Family Business Management

 

Assignment A

1     What are the various sources of power in a family business?

2     Identify the issues associated with Succession in a Family

3     Explain the concept of Corporate Governance and state hurdles in effective governance in a family business

4     State different models in Family Business?    

5     State behavioural issues in closely held & family owned business & managed business

6     What do you understand by capital structure? Is there any need to plan the Capital Structure? If so why?    

7     How do you manage and resolve conflicts among family members?

8     What do you mean by family business? State their advantages and disadvantages.    

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. 

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 B
Case Detail: Case Study   There is  a company called Ferro villa furniture which is run by three brothers called as Ram, Raman and Ratan. The three brothers are barely speaking to each other. Communication through phone is about all they have to say. It has not always been like this. For more than 30 years, Ram, Raman, and Ratan have a successful manufacturing business founded by their father. For most of that time, they had gotten along rather well. They have had their differences and arguments, but important decision was thrashed out until consensus was reached.     Each brother has two children in the business. Ram's oldest son manages the plant, Raman's oldest daughter keeps books and Ratan's oldest son is rising outside salesman. The young, children are learning the ropes in lower-level positions. The Problem? Compensation. Each brother feels that these own children are underpaid and that some of his nieces and nephews are overpaid. After violent arguments, the three brothers just quit talking while each continued to smolder. The six younger generation cousins are still on speaking terms, however. Despite the difference that exists among them, they manage to get along with one another. They range in age from 40 down to 25.    
1.     The business is in a slump but not yet in danger. Because the brothers are not talking, important business decisions are being postponed. The Family is stuck. What can be done?

                  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

Ans- Approximately one-third      

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
Ans- 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 "Grameenkidz" 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 "Grameenkidz" 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

Assignment C
Question No: 1 
 The golden rules for setting up corporate governance are    
Fairness 

Education 

Flexibility 

All the above 

    
Question No: 2 
 Internal issues facing Indian family business are    
staff recruitment 

market condition 

compettion 

Government policy 

    
Question No: 3 Solve by www.solvezone.in
 The three circle model of family business consists of    
Ownership 

Family 

Business 

All the above 

Question No: 4 
 Most Family organisations do not have plan for handing the power to the next generation, leading to great political conflicts and divisions and this is called a    
Power Handling 

Succession Planning 

Overly Conservative 

Coping approach 

Question No: 5 
 Family business has a unique set of problem because    
the success of family and success of a business are based on different criteria 

family members have different goals 

family members usually prefer to work for a large corporation 

all of the above 

Question No: 6 
 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
a family council 

equitable distribution 

an advisory board 

all of the above 

Question No: 7 
 Which of the following influences organizational culture and thus organizational buyer behaviour
culture 

marketing activities 

organizational values 

All of the above 

Question No: 8 
 Which of the following is not a role played by members of the decision-making unit?    
information gather 

key influencer 

regulator 

user 

Question No: 9 
 The sources of power does not include    
Referent 

Coercive 

Legitimate 

Status 

Question No: 10 
 Which of the following statement is false about the bases of power?    
Regard power comes from a manger's use of positive outcomes for a subordinates performance 

Expert power derives from the mangers technical knowledge 

Information power comes from the control and distribution of information ina organization 

Personal bases of power flow from one’s organizational position 

Question No: 11 
 Individuals such as Albert Einstein, Edwin Land and Steven Jobes lead through which type of power
Legitimate 

Reward 

Expert 

Charismatic 

Question No: 12 
 ______________ avails directions to each and every member to keep them on single track
    
Director 

Risk Taker 

Employee 

Innovator 

Question No: 13 
 ______________ is not capability of an employee having positive attitude    
Focus 

Creativity 

Pessimism 

Confidence 

Question No: 14 
 Which of the following is not recognized type of plan    
Business 

Succession 

Ad hoc 

Financial 

Question No: 15 
 What is a succession plan
Dismissing an employee for a more favourable employee 

A formal process of planning to fill a role that will become vacant 

A vote of no confidence in a board member 

The formal process of acquiring a new staff member 

Question No: 16 
 Family businesses account for what percentage of the businesses in North America?    
Less than five per cent 

Approximately one-third 

Approximately half 

Over 80 per cent 

Question No: 17 
 Family-owned businesses account for what percentage of the nation's employment?    
Five per cent 

Twenty per cent 

Sixty per cent 

Ninety per cent 

Question No: 18 
Family businesses have a unique set of problems because:    
The success of a family and the success of a business are based on different criteria. 

