Strategic Business Mnagement
The definition of strategic management as the process that is aimed on defining the
strategy or direction of an organization, as well as on making decisions concerning allocation of
resources in terms of the identified strategy. Strategic management for family businesses is not
only a concept that aims at the achievement of the financial goals; rather, it targets at dealing
with the social aspect of the family and the role that the business plays in it, social duties and
values, and culture that precipitate the success or the failure of the business. It would be vital and
strongly advisable to set more emphasis on the strategic management of family businesses as the
main key to implementing sustainable success as well as managing the conflicting interests
between business and family goals.
The process of strategic management can be defined as a scientific and purposeful
process of decision making at the cross-functional level that aims at creating the necessary
conditions for an organization to achieve its goals and objectives. It consists of various steps,
namely, Environmental analysis,Strategy development,Strategy execution, and monitoring and
controlling. Among these processes, the following are important in improving the business’s
ability to adapt to changes in the external environment and to align resources to business
objectives in order to foster sustainable competitive advantage.
Culturally, family businesses are more likely to be inclined to be highly organized with
values and norms intrinsic to the family. It could be a useful tool for creating a sense of
belonging among the employees, as well as for clients and other groups of society. The following
points show how organizational culture and values play a role in shaping employee behavior:
Firstly, maintaining a culture that is consistent with that of the surrounding community also
creates a positive feeling of identity and meaning in the company, which in turn strengthens the
level of commitment in the employees thus lowering the turnover rates. For instance, family
business visions and/or missions may entail corporate values and goals like integrity, trust, and
commitment to the community, which sets the family business apart from other similar
businesses. These values are often embedded in different aspects of the company including its
relationships with the customers and with regard to the performance of internal managerial
activities foster a consistent and strong culture for the achievement of sustained performance.
High Level of Commitment is another remarkable attribute is that everybody in the
family is fully committed to the business. People in the business come from the same families
meaning that they indeed have a lot to lose and to gain and thus will work as hard as possible to
ensure success. This high level of commitment can again be a plus in contributing to
organizational success particularly during difficult periods. This is because family members are
always ready to do their best to see the business prosper, evidenced by the fact that they spend
more time working, giving up personal opportunities, and reinvesting their profits in the
business. A dedication of this nature can also be an advantage to the business because it will be
in a better position to fight the adversities that come with the conflicts.
Some of the positive effects of family businesses include; family business management
decision making is normally more flexible than any other business. One of the major advantages
of family businesses is the strong relationships and thus information flow within family
businesses are better and faster than in large organizations with many layers of hierarchy. This is
because the decision making process is not only fast but also flexible to accommodate for change
in market, exploitation of opportunity or tackling of any difficult issue as is seen in most family
businesses. For instance, in cases of economic instabilities or shifts in markets, family businesses
can be able to deploy their strategies and take action within short periods, adjust their operations
for cost-cutting measures, or develop new revenue models. This agility may be valuable for the
ability to survive and develop in conditions that are constantly changing and/or highly
competitive.
Family business are defined by the integration in business of family, ownership, and
business sectirs. This overlap still produces dynamics different from those of pure business
fields, which shape the practices of strategic management. For instance, the nature of the family
entrepreneurial, with its entailing values, vision and culture, significantly influences the strategic
direction of the business. Specifically, it has been observed that the strategic long-term
prospective of many family business due to the strong intention of transferring the business to
the future generation results to concentration more on the long-term profit. While, there is a
positive side to having a unique approach that may become a strength in a strategic point of
view, it can also be challenging to strike a balance between a family’s needs and requirements of
the organization. Thus, one of the major discusses that can be linked to the management of
strategic operations in the family businesses, refers to the long-term vision aspect. Whereas, non-
family businesses may give more emphasis on returning higher earnings to shareholders
immediately, these business organizations monitor long-term longevity. For example, a given
family business will embrace environmental friendly practices in their business not only because
it will be financially fruitful but also because it will be favourable to the next generations. These
types of long-term orientations may also bring continuity and purpose within the employee,
customer and stakeholder base.
Strategic management in family businesses is the process of building the long-term fit
between the family’s goals and the goals of the business while maintaining a delicate balance
between their usually conflicting interests. It could also provide employment to its members,
maintain the control of the family and ultimately protect the legacy of the family business.
Business objectives on the other hand are usually more narrowly framed and could include goals
such as sales, revenue, and market positioning. These goals imply that effective strategic
management should ensure correspondence through communication, governance systems and
decision making processes.
One of the most essential levers to aligning strategic objectives with ownership
management in families is the existence of family governance structures, including family
councils or family constitutions. These structures serve as a formal channel of addressing issues
arising from family involvement in the business enterprise, succession and profit sharing.
Therefore, by setting senior roles, duties as well as expectations, these mechanisms of family and
business governance cut down on possible conflicts to the overall capacities of the family and
business in meeting its objectives, and align its strategic plan.
