MGT 4550 - Family Business Management

STRATEGIC MANAGEMENT OF THE FAMILY BUSINESS

ChapterChapter 10 10

Family Business Management, Concepts and Practice

By A. Bakr Ibrahim & Willard H. Ellis

Instructor: Dr. Irene Duhaime

Class Schedule - Week 10 Class Schedule - Week 10 (03/29)(03/29)

• STRATEGIC MANAGEMENT OF THE FAMILY BUSINESS – Reading: Chapter 10 FBM

– Questions • 1, 2, 38-41, 68, 69, 71, 72 FBAB

Question 69

Strategic Planning, mission statements, business plans, how should these

concepts apply to a family business?

Question 1

How well is your business doing in your industry and in the context of the

current economy?

Strategic Management of the Family Business

• Planning: systematic evaluation of firm’s mission, objectives, strategy against its capabilities/resources and the environment– process, not document– continuous and periodic scheduled– both direction setting and activity guiding– process has content & behavioral outputs

Why Plan ?• To anticipate and respond to the dynamic,

turbulent and unpredictable environment• To allow assessment of the past, present

and the future• To guide the firm through strategic changes

Question 2

What is the best way to develop a long term strategy, including developing a framework to continue the business

over the long haul?

Strategic Planning

• Long term strategic planning

• Operational planning

• Budgeting

The Strategic Planning Process

Figure 10.1 The fam ily bisuness strategic planning processFam ily Business M anagem ent, C oncepts and P ractice, Ibrahim & E llis , 1997

The M issionObjectivesThe BusinessConcept

The Situation AuditAssessm ent ofInternal andExternal Capabilitiesof the Firm

Forecasting

Strategy

TheOperational(12-m onthbudget)

M edium - &Long-RangePlanning

Im plem en-tation

The Succession PlanOffspring Integration

Feedback& Control

Premises

The Strategic Planning Process - Mission Statement

• Shared values and vision

• A clear sense of purpose

• Says what business your are in and scope of operations

• Identify competitive advantage

• Identify expectations of stakeholders

• Identify industry and or market

The Strategic Planning Process - Planning

• Long-range Plan– Strategic critical to the firms’ survival from

generation to generation– include succession plan, plan to go public,

hiring professional management, diversifying or going international

The Strategic Planning Process - Planning

• Medium-range Plan– business direction for next 2 to 4 years– include targets critical to the firm’s survival– report on operational plan and performance,

quarterly / half-yearly reporting

The Strategic Planning Process - Planning

• Operational Plan– business direction for next 3-,6-, 12- months, – financial projections, production schedules,

inventory schedules, sales forecast, profit margin forecast.

– Monthly reporting

Strategic Planning in the Family Firm

• Early - intuitive– longer phase than non-family firms

• Later - more formal, systematic– often at successor generation stage– or at professional management stage

The Strategic Planning - The Intuitive Process

• Planning process is informal and intuitive and is based in gut feel

• CEO/ Founders with keen sense of judgement and wisdom and vision.

• Companies facing emerges often blend the intuitive behavior with strategic planning

The Strategic Planning Process - Forecasting

• Small Firms may use inexpensive and make use of published economic and Industry trends

• Large forms may use elaborate statistical models or computerized applications (Decision Support Systems)

The Strategic Planning Process - Formulating the

Family Business

Figure 10.7 Strategy Form ulation in fam ily firm sFam ily Business M anagem ent, C oncepts and P ractice, Ibrahim & E llis , 1997

Strategy Formulation in Family Firms

PerceptionFilter

Shared Values,Beliefs and

Vision

S tra tegicD ecis ion

Im plem enta tion

The F irm 's In te rna l E nvironm ent

The F irm 's E xterna l E nvironm ent

S itua tion A ud it The Fam ily F irmS tra tegic Form ula tion and

Im plem enta tion

Strategic Management & Strategic Planning

• Processes that have content benefits and process benefits

• Strategies specified to guide operational decision, actions of firm

• Process is vehicle for communication, value transfer, leadership development

Class Schedule - Following Class Schedule - Following week (04/05)week (04/05)

• FINANCIAL ISSUES FOR THE BUSINESS AND FAMILY

– Reading: Chapter 9 Going Public, FBM

– Questions:• 6, 42-51, 79, 97-100 FBAB

– Cases:

• Tender Touch Car Wash Ltd., p. 465 FBM