro, multinational family corporations can operate in more than two countries. Most of these multinationals’ family businesses are located in the United States of America, the United Kingdom, and Colombia. Basing the research conducted by the Institute of Family Business (IFB) 2012, about 5millions micro-businesses operating internationally are private sectors. These macro businesses contribute approximately 76% internationally to create job opportunities for the family members and other none related people (Antcliff et al.; 2020 pp 34 ). In the United States of America, micro-businesses such as family businesses are more considered than governmental sectors. Family businesses are believed to have contributed positively to providing affordable products and services to most unstable people.

In most cases, the family business is owned and directed by family members, thus minimizing the chances of loss due to poor organization. The main strength of a family business is that there are no interferences since its characterized by monopolistic. Here are some examples of the most successful family business in the world.

Family-owned businesses are believed to be the oldest form of business organizations. Since the 1980s, the research shows that family business has distinct significance, especially in raising the county’s Economy; that’s why most countries consider operating micro-businesses as big firms and companies.

These family businesses are currently recognized as crucial and dynamic participants contributing to the highest world economy (Brenkman, 2020 pp 67-89). Basing U.S statistics, 90 percent of the United States of America owned family business. The growth and development of family business have mainly contributed in some countries such U.K. and Colombia. According to the IFB, the United Kingdom record more than a 4.8million family business which occupies more than 88 percent of the total business conducted within the United Kingdom. Currently, family businesses are the backbone of the United Kingdom economy, thus contributing about $ 150 billion annual tax. Within the age of huge businesses, it is significant to understand why family businesses are emerging to be the most successful than other forms of enterprises. In the United Kingdom, family business is growing at a higher rate, thus tending to outperform other close companies in physical markets. Naturally, United Kingdom is a unique country dominated mainly by heritage and encourages most families to inherit their parents’ work even if they pass away (Caputo et al.;2018). The aspects of origin in the country elaborates on why the percentage of family businesses is rapidly increasing every year. In most cases, the family businesses are operated depending on the types and complexity of each. For instance, the chart below shows different kinds of family businesses and how they are managed.

The main reasons family businesses are more than other private sectors are that they are easy to perform and operate since they do not need to hire specialists or managers. Instead, they are primarily used and ran by related people. Additionally, these types of businesses do not incur much labor costs since they mostly rely on family members who are always available to offer free assistance (Seaman et al.; 2019 pp 345). According to Bolton Consulting Groups (BCG) arguments, the analysis shows that family businesses contribute about 45 percent of all the companies and organizations. To prove this, Dyson and JCB are good examples of the most prominent family businesses in the United Kingdom, which participate within their country and internationally. In connection to this, family businesses are the largest employers in the United Kingdom. So, it’s clear that family businesses have more benefits since people are derived by their determinations and what they need to achieve after operating their business.

Characteristics of Family Business

Family businesses are characterized by several features, which makes them operate successfully, unlike other companies. Family businesses are monopolistic by nature since only family people, and other relatives can run the business. In most cases, the business will only operate depending on the culture and norms of the family, thus not satisfying customers’ needs. From a perspective, a family business has operating hours and mostly may limit people from purchasing since customers have different times of purchasing. Basing the analysis of 33 countries, family businesses are simple to manage since their structure is less complex than other operating businesses (Chang et al.;2020 pp 56). The design and characteristics of a family business depend on the number of people involved in the business operations. Concerning this, some features can be tangible while others are intangible. One of the most crucial characteristics of a family business is its strong trust and the inter-relationship between the family members.

In contrast to the other companies, there exist constant ideological differences between the management and other stakeholders within the industry. Regardless of the type of ownership and management team, the entire family members remain the critical participants in the company and can immediately decide to manipulate the nature of products they deal with. Another characteristic of a family business is that the management is always informal, and it’s hard to recognize any mistakes arising from the way of operations.

Most managers of these businesses have no definitive ideas to promote the business’s operations from one level to another.

The excessive intermingling between the company and family members may encourage financial problems since most of the business’ capital can be directed to family issues that were not planned in the money. In some family businesses, there is no working time and private hours. Therefore, the operation of the company may become monotonous to some members. Naturally, doing one thing over a long time reduces interests (Pham et al.;2019). Even though a family business may consist of other non-family members, the ownership and management of the company lie within the family members only. The figure below shows an example of business ownership and its structure. This is one of the main characteristics of family business currently

Therefore, the family business needs more management teams to ensure proper supervision is achieved. In some countries such as Canada and Australia, family business focuses on the companies’ long-term sustainability rather than gaining considerable profits. Most family businesses have limited access to goods and services; therefore, all characteristics of family business are passed from one generation to another. The generation to come will have to use unique features but what they think it’s good. However, according to Ryann’s arguments, family businesses have supported entrepreneurship since most family members another characteristic of a family business is complete control in terms of productions since the family is responsible for any required materials. However, most companies produce limited goods and services, such that there are no suppliers that can benefit none family people. To have a robust business, most families form cartels and partners with other more developed cooperation’s thus getting more chances of thriving in business.

Challenges facing family business

Even though family business is simple to manage, there are several challenges. The main challenge affecting family businesses is a generation gap. When many generations of different families are administering the company, the rate of changing from one technology to another might take long since not all people may understand it (Friar and Clark, 2021). For instance, the founders of some family businesses may resist handing off the management responsibilities to other upcoming families. This action creates characteristics of monopoly since most leaders make decisions based on their perspectives and ignoring the opinions of others. Even though younger generations may have some great ideas on how the business can operate efficiently and accurately, they are never involved in the business operations. This means that the company will continue working within flawed and outdated technologies since they lack the knowledge and skills to implement the new ideas (Heinonen et al.;2020 pp 1-34). Due to this, there may occur conflicts and frustrations since some employees feel that their voices and opinions are not considered in the implementation of the business.

