Family Business Management
Assignment A
1. Family business are passed on from generation to generation usually by way of inheritance. As in any other establishment, it is important to ensure that successors are well prepared to carry on with the business. Discuss the process involved in the succession planning and what you consider to be hindrances to succession planning in a typical Indian family business.
2. Explain at least three reasons on the need to professionalize family business management and explain three alternative methods for integrating professional management into the family firm.
3. Explain the need for good corporate governance in a family firm and highlight at least four principle of good corporate governance.
4. Discuss the differences and similarities among family business and non-family businesses. Explain the benefits that result form family involvement in the business.
5. Write a short note on behavioral issues of promoter in a typical family owned business? What impact does it create on long-term performance of the business? Support your answer with relevant example.
6. Your family business of supplying readymade garments to Shoppers’ Stop is going through a bad phase and now you are forced to diversify. How would you choose your next venture? Clearly state your assumptions right up front.
7. You run a 20-year old family-owned business based in Chennai, manufacturing Headlights exclusively for General Motors. With an increased demand of cars internationally, General Motors has given you and option to increase the supplies by two folds. To increase the manufacturing capacity, you would need Land, Plant & Machinery and Working Capital. Explain at length your approach to secure Working Capital loan from your Banker. You are expected to detail the financial ratios you would emphasize on while convincing your banker for the loan.
8. Critically evaluate the statement "Joining the family business is a norm, not a matter of choice". Do you agree with this statement? Support your answer with relevant examples.
Assignment B
Case Detail:
Caroline said goodbye to her brothers Louis, Charles and Timothy, and rushed to her car, very satisfied with the decision that had been made. They had agreed to develop a shareholders' agreement to secure the future ownership of the family business while giving some flexibility to individuals to sell shares. She could now go and visit her father Thomas Sages to share the good news.
Thomas Sages was a very successful entrepreneur who had transformed his first grocery store into a large supermarket chain over the past decades. He was in his late 80s now, and had initiated a conversation with his four children about the future of the family business. Contrary to what he had expected, each of them had expressed the wish to become, or remain, a shareholder in the business as they wished to be in a position to pass on some shares to the next generation. The Sages family circumstances (Thomas’ two marriages and prior distribution of shares to his second wife and their children; Caroline’s husband David’s ownership; and a transaction between David and Timothy), would result in an uneven distribution of the shares between the four children upon the demise of Thomas and his second wife Martina.
Future projection of ownership:
Louis: 11%
Charles: 23%
Caroline + David Jr.: 30%
Timothy: 26%
The managers of the group owned 10%
The four siblings were aware that there may be a requirement for them, or their children, to sell part or all of their shares in the future. It was therefore important to plan ahead, while at the same time trying to avoid the entry of an external investor. They had considered the following:
- What would be the process if someone wanted to sell his/her shares?
- How would the transaction price be established?
- Would other family shareholders have a pre-emption right? How would that work if there were more buyers than sellers? Would shares be allocated in proportion to the existing stakes, or would priority be given to those with fewer shares?
- What would happen if there were fewer buyers than sellers? Would the company buy the shares?
- While they had listed their preferred options, they now needed to further discuss the matter with their trusted advisor.
Questions
1. What advice would you give the Sages siblings regarding their shareholders’ agreement?
2. If you fail to create a succession plan, what implications would it have on future of business?
3. Based on the above case, what, according to you, are the greatest challenge that family business face? Support your answer with relevant examples.
Assignment C
Question No. 1 Marks - 10
Family businesses account for what percentage of the businesses in India?
Options
- Less than 5%
- Approximately one-third
- Approximately half
- Over 80 percent
Question No. 2 Marks - 10
Family-owned businesses account for what percentage of the nation's employment?
