Business Strategies of Filipino Entrepreneur by qcv20507

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									“ A Family Business: Applying Strategic
    Management to Family Business “
Family businesses merit special attention because
they are especially complex, definitely more so than a
“regular” enterprise owned by public shareholders.
The reason for this is that in family firms there is an
added dimension of real relationships—between
parents and children, brothers and sisters, husbands
and wives, cousins, in-laws, grandparents, etc. In all
or most of these, love or affection is involved. In
other words, the people who own and run the
business are bound together by ties that go beyond a
mere shared desire for profit.

      Family firms can address this dilemma by
         implementing the following steps:

•Acknowledging and accepting the difference between
corporate ownership and professional management
•Establishing separate processes and structures for dealing
with purely family issues and purely business issues
•Professionalizing the business by delegating management
tasks to qualified family and nonfamily professional
managers who can make logical and unbiased decisions
•After these three steps have been taken, taking the final and
most important step, which is to introduce Strategic
Management as the process for managing the organization.

We often use the term “family business” without having a clear
definition of just what the term really means. There is actually
considerable definitional confusion concerning the term family
business. While coming up with such a definition is more difficult
than it might at first seem, it would be very useful for a number of
reasons. For example, the question of what defines family business
succession and what distinguishes it from management succession,
leadership succession or executive succession will be very critical to
determining the basis for successful or effective family business

Given estimates that in the Philippines close to 100 per cent of all
business establishments are either family owned and/or family
controlled, this definition question demands much more attention
than it has received to date.

The definition of a family business has been further confounded because of
confusion with two variables. Family business is often subsumed within the
general area of entrepreneurship. However, the two concepts are entirely
different. A family business may or may not be headed by an entrepreneur.
Entrepreneurship has been defined as a demonstrated willingness to initiate
risky and innovative actions which are not a necessary characteristic or value
in a family business.

A second variable that confounds the defining of family business is that of
size. Family business is often assumed to be synonymous with small business.
However, any survey will show that in the Philippines practically all the largest
business entities are family businesses.

 The economic landscape of most countries, including the Philippines,
remains and will continue to remain dominated by family firms. Therefore, it is
not surprising that management practitioners and scholars have begun to
realize the importance of family business studies. However, a visit to the
management section of any library and bookstore will confirm that the literature
on family enterprise is relatively sparse compared to other major management

 There are currently no dominant theories of the family firm unlike in the
fields of marketing management or strategy. For example, there continues to be
a controversy over the definition of a family business.

 “A business firm may be considered a family business to the extent that
its ownership and management are concentrated within a family unit, and to
the extent its members strive to achieve, maintain and/or increase intra-
organizational based relatedness.”

 Unfortunately, researchers have had problems making any of precise
definitions. For example, does family ownership require 100% ownership,
controlling ownership or effective control? Does governance by the family
suffice or is management a necessary condition? Is a substantially concrete
possibility of succession within the family necessary or is the possibility of
such occurrence enough?         Researchers following this approach have
proposed a wide variety of definitions.

Proposition 1: A business firm may be considered a family business to the extent that its
ownership and management are concentrated within a family unit.

Proposition 2: A business firm may be considered a family business to the extent that its
members strive to achieve, maintain, and/or increase intraorganizational family based

Proposition 3: A business firm may be considered a family business to the extent that its
ownership and management are concentrated within a family unit, and to the extent its
members strive to achieve, maintain and/or increase intraorganizational family based

The Litz definition of a family business, therefore, incorporates three broad issues: the
extent of ownership and or management, the degree of family involvement’ and the
availability of family members for generational transfer.

 Family controlled enterprises drove the economic development process
in the early phases of the industrialization age as evidenced by the success
of the pioneering activities of the Vanderbilts, Rockefellers, Astors,
Carnegies and Fords of the United States; and the Rothschilds, Zegnas,
Heinekens and Henkels of Europe.

 Hongkong was literally transformed from a fishing village into an
international entrepot by the noble houses of the” taipans”, the Jardines and
Hutchisons. Certainly in the Philippines, all the major businesses today are
family-based such as the Ayala, Lopez, Aboitiz, Cojuangco, Sy, and
Gokongwei families.

Utilizing the framework of strategic
management in the management of family
business firms can, therefore, make Filipino
firms globally competitive, and , in turn, break
the cycle of poverty that has become the tragic
trap for millions of Filipino families.

There is a misunderstanding, even among professional
managers, of the real meaning of strategic
management. Most businessmen believe that this is
the same as strategic planning, when in fact strategic
planning is merely one of the tasks included within the
larger framework of strategic management. The first
thing that needs to be done in introducing strategic
management to any corporation, especially family
firms, is to clarify its real meaning.

Strategic Management
 1. Forming a strategic vision of where the
    organization is headed.
 2. Setting Objectives
 3. Crafting a strategy to achieve the desired
 4. Implementing and executing the chosen
    strategy efficiently and effectively.
 5. Evaluating performance and initiating
    corrective adjustments in vision, long-term
    direction, objectives, strategy or execution
    in light of actual experience, changing
    conditions , new ideas and new
     Strategic Management
    Task 1          Task 2        Task 3           Task 4            Task 5

  Developing a                    Crafting a
                    Setting                      Implementing     Performance,
Strategic Vision                  Strategy to
                   Objectives                    and Executing   Monitoring New
 And Business                      Achieve
                                                  the Strategy   Developments,
    Mission                     the Objectives                    and Initiating

                                  Improve/        Improve/          Recycle to
    Revise           Revise
                                   Change          Change          Tasks 1,2,3
  as Needed        as Needed
                                 as Needed       as Needed              or
                                                                   4 as Needed

             Basic Concept:
 Task 2

             Objectives are an
             organization’s performance
             targets – the results and
             outcomes it wants to achieve.
             They function as yardsticks for
             tracking an organization’s
             performance and progress.