Family members have different goals. 

Family members usually prefer to work for a large corporation. 

All of the above. 

Question No: 19 
 In order for entrepreneurial couples to avoid problems with power and decision making, it is best to:    
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: 20 
 The clothing company Esprit de Corp. experienced financial problems because the owners:    
spent too much money on personal expenses. 

had different management styles. 

did not have the same goals and vision for the company. 

had different personalities. 

Question No: 21  
The percentage of family-owned businesses that are successfully transferred to the second generation is approximately:    
ten percent. 

one-third. 

One quarter. 

ninety percent. 

Question No: 22 
The process of transferring leadership to the next generation is known as:    
power sharing. 

succession. 

natural division of responsibility. 

community property. 

Question No: 23 
 When transferring the ownership of the business, an entrepreneur can do which of the following    
Give ownership to family members as a gift 

Sell ownership to family members 

Transfer ownership while still alive 

All of the above 

Question No: 24 
 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:    
a family council. 

equitable distribution. 

an advisory board. 

all of the above. 

Question No: 25 
 In a business plan, the succession plan becomes more of a concern for bankers and investors:    
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: 26 
 The conclusion of the business plan will identify the:    
feasibility of the business. 

purpose of the business. 

form of organization of the business. 

business suppliers. 

Question No: 27 
 Which of the following might be included in the assumptions made in a business plan?    
A specific site 

A certain dollar amount for start-up costs 

The ability to obtain financing

All of the above. 

Question No: 28 
 The conclusion of a business plan should include:    
all assumptions made while creating the business plan. 

the top two assumptions made while creating the business plan. 

all the assumptions that are critical to the feasibility of the business. 

none of the above. 
Question No: 29 
 The conclusion of a business plan should also include:    
a statement of what assumptions must hold true in order for your feasibility conclusion to hold true. 

a restatement of the break-even analysis. 

the contribution margin for the investors. 

a description of sales promotions. 

Question No: 30 
 The conclusion section of a business plan written for an existing business:    
does not need to include assumptions. 

will include more detail than the business plan written for a new business. 

should include assumptions and the future of the business based on the information in the plan. 

will include the owner's qualifications. 

Question No: 31 
 The Family and Medical Leave Act:    
provides employees with up to 24 weeks of unpaid leave to deal with family matters. 

requires companies with 25 or more employees to provide unpaid leave for family matters. 

requires companies with 50 or more employees to provide unpaid leave for family matters. 

provides employees with up to 12 weeks of paid leave to deal with family matters such as a birth of a child. 

Question No: 32 
 Small firms are often unable to conduct business transactions with:    
wholesalers. 

functional agents. 

producers. 

merchandise brokers. 

Question No: 33 
 Along with finding suppliers, the small business owner is wise to:    
obtain costs for items as well as delivery schedules. 

cultivate excellent working relationships with wholesalers. 

understand supplier minimum order requirements. 

all of the above. 

Question No: 34 
 In order to use the Internet to search for suppliers, an entrepreneur will use:    
the Encyclopedias of Associations. 

a search engine. 

yellow Pages. 

none of the above. 

Question No: 35 
 Intermediaries who buy from producers and take title for the goods are:
wholesalers. 

functional intermediaries. 

merchandise brokers. 

resident buying officers.

Question No: 36 
 Most entrepreneurs find the early years of business ownership very:    
monotonous. 

rewarding. 

frightening. 

stressful. 

Question No: 37 
 As a company grows, the loss of the family atmosphere:    
 
is a relief for most employees.

is often a source of discontent for the company founder. 

doesn't generally impact sales. 

is one reason why many companies succeed. 

Question No: 38 
 The business plan must show consistent, but manageable projected growth because:    
many entrepreneurs fail after expanding too rapidly. 

investors want to see quick growth.

banks are interested in profits, not expenses. 

bankers and investors prefer small companies. 

Question No: 39 
 Many entrepreneurs are reluctant to get into exporting because:    
it's a complicated process. 

they believe the U.S. market is large enough.

getting paid can be difficult. 

all of the above. 

Question No: 40 
 Employees that do not receive overtime pay are called:    
subcontractors.

exempt employees.

supervisors. 

subordinates.