Options
- 5%
- 25%
- 55%
- 85%
Question No. 3 Marks - 10
In order for entrepreneurial couples to avoid problems with power and decision making, it is best to:
Options
- designate one person as the legal owner of the company
- work different hours in the business
- assign specific areas of responsibility
- work in different locations
Question No. 4 Marks - 10
The Vijay Mallya company Kingfisher experienced financial problems because the owners
Options
- spent too much money on personal expenses
- had different management styles
- Invested in various businesses without having an expertise in them
- option 1 and 3
Question No. 5 Marks - 10
The percentage of family-owned businesses that are successfully transferred to the second generation is approximately
Options
- Ten Percent
- Approximately one-third
- Approximately one-quarter
- Over 90 percent
Question No. 6 Marks - 10
The process of transferring leadership to the next generation is known as
Options
- power sharing
- succession.
- natural division of responsibility
- community property
Question No. 7 Marks - 10
When transferring the ownership of the business, an entrepreneur can do which of the following?
Options
- Give ownership to family members as a gift
- Sell ownership to family members
- Transfer ownership while still alive
- All of the above
Question No. 8 Marks - 10
A group that gives advice to a family-owned company, and is made up of family members as well as non-family members is called
Options
- a family council
- equitable distribution
- an advisory board
- all of the above
Question No. 9 Marks - 10
In a business plan, the succession plan becomes more of a concern for bankers and investors
Options
- when there are more than three children involved
- as the entrepreneur ages
- when the entrepreneur has no children
- if a family council exists
Question No. 10 Marks - 10
The nation with largest number of family businesses in the top 200 is:
Options
- USA
- UK
- India
- Japan
Question No. 11 Marks - 10
One of the key issues in family businesses is:
Options
- Future planning
- Strategic planning
- Succession planning
- Support for planning
Question No. 12 Marks - 10
Which one of the following is not a characteristic problem in family business management
Options
- Sibling rivalry
- Nepotism
- Issuing shares on flotation
- Launching a new business
Question No. 13 Marks - 10
Which one of the following is not an advantage of a family business at start-up?
Options
- Credibility
- Additional capital
- Family labour
- Family advice
Question No. 14 Marks - 10
Which one of the following is regarded as an advantage of family businesses, especially during business development:
Options
- Additional capital
- Employee loyalty
- Close knit network of contacts
- Family advice and support
Question No. 15 Marks - 10
Which of the following actions would dilute family control in a family-owned business?
Options
- Increasing the size of the business
- Increasing non-executive directors
- Increasing number of shares issued
- Increasing family board members
Question No. 16 Marks - 10
Why can venture capital organisations assist family businesses?
Options
- They can inject capital
- They can review performance
- They can implement strategic planning
- They can call on experienced family-business advisers
Question No. 17 Marks - 10
If a new CEO is brought into a family business, it is advisable that he/she has:
Options
- Family business experience
- Sectoral experience
- New firm experience
- Taxation experience
Question No. 18 Marks - 10
In developing a successful exit strategy, a founder of a family business would not consider:
Options
- Trade sale to another organisation
- Educating heirs to take over management
- Bring in non-executive directors to assist succession
- Abandoning succession planning
Question No. 19 Marks - 10
The ability of business owners to structure life in the way that suits their needs best refers to
Options
- flexibility rewards
- family rewards
- growth rewards
- wealth rewards
Question No. 20 Marks - 10
Which of the following is NOT a myth about small businesses?
Options
- There is not enough financing to start businesses
- You need to make something if you are going to make money
- You can never try again if you fail once
- There is no flexibility when you own your own business
Question No. 21 Marks - 10
Funding invested for a share of a firm or given as loans or credit from family, friends, and other businesses used to help start or grow a firm is known as
Options
- committed capital
- informal capital
- mezzanine capital
- formal social capital
Question No. 22 Marks - 10
In 2008, amid a recession, which of the following represented the most profitable industries for small businesses?
Options
- Manufacturing industries
- Financial services
- Service industries
- Software industries
Question No. 23 Marks - 10
In order to start a business, you need all of these elements to come together EXCEPT
Options
- boundary
- resources
- intention
- experience
Question No. 24 Marks - 10
Which factor distinguishes a firm from the process of buying or selling or bartering we all do occasionally?