In the context of organization management succession planning means preparation of the
successors to follow the existing leaders in order to maintain stability and continuity. An
effective succession plan means more than changing the ownership of a business and hence it
addresses the leadership and management changes as well. This involves identification of
potential followers, orientating them, training them and then gradually accustomizing them to the
increased responsibilities. It is also important to keep control and shape the strategic course of
the business in the future with the generations to come. It also aids in avoiding confusion mainly
common with instances of poor succession planning.
When such enterprises develop, the problem of management quickly appears, and
professional solutions quickly surface. Professionalization means that the nature of the
organization and its activities can be more controlled and directed by external experts instead of
informal communitarian forms of governance. This transition may be difficult because it means
transitioning from a kind of management style that was probably closer to a family or close
friends and relationships that the business has, to a more professional structure for the business.
Professionalization entails the adoption of proper managerial practices in the operation of
family businesses such as the use of stringent financial measure, strategic planning, and
reinforced performance measurement systems. It also covers the selection of executives who do
not belong to the family; they could be more resourceful and knowledgeable. These key workers
can assist the company in understanding how better to approach strategic movements, as well as
how to most successfully exploit opportunities for expansion and improvement of managerial
systems.
Corporate governance mechanisms, for example having boards of directors with
independent directors, are vital for accountability and impartiality in decision making for
strategic cadres. Member of the family and the Board of Directors can benefit from independent
directors by gaining significant and independent advice which would enable the family business
to avert some possible pitfalls and make sound strategic decisions.
Based on the mixed and close-knit systems of the family business stakeholders, conflicts
of interests and emotional involvement in the business are common phenomena. These may
occur in vision, leadership direction, or remuneration and reimbursement expectations between
initiative proponents and organizational leaders. Managing competition can be done through
introducing formal procedures for dispute solving to provide effective regulation of these
problems.
Methods mutual agreement, such as mediation, and the use of family councils as a
platform for dealing with conflicts allow for a systematic approach to the solution of
controversies and the preservation of a harmonious atmosphere. This means that with proper
management of conflicts, it becomes hard for them to degenerate into a plan that hinders the
direction that the business is being taken for example by shutting down operations. It also assists
in developing a culture of openness and recognizing and valuing the other party in the
management of strategies.
Summarizing the general idea of the research, it is crucial to underline that innovation
and flexibility are the key factors that help family businesses stay competitive in a constantly
evolving environment. The third approach of strategic management is the creation of a climate
within which everyone is given an avenue to develop the culture of innovation; and wherever
there exists an opportunity for improvement, this must always be embraced. It is useful for the
frameworks and practices to maintain the competitiveness and develop strategies relevant to the
family businesses in terms of changes in the market.
The threshold ability of adaptability concerns the flexibility of altering the extent and
nature of strategic actions and decisions in light of external pressures or opportunities like
technology, markets, or macro-economic conditions. For family businesses to be strategic and
sustainable organizations, adaptability becomes a major concept that they should adopt so that
they can be in a position to harvest new opportunities while at the same time avoiding new risks
that may be harmful to the overall running of the business. It should be though noted that
independent of the sector or the industry the business belongs to, proper management of financial
resources is a key component of strategic management of the family business. This involves
proper documentation of all the healthy financial transactions, well management of the cash and
ensuring proper accounting. Finance plays an essential role in the institutional management
framework since it ensures financial discipline required in strategic decision-making and the
search for funding sources for growth activities.
Risk management is another factor that can be considered as essential for strategic
management. The management of family businesses should periodically identify and solve the
existing problems, which can be divided into three major groups: market risks, operational risks,
and family risks. When business and its future is dealt with the issues such as risk management
tool prove to be very beneficial. It may affect the expansion of the business lineup, the presence
of strict measures for financial oversight, and plans for potential economic declines. This is why
strategic partnership and alliances are crucial to the growth and diversification of the family
businesses, expanded market access and increased competitive advantage. These collaborations
help the family business to gain access to external sources, share risks, and take advantage of
strengths in financial and human resources. For example, a family business may bring in a new
product line or venture in a new level by merging with a larger firm. Another type of strategic
alliance is when MMB and KGF cooperate with other research institutions, industry associations
or other family businesses. Family businesses should consider the process of developing strategic
partnerships as one of the key approaches within their strategic management system, which will
successfully address such problems in the future.
Corporate Social Responsibility (CSR)
It is very important for family firms to undertake CSR activities as this ushers in fame
especially in cases where the company has not been perceived well in societies or communities.
CSR activities demonstrate the devious values and its mission of the family to corporate
effectively in the betterment of society, in pursuit of their vision and mission.
CSR undertakings might extend to charitable contributions, environmental concerns, or
projects designed for the improvement of neighboring towns and villages. Thus, the
implementation of CSR in the management of the FBs make them to differentiate themselves
from the competitors, utilize opportunities to attract the socially responsible consumers, and
develop a favorable brand image. Since family businesses are commonly present in every
economy worldwide, it was deemed relevant to determine their features that would differentiate
them from non-family businesses. These characteristics are derived from the family-business
interface, which is a complex system that involves family members and business systems.
