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As the name suggests, a family-owned business refers to businesses in which family members own, operate, and control them. In the beginning, they were small and medium scale.
Then, some family businesses grew up, even making their owners a conglomerate. Some of them listed their shares on the stock exchange.
Examples of family-owned business
The family business has become an influential player in the world economy. Maybe you are familiar with these examples:
- Walmart Inc. by Walton
- Volkswagen AG by Porsche and Piech
- Berkshire Hathaway Inc. owned by Buffett
- Exor NV by Agorelli
- Ford Motor Company owned by Ford
- Schwarz Gruppe belongs to Schwarz
- BMW AG owned by Quandt and Klatten
- Cargill, Incorporated by Cargill and MacMillan
- Tata Sons Ltd owned by Tata
- Koch Industries, Inc. by Koch
Pros and Cons of family-owned business
The strength of a family-owned business lies in a shared commitment to business success. This commitment is rare in non-family firms.
The next advantage is leadership stability. Leaders usually serve for years. It results in overall stability in the organization and facilitates the smoother execution of strategies towards the vision.
Conversely, leadership changes in non-family businesses often create discomfort in organizations. Each leader usually carries a different strategy, even a different vision. That’s confusing for subordinates.
While it’s good for long-term vision, you will find family conflicts in business, especially if the leader steps down or dies. The fight for control arises because it does not have a succession plan.
The next problem is governance. Professional employees often find it challenging to deal with family members. They must submit to the decisions of family members, even if they conflict with their views.
Nepotism also often arises in family businesses. Family members are reluctant to allow outsiders to join the upper levels, despite having extraordinary talent.