Week 2

Question 1

What makes family business different

Answer 1

The presence of the family

The overlap of family, ownership and management.

The owner’s dream to keep the business in the family

The competitive advantage derived from the interaction of family, management, and ownership

Question 2

Three generation rule

Answer 2

Most family businesses don’t survive the third generation.

Question 3

Three circle model

Answer 3

1 Family members

• Do not work or own the business
• May feel like they still have say or influence with respect to the business

2 Non-family managers/ employees
- Can have hard feeling towards family member employees/ managers

3 External Investors/ Other Shareholders

• Rare to see this in a family business
• Often have differing expectations and goals than family owners

4 Family employees

• Likely more loyal and more committed
• may aspire to become an owner

5 Family-owner or shareholder

• may not be a committed and engaged owner
• may have inherited shares and know nothing about the business

6 Owner manager

• non-family
• expectations may not be in-line with those of the family

7 Family-owner manager

• key to long-term success
• this is the ideal situation to encourage stewardship of the family business