Awareness of these special characteristics is therefore helpful for strategic leadership as they
impact on decision making, values and directions of organisations. This section also explores the
specific characteristics of family businesses and their consequences to strategic management.
Of all the features commonly associated with family businesses, the long-term
perspective prevailing in this type of enterprise is one of the most distinctive. Rather than
striving for quarterly results similar to a publicly traded firm that needs to meet the expectations
of shareholders, most family businesses look at the long-term stability of the business and the
family. The aspiration to leave a positive visual mark and to secure the perpetuity of the
enterprise’s existence lies at the roots of such visions.
The second dimension is the reserve, which includes making long-term focalised
investments in innovation, in employees, and in sustainability. For example, venture and working
capital may be used to buy new equipment or to implement environmentally friendly sources of
energy in a family business in order to remain competitive a long time ahead and take care of the
surrounding environment. In this respect, this perspective has the potential to foster a sustainable
and long-term mindset of the company’s growth, without yielding to the infamous ‘short
termism,’ capable of damaging the business.
A clear definition for family business is: company where the management and ownership
are closely linked within one family; Goals of family and business are very likely to be aligned.
This situation may result to a synergy that ensures that everyone benefits whenever the business
thrives and the family as well. But, it can also lead to certain dilemmas, being difficult to resolve
when family and business interest collide.
In addition, strategic management includes the guiding principles of family businesses
and the ensuring that they have a clear line of sequenced direction in order to avoid conflicting
with each other. For example, it is possible to refer to family governance tools, including family
councils or family charters, which may assist to regulate the relations between family and
business on the basis of transparent rules and regulation of rights and duties of the members
involved. These structures offer solutions to enterprise concerns common to family businesses,
such as the role of the family in the business, the issue of succession, and ways of distributing
profits, which are all pro-business measures. Before getting into the main topic, it is imperative
to consider some obligatory regression. To be more specific, the subject matter is to address
certain features of intergenerational alternating, and more specifically, succession shortcomings.
The strength associated with generational differences arise from the fact that the presence
of young brains increase the innovation input to the business. Though the founding generation
might focus more on the conventional approaches to doing business and their associated ethics,
young people are assets because they possess other perspectives, methods, and fresh visions
different from those of the founding generation. This paper tries to demonstrate why regulation
of these generational differences for strategic management is important because it leads to
strategic development and innovation while maintaining business values.
Succession planning is probably one of the most critical and the most demanding
assignments that can be given to people who work in organizations of any type. Leadership
succession is not an easy process but if done well strategic planning, stating the facts, and
following change are crucial in transition. Outsourcing mentoring programs, leadership
development, and gradual succession can also be an effective way to develop the leadership and
keep organizations stable and effective.
Another specifically identified headline is that the parties involved in the business have
an emotional connection to it because of the family bond. This is a focus on the facts that the
person wants to go back to the roots and maintain the Family Values of the founding generation.
While strengthening this psychological ownership, people are truly motivated and committed to
their activities but they do not look beyond the existing frame of reference resisting any change.
It is an essential factor in the strategic management of family businesses: on the one
hand, owners cannot ignore their close-knit emotions related to the business, but on the other
hand, it cannot be the main criterion in making management decisions. Some of the ways which
the emotional bias can be redressed include the following: Setting formal procedures to arrive at
decision-making, involving non-family managers in decision-making, and hiring consultants to
advise on any decision-making course of action to be taken.
Whereas in a traditional organization, the roles and relationship between people are well
defined and clearly articulated, in a family business there are multiple layers of overlapping
interaction. The blurriness of the owner-manager-Relative interface also poses a problem of
conflict of interest and power while a close one is both owner and CEO, it may not be easy for
his subordinates who are equals as siblings. It is a delicate process by which Henri struggles to
balance the relationships within his family with those pertinent to the vice presidency. Some of
these issues include strategic advisory boards or independent directors that may assist in the offer
to exercise impartiality on governance responsibilities. Also, procedural communication should
be good and better approaches to conflict resolution to solve issues arising from the complicated
role of balancing between family and business duties that foster a good organization.
The sources of their funding are likely to be more stable, have a long-term orientation,
have access to substantial networks and be more knowledgeable about the business than other
investors. Long-term investment is also possible when the initial capital required for an
investment comes from the patient capital offered by extended family members who reinvest the
profits and do not seek the returns in the short run. It important to have good connections that are
the result of years of nurturing the relationships – they offer rich opportunities for partnerships.
These sources of resources can be utilised for some strategic purposes like venturing into new
markets, finding new product fronts, and research and development. In particular, family
businesses can leverage their resources in order to establish competitive advantages that will
enable the businesses to grow and succeed.
