People of various cultures and countries of origin are increasingly conducting business with each other due to globalization. Technology has made it easier for businesses to reach out to new markets and to expand their consumer base. This has also stiffened the competition for market and has threatened the very existence of many businesses. Family owned companies have not been spared in this attempt to expand market. Therefore, the choice of going global is not open for debate and as panelist Alden G. Lank offers for family business owners, “go international, or die”.
The first suggestion made by the three panelists is that family owned businesses should seek “strategic alliances” with businesses in other countries. Such collaboration can be established between two or more interested companies which should not necessarily be other family owned businesses in other countries. The suggestion to form a collaboration or cooperation that involves technology transfer, economic specialization and shared risks and costs is brilliant. It is absolutely correct especially when working in the global commercial environment where there is ever increasing, cut-throat market competition. As panelist Francois M. de Visscher himself points out, more and more large multinational companies are taking over markets which were once considered family business territories.
The suggestion to form a global strategic alliance is therefore agreeable because of two main reasons: One, it is a much easier way for family businesses that lack adequate or extensive distribution to get into and to reach overseas markets. In Understanding Family Business, Alderson Keanon argues that “it makes it easier for a family business to get instant entry into a new market as well as strengthen their position in markets where they have a foothold”1. It also makes it possible to enlarge distribution channels and to increase sales. This is because Strategic alliances are typically formed between two or more companies, each based in their own home country, thus allowing each partner to concentrate in activities which best fit their capabilities. As a result, companies are able to maximize their competitive advantages in their combined market territories.
Two, the costs accrued in running such a global alliance are shared equitably among the companies involved making it arguably the least expensive and most flexible way to form family businesses partnership. It is flexible in the sense that it can be structured as an equity alliance or as a non-equity alliance (in which the host country partner has a greater stake).
Again, a global strategic alliance comes along with several benefits. In Managing Globalization in the Age of Interdependence, George Lodge describes it as “a way of broadening business and political contact base”2. Access to the latest technology as well as exchange of competitive skills and expertise is also made possible through strategic alliance. Partners are able to learn from each other and develop competencies which can profitably be exploited elsewhere. It thus makes it possible for a family owned company to enhance its image in the global market place.
The second suggestion about involving only family members in all international joint ventures is not a sound idea. When it comes to business it is more advisable that competencies, character and commitment to do work take precedence over kinship. A family business will do better in the global market by seeking a professional in specific skills such as communication, legal, finance, Information communication technology, marketing, strategic planning and management development.
Despite the fact that family companies present special management challenges in terms of successfully balancing of the differing interests of family members and the interests of the business, it is often prudent if the business is run by individuals who are adapt to the family tradition. Thus, a family company can benefit immensely by bringing on board a professional advisor who has a particular skill-set sought by the family.
The third suggestion offered by panelist Bruce E. Grossman is that for family businesses to remain competitive cultural differences should not be underestimated. The panelist, whose family owns more than fifteen coca-cola plants throughout Mexico, categorically and correctly states that family business owners should expand their cultural knowledge if they are to “play outside their own boundaries”.
Grossman’s observation is the most accurate suggestion, because knowledge of the impact of differences in culture is one of the keys to global business success. Cultural differences occur in all forms and ranges from basic customs to mannerism and gestures. But, generally, culture can be broken into eight major elements: material culture, language, education, religion, aesthetics, attitudes, values and social organization. The differences in all this elements have a direct influence on the profitability of international business. The differences in culture also affect business communication. Awareness of all this constituents and on the levels of conservatism, ideologies and views on gender can help a family business narrow down the target market.
It is also important to note that understanding of different cultures should move beyond the simple categorization of regions into West, Africa, Latin America, Middle East, Far East and Asia countries. In Cultural Analysis of Overseas Operations, Lee J.A provides that cultural awareness “entails a thorough understanding of all the elements of culture at least at national level”3. Therefore, expanding focus and taking time to study various world customs can help family owned businesses to gather more knowledge regarding international market trend. In Nationalism and Globalization, Leo Suryadinata explains that understanding of different cultures enable a business to “develop international competencies and to be more sensitive on global issues”4.
The last but equally important suggestion presented by the three panelists is that although there are “pitfalls” and setbacks, globalization also presents enormous opportunities and that it is imperative to “take a long view”.
Present business successes should therefore not bring forth the natural temptation to forget about the future. It is literally suicidal to think that the long-term future doesn’t matter in a profit driven business.
In World Systems Analysis: An Introduction, Immanuel Wallerstein points out that there are “no secrets in global business and no business can become a success overnight”5. Family businesses have to take a long view and be ready to put in the effort and time if they are to remain competitive in the global market. To succeeded, family owned companies need to take time to recognize what is working and to anchor the business around their successes.
A classic example of the wisdom of taking a long view is that of American giant Apple Computer Inc. which (although it is not a family owned company) was almost faced out of the market by other competitors like Dell and IBM. Apple however emerged a behemoth by testing new markets, insisting on top quality and innovation and pivoting their business around their success.
Bibliography
Keanon, Alderson. Understanding the family Business. New York: Business Experts Press, 2011.
Lee, J.A. Cultural Analysis in Overseas Operations. Harvard: Harvard Business Review, 1966.
Leo, Suryadinata. Nationalism and Globalization: East & West. Singapore: Institute of Southeast Asian Studies, 2000.
Lodge, George. Managing Globalization in the Age of Interdependence. Kuala Lumpur : Gloden Books Center, 1995.
Wallerstein, Immanuel. World-Systems Analysis: An Introduction. London: Duke University Press, 2004.
Alderson Keanon, Understanding the family Business (New York: Business Experts Press, 2011),13.
George Lodge, Managing Globalization in the Age of Interdependence (Kuala Lumpur: Gloden Books Center, 1995), 2.