Options
- Resources
- Boundary
- Intention
- Exchange
Question No. 25 Marks - 10
A business name or government registration, a phone or e-mail address dedicated to the business, or a specific location for the firm in a home, commercial space, or on the Internet are examples of a(n)
Options
- exchange
- resource
- boundary
- intention
Question No. 26 Marks - 10
Resources
Options
- include a business name or government registration
- refer to moving goods or service to others in exchange for money
- are the most frequently occurring elements to run the business
- include the product or service to be offered
Question No. 27 Marks - 10
The sequence or organization of jobs and careers in the economy refers to
Options
- franchising
- creative destruction
- occupational structure
- incubators
Question No. 28 Marks - 10
The way newly created goods, services, or firms can hurt existing goods, services, or firms refers to
Options
- franchising
- creative destruction
- occupational structure
- incubators
Question No. 29 Marks - 10
Mandarin is a restaurant which has opened recently. People from all over town flock to Mandarin to find out how good it is. This gives a big boost to the restaurant's initial business. But it causes the other restaurants in the area to lose business temporarily. The way in which Mandarin hurts existing restaurants is an example of
Options
- creative destruction
- efficiency
- innovative disruption
- market penetration
Question No. 30 Marks - 10
A nation where the major forces for jobs, revenues and taxes come from farming or extractive industries like forestry, mining, or oil production is a(n)
Options
- factor-driven economy
- efficiency-driven economy
- innovation-driven economy
- competency-driven economy
Question No. 31 Marks - 10
Innovation-driven economies
Options
- are those where entrepreneurship becomes a key way to build the middle class
- are nations where industrialization is becoming the major force providing jobs, revenues and taxes
- are focused on high-value-added manufacturing but are marked by a very large service sector
- are those where entrepreneurship is essential to helping build personal wealth and break the cycle of low-wage jobs
Question No. 32 Marks - 10
Entrepreneurship levels in countries such as Germany, Israel, the Republic of Korea, and the United States average the lowest of the
Options
- innovation-driven economies
- efficiency-driven economies
- factor-driven economies
- competency-driven economies
Question No. 33 Marks - 10
Which aspect of family owned business refers to being in-tune with one's market?
Options
- Efficiency
- Creation
- Customer-focus
- Growth
Question No. 34 Marks - 10
The form of entrepreneurship in which a person or a family own their own for-profit business is
Options
- independent entrepreneurship
- social entrepreneurship
- public entrepreneurship
- corporate entrepreneurship
Question No. 35 Marks - 10
The family owned business' focus which refers to doing the most work with the fewest resources is
Options
- innovation
- creation
- efficiency
- customer-focus
Question No. 36 Marks - 10
Which of the following best describes a corporate form of entrepreneurship?
Options
- It is a form of entrepreneurship involving the creation of self-sustaining charitable and civic organizations
- It is a form of entrepreneurship that involves revitalizing government agencies
- It is a form of entrepreneurship in which a person or group owns their own for-profit business
- It is a form of entrepreneurship which takes place in existing businesses around new products, services or markets
Question No. 37 Marks - 10
This is the degree of attention your target market pays to your idea or organization
Options
- Efficiency
- Identity
- Mindshare
- Growth
Question No. 38 Marks - 10
Given that "Grameen kidz" will be a small business in a rural area, which of the following characteristics would be true?
Options
- Its focus should be on effectiveness
- The approach to human resources should be to professionalize
- Metastrategy should be imitation
- It should grow when possible
Question No. 39 Marks - 10
In order to start "Grameen kidz" successfully, Jamie needs all of the following elements to come together EXCEPT
Options
- boundary
- recruitment
- intention
- exchange
Question No. 40 Marks - 10
Which of the following is not a recognised type of plan?
Options
- Business
- Succession
- Ad hoc
- Financial