 Task 2
             Relate to outcomes that strengthen
             an organization’s overall business
Objectives   position and competitive vitality.


             Relate to the financial performance
             targets management has established
             for the organization to achieve.

                 Basic Concept:
  Task 3

  Crafting a
  Strategy to
                 A company’s Strategy
the Objectives   consists of the competitive
                 efforts and business
                 approaches that managers
                 employ to please customer,
                 compete successfully and
                 achieve organizational

                 Strategy is both proactive (intended and deliberate)
                 and reactive (adaptive):

  Task 3

  Crafting a
  Strategy to
   Achieve                                   PLANNED STRATEGY
the Objectives

                 Know-how,Resource                                Actual
                   Strengths and                                  Company
                  Weaknesses, and

                                      Adaptive reactions to
                                      changing circumstances

                                              REACTIVE STRATEGY

      Who performs the five tasks of

An organization’s chief executive officer, as captain of the ship,
is the most visible and important strategy manager.
The title of CEO carries with it the mantles of chief direction
setter, chief objective setter, chief strategy maker, and chief
strategy implementer for the total enterprise. Ultimate
responsibility for leading the tasks of forming, implementing, and
executing a strategic plan for the whole organization rests with
the CEO, even though other senior managers normally have
significant leadership roles also.
What the CEO views as strategically important usually is
reflected in the company’s strategy, and the CEO customarily
puts a personal stamp of approval on big strategic decisions and

1.   Provide better guidance to the entire organization on the
     crucial point of “what it is we are trying to do,”
2.   Making managers and organizational members more alert
     to new opportunities and threatening developments,
3.   Help unify the organization,
4.   Creating a more proactive management posture,
5.   Promoting the development of a constantly evolving
     business model that will produce sustained bottom-line
     success for the enterprise, and
6.   Providing managers with a rationale for evaluating
     competing budget requests – a rationale that argues
     strongly for steering resources into strategy-supportive,
     results-producing areas.
             Three Elements of a

•   Coming up with a mission statement that defines
    what business the company is presently in and
    conveys the essence of “who we are, what we do, and
    where we are now.”

•   Using the mission statement as a basis for deciding on
    a long-term course, making choices about “where we
    are going,” and charting a strategic path for the
    company to pursue.

•   Communicating the strategic vision in clear, exciting
    terms that arouse organization wide commitment.
Strategy-Making Pyramid

                           Responsibility of
                           managers                           Strategy

                                                        Two-Way Influence

            Responsibility of
            heads of major                              Functional Strategies
                                                       (R & D, manufacturing,
            functional activities                        marketing finance,
            within a business                          human resources, etc.)

                                                       Two-Way Influence
    Responsibility of
    plant managers,
    geographic unit                                    Operating Strategies
    managers, and                                 (regions and districts, plants,
    lower-level                                departments within functional areas)

    Management’s Direction – Setting
          Tasks (Key Points)

•   Charting a company’s future strategic path,
•   Setting objectives, and
•   Crafting a strategy.

    Management’s Direction – Setting
          Tasks (Key Points)

•   Charting a company’s future strategic path,
    –Management’s views and conclusions about the organization’s future
    course, the market position it should try to occupy, and the business
    activities to be pursued constitute a strategic vision for the company.
    –A strategic vision indicates management’s aspirations for the
    organization, providing a panoramic view of “what businesses we want to
    be in, where we are headed, and the kind of company we are trying to
    –Effective visions are clear, challenging and inspiring; they prepare a firm
    for the future, and they make sense in the marketplace.
    –A well-conceived, well-worded mission/vision statement helps managers
    manage – serving as a beacon of the enterprise’s long-term direction,
    helping channel organizational efforts and strategic initiatives along the
    path management has committed to following, building a strong sense of
    organizational identity and purpose, and creating employee buy-in.
    Management’s Direction – Setting
          Tasks (Key Points)

•   Charting a company’s future strategic path,
•   Setting objectives,
    –Establish strategic and financial objectives for the
    organization to achieve.
    –Objectives convert the mission statement and strategic
    vision into specific performance targets.
    –The agreed-on objectives need to spell out precisely how
    much by when, and they need to require a significant amount
    of organizational stretch.
    –Objectives are needed at all organizational levels.

    Management’s Direction – Setting
          Tasks (Key Points)

•   Charting a company’s future strategic path,
•   Setting objectives, and
•   Crafting a strategy.
     –The third direction-setting step entails crafting a strategy to
     achieve the objectives set in each area of the organization.
     –A corporate strategy is needed to achieve corporate-level
     objectives; business strategies are needed to achieve business-
     unit performance objectives; functional strategies are needed to
     achieve the performance targets set for each functional
     department; and operating-level strategies are needed to
     achieve the objectives set in each operating and geographic unit.
     –Lower-level strategies should contribute to the achievement of
     higher-level, company wide objectives.
Thank you!

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