Currently, most family members fail to understand that everybody can contribute positively to the industry. To overcome such challenges, the family should negotiate towards the succession of leadership without chaos. Another challenge associated with family businesses is business culture. In this type of business, it’s tough for the company to accept all cultures and values from different families. Even if related people form the industry, some people have different cultural opinions that may not match other family members involved. For example, Samsung business involves different families with different ideological thinking thus may be difficult to operate within the same culture. In this case, most family businesses use basing the cultural system of the paramount families. The interferences of business can lead to low turnover rates, thus reducing the productivity of the company. Setting up payment strategies can currently face other problems facing family business (Núñez et al., 2018). Determining payments in the industry may raise conflicts because some members cannot be paid equally. The prices should be determined based on the duties and responsibilities of the individuals; however, some family members may demand equal payment, thus building uncertainty and mistrust. Some employees may get annoyed in the reaction to such cases since they don’t expect to work hard and get fewer payments.

When employees are not positively encouraged, they may lose morale, while others may decide to leave the job to look better. Therefore, this means some family members will lose business morale and, with time, will seize supporting business operations. Another challenge affecting family business is mixing business with home life. According to the research, when family members work in the same companies and organizations, it becomes challenging to make definitive decisions without basing personal feelings. (Kanade et al.;2020) Due to this, family businesses can operate poorly due to family events, whereby families may decide to make frequent holidays that do not concern business operations. The issue of holding every family member in the same standard is another challenge facing family enterprises. For instance, some employees may be spending a lot of time in the breakfast rooms than in the business desk operations. The aspects of some members westing time in the busines may contribute low output thus reducing the business’s productivity.

When some people in the business are not operating according to business formalities, the other employees may develop negative implications. They may not work smart to achieve the objectives and anticipated target of the organization. Additionally, these behaviors will create laxity and mistrust in the organizations. According to the research, the most family business faces interferences and challenges from within the family members especially those in the top management (Michiel et al.;2017 pp 369). Planning for the future is another upcoming challenge facing the operations of most family businesses. Since most family enterprises are characterized by solid planning, it becomes difficult to modify the planned decisions.

Consequently, making decisions becomes tedious because of the extended channels to be followed. If the business involves more than two families, the decisions are made based on both families’ final discussions. Therefore, before plans and decisions are made, there must be consultations from all the family and relatives. Nowadays, there is a need for family members to understand how the business should be conducted to avoid such challenges.

Recommendations

To overcome the social and economic contributions made by the family businesses, there are crucial aspects that we need to look at. Both characteristics and challenges associated with family businesses can be overcome if the family members get serious with business and stop focusing on things that do not relate to the business (Michiel et al.;, 2017 pp 369). According to the discussions, most family businesses are affected by top management’s ignorance since they think they control everything in the business basing their knowledge. According to my perspective, family businesses can only improve if the management team considers the opinions of others. To have good business, there is a need to involve all the employees in the decision-making process. To have a better understanding of family businesses, the following recommendations should be taken into account. The performance of the business should be optimized and act as a reference to other generations to come. Family businesses are believed to have contributed positively to providing affordable products and services to most unstable people.

In most cases, the family business is owned and directed by family members, thus minimizing the chances of loss due to poor organization. Additionally, the operation of a family business should not base on the specific family since it may promote hatred and non-stoppable conflicts within the related people (Musso et al.; 2020 pp 23). Also, the business should be in the position to serve the general population without considering if the buyers come from the same clan. The family business will act as a catalyst that speeds the growth and development of the Economy. For better family business success, the younger people should be involved in the management team since they might have more technical skills to help family businesses thrive well.

To have peace and harmony within the industry, there should equal distribution of the profits gained from the company since its efforts of every individual performing in the industry. For instance, when some industries are not operating according to business formalities, the other employees may develop negative implications. They may not work smartly to achieve the objectives and anticipated target of the organization (Musso et al.; 2020 pp 23). The family should be considered as the primary influence both on the companies’ operations and strategic orientations. For this reason, the management and combination of the several families will positively contribute to the growth and prosperity of the business even in the future.

Self-reflection on family businesses

The family business is one the best enterprise to operate despite its challenges. Basing the research analysis, the family business is simple to use compared to all other forms of business internationally. Basing my views, the family business has benefited most people worldwide by providing employments to non-employed people. Even though the company operates without physical interference from governments, it faces some challenges which can be solved basing its structure. This reflection is a way of considering all the characteristics and challenges that have been facing family businesses. According to my arguments, a family business can improve if they follow all the above recommendations. Additionally, there is a need for the managers and supervisors to understand that the success of most companies depends on decision-making.

Conclusion

To sum up, the family business has contributed to social-economic growth, especially in European countries. According to the research, these businesses have contributed about 67% of Gross Domestic Products, especially in the United States of American and the United Kingdom. Regardless of the type of ownership and management team, the entire family members remain the critical participants in the company and can immediately decide to manipulate the nature of products they deal with. Another characteristic of a family business is that the management is always informal, and it’s hard to recognize any mistakes arising from the way of operations. Even though family business is categorized as micro, multinational family corporations can operate in more than two countries. Most of these multinationals’ family businesses are located in the United States of America, the United Kingdom, and Colombia. The prosperity of many family businesses depends on their structure and operational structure. Basing the research arguments, the family business will continue been in the top in European’s countries since families believe in amalgamation is more effective than individualism.

References

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