FAMILY BUSINESS

MODULE-5
INTRODUCTION
Family business & small business are not
the same. A family owned business is any
business in which a majority of the
ownership or control lies within a family.
MEANING
Family-owned business is one that is
owned and managed (that is controlled) by
one or more family members.

Definition

According to Davis & Tagiuri-
Family firms are organizations where
two or more extended family members
influence the direction of the business through
the exercise of kinship ties, management roles
or ownership rights.
According to Gallo-
Family business are essentially the
same in every country in the world relative to
their problems, issues and interests.
FAMILY-OWNED BUSINESS IN INDIA

Importance of family business
To meet the needs of generating larger amounts of
capital and dealing with legal issues such as protection
against lawsuits and bankruptcy.
It was the Industrial revolution that replaced family-
based craft industry with larger manufacturing
enterprises.
Cause for the rise of a massive service sector generated
numerous new opportunities for family ventures.
Big public companies are tend to attract the most
attention in terms of share offerings, stock values and
assumptions.
.


Motivator for many career switching
entrepreneurs.
Family business is dominant in rural and
minor areas because of traditional land owning
patterns and the impracticalities of operating
larger co-operations in marginal economies.
Family business will undoubtedly endure as
the backbone of enterprise.
Many unique oppturnities for individual
entrepreneurship and family business within
the industry.

TYPES OF FAMILY BUSINESS
TYPES OF FAMILY BUSINESS
FAMILY-OWNED AND
MANAGED BUSINESS
FAMILY-OWNED AND LED COMPANY
FAMILY-OWNED
BUSINESS
TYPES
1. 1.Family Owned Business
2. 2.Family-Owned and
Managed Business
3. 3.Family-Owned and Led
Company
The history of a of its primary assets,
preserving that history in business memories conveys
hands on experience and records the heartbeat of an
evolving corporate culture. Families who combine
their personal history with history of their family
business pass on their principles as well their business
assets to future generations.
Families they celebrate and transmit their familys
mission, achievements, and place in the community.
IMPORTANT REASONS FOR TO CREATE A
FORMAL HISTORY
1)Founders Vision and Mission
2)Historical Accuracy
3)Honoring Longtime Employees
4)Thanking Customers and
Vendors
5)Background for the Uniformed
Responsibility of shareholders of a family
business
Responsibility of shareholders of a family
business
SETTING FAMILY POLICY
FAMILY ORGANISATIONF
FAMILY EDUCATION &
INFORMATION
FAMILY MISSION &
VISION
FAMILY OWNERSHIP
POLICY
FAMILY CIVIC,POLITICAL &
PHILANTHROPIC ROLES
FAMILY FUN
Responsibility of shareholders of a
family business
1.Setting Family Policy
2.Family Vision and Mission
3.Family Organization
4.Family Ownership Policy
5.Family Education and Information
6.Family Civic, Political and Philanthropic Roles.
7.Family Fun
SUCCESION IN FAMILY BUSINESS
Family business succession has been defined as the
passing of the leadership baton from the founder-
owner or incumbent-owner to a successor.

For the success of the process, changes are needed-
Legal transfer of property, which concerns the law, and
the management decision for authority transfer

Alternative for the business continuity

Transferring the business to the next generation

Transferring the Management of the business
THE CHALLENGES FACED BY FAMILY-OWNED
COMPANIES
1. Non participative family members:
2. Family emotions:
3. Family or Business what comes first?
4. Human Resource:
5. Defining Authority:
6. Fair to all approach:
7. Retaining non family professionals
8. Speed of accepting change:
9. Succession Planning:

PITFALLS OF FAMILY BUSINESS
Pitfalls of family business
Ignoring Fiduciary Responsibilities in the
event of a dispute
Failing to document the
terms of the agreement in
writing
Failing to plan for
the future
Nepotism(favoritism)
STRATEGY FOR IMPROVING THE
CAPABILITY BUSINESS
Strategy for improving the
capability business
Demise of the joint family
Need of Professionalism
in Family Business
Replenishing
entrepreneurship
Good Management
Have an Active Board of
Directors
Have a Strategic Planning
IMPROVING FAMILY BUSINESS
PERFORMANCE
Family-owned business have a long term history of
consistent profitability, others however, have a
similarity long term history of weak performance.
Core value Factors:-
1)Training
2)Future Outlooks
3)Accountability
4)Finances
Other Core Values-Decision making, internal
communications, method of conflict resolution,
method of compensation and formality of FOBs
Operating Procedures.
CONCLUSION
Though it is easy to give family-owned firms
advise no how they can overcome their
challenges and be global players it may not be
very smooth. Family ties and traditions are
very deep rooted in family firm. Some families
tried to separate ownership and management
but it did not work for the long and
unfortunately in many of the cases the
movement of the family outside the
management resulted in fall in the business
fortunes and the family was forced to get
actively back into business