Family Business

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GAC008 Assessment Event 4: Academic Research Essay

Advantages and Disadvantages: Doing Business

Student Name: Aaron Student ID#: Teacher: Rose Hyson Due Date: 17 May 2013 Word Count: 1,032

GAC008 AE#4

Aaron

Question: The benefits of running a family business far outweigh the disadvantages. Relate this to your personal experience. Use specific examples and provide appropriate evidence to support your answer. Family business occupies a large part of business structure and earns an estimated 70% to 90% of global GDP annually (Bryant, 2007). However, it is facing some vital challenges in recent years such as: aging time, the gender issues, vast quantities of expenses, deficient innovations and scale. While there are some difficulties, the advantages of family business are still distinct. Some positive aspects include professionalism, the trust of employees and the sustainable features of family business. The challenges are vital for family business. One of these problems is aging time. The American Family Business Survey made by MassMutual Financial group demonstrated that “within 10 years, 40.3% of business owners want to retire or make a total transition. And fewer than half of them want to retire within 5 years” (Glavin 2007, 4). Aging time brings not only the dramatic decrease among high position leaders as they become too old to work but also the decrease of stability of family business interior employment structure. That may form a negative effect on family business’s further development. Another problem is related to demographic. In 2002, only 24% of family business leaders were women (Glavin 2007, 5). That leads to a social problem – sexism, which is wildly concentrated worldwide. Businesses not only need men, but also need women to adjust the inner relationships and communications within the company. Also, the statistic

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GAC008 AE#4

Aaron

demonstrates the positive increase in women involved in family business. Compared with 2002, there were only 10% of women on the top position in family businesses (Glavin 2007, 5).The gender discrimination is decreasing now, and may generate much more equality in the work circumstance. Not only demographic problems, but commercial problems are also cardinal to family business. These issues are usually related to capital and maintenance fee. Family business maintenance costs are extremely heavy burdens. The survey made by MassMutual also finds that there are 8 aspects which are potential risks for businesses functions. They are “labor costs, health care costs, finding qualified employees, foreign competition, labor union demands, domestic competition, oil prices and availability of credit from lenders” (Glavin 2007, 5). These risks are all connected to human resource management and trade relationship. In addition, this list illustrates that maintenance costs are central to every business and occupies a large part of expenditure. The commercial problems lead to another significant problem – innovation. According to PWC’s survey, “62% of respondents cited the need to continue to innovate, and 37% anticipated the need to invest in new technology. Companies in Italy, Turkey, and South Korea were particularly concerned about innovation” (PWC 2012, 8). Family business still needs some innovations to advance their current products or services in order to progress with the contemporary changing society. They need to change, in order to succeed. However, modernization and innovation is occurring worldwide, and should be considered carefully by thousands of businesses.

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GAC008 AE#4

Aaron

Scale is another problem which interacts with innovation. The survey made by PWC demonstrated that even if family business is developed well, is still very difficult to develop further. The reason is due to the limited size of family business, which will lead to future problems hazardous time if there is no significant change. Even though it...
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