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Purpose - The research aim to identify the family business process in Italy. The purpose of this study is to recognize which are the successful points, the key issues and the Value Chain (Michael Porter 1985) of a Family Business, underline the comparison between family business in the North and South of Italy.
Methodology - The research will be led in two different phases. The first one will include a closed questionnaires /surveys based on the recommendations in prior research on the topic (see literature review), from which a number of five or seven firms will be choose for the second phase of research. The second part will consist in face to face interview with owners/managers from different part of Italy, in order to underline the family business differences, successful point and key issues between these two parts of the country and if any form of generic value chain was used.
Hypothesis - The successful Family Business in Italy will show a variety of strategies, how the small or medium company used to expand the business and make it successful and in particular the value chain of a successful Family Business.
Value - This study will give an important contribute for a specific literature branch, such as Successful Family Business and underline the differences that might exist in the same country. Moreover, it will show how different entrepreneurs first and the families later have built the meaningful way for the company. This will provides useful information for future family start up and also for the family business that want to succeed in the market where they are playing.
Family Business, Successful, Italy, value chain, Porter, key issue, successful factors, comparison, North and South, small and medium business, differences.
The numbers of family business in Italy are roughly 4,285 which are generally clisified in small and medium company. The small companies firm are usually with less than 250 employee and 50 million Euro's turnover; despite the medium-sized that are a range of employee between 251 and 500 and totalling Euro's turnover of 50 to 250 million. (L'Osservatorio AIdAF-Unicredit-Bocconi). "If organizations are to achieve competitive advantage by delivering value to customers, managers need to understand which activities they undertake are especially important in creating that value and which not." (Fundamentals of Strategy 2009) The Value Chain (M.Porter 1985) can be an important instrument that can help the company to understand this, because it described the categories of activities within and around an organization, which together create a product or service. With family business literature ( J. Poza,2009; D.Kenyon-Rouvinez and J.L. Ward, 2005) the value chain in a sector deemed to be of great importance, it will offer a benefit to the future and existing family business.
The objectives and purpose of the project
The purpose and objective of the research is to recognize which are the successful points, the key issues and the Value Chain (Michael Porter 1985) of a Family Business, underline the comparison between family business in the North and South of Italy, in order to add to the current literature on family business and Italian sector.
The justification of the project
The real problem for the Italian family businesses, which have been exacerbated by the crisis period, is the lack of venture capital. By the end of 2007, the family businesses tended to use more bank debt compares to others companies and in 2008 the use of debt is further increased. This emphasizes the huge gap that exists between successful and unsuccessful family business and it will highlight specific challenges and issues that are present in the country (compare the two different situations between north and South). Additionally the family business will allow new investors or entrepreneurs to have an overview on different methods of being successful, in order to allowing them to follow and differentiate their future strategies.
The research question
By using the value chain model which one are the differences and secrets of a successful family business in the North and South of Italy?
In order to answer the above question it is necessary to look into the following:
H - The successful Family Business in Italy will show a variety of strategies, how small or medium company used to expand the business and make it successful and in particular the value chain of a successful Family Business.
We will use the value chain model by Porter to base the interviews questions. This will be also elaborate in the literature review and research design sections.
As the study will involve looking at small to medium size of SFB (successful family business), in order to keep the study in focus a definition needs to be draw. Categorize these companies by various quantitative criteria with the purpose to define them. Thus SFM refers to firms in any sectors that do not exceed a particular size or level. Indicators for instance market position, number of employees, turnover, profits or total capital can be used in assessing and differentiating FB from other firms. The numbers of family business in Italy are roughly 4,285 which are generally clisified in small and medium company. The small companies firm are usually with less than 250 employee and 50 million Euro's turnover; despite the medium-sized that are a range of employee between 251 and 500 and totalling Euro's turnover of 50 to 250 million. (L'Osservatorio AIdAF-Unicredit-Bocconi).
Recent studies try to indicate different points for identify a successful path for families business. Many authors have written about the " uniqueness" ( J. Poza, 2009 ), "family bussiness special challenges" , "the fundamental dilemma" (D.Kenyon-Rouvinez and J.L. Ward, 2005) "organization's culture" (Fundamentals of Strategy 2009). In order for this study to be significant to the topic, they have to be taken into account and link together. It is not realistic to try to correct them all, thus the factors that affect this study need to be identified and taken into consideration, in order to build on the strengths for a successful family business.
"There are many family companies in Italy and they represent a notable and important contribution to the country's economy. In general family businesses are loyal to the principles and the ideals of the founder, who was more often than not a self-made person. The beautiful thing about this is that in the reality of the family business, even when the founder is no longer present, there remains an enduring sense of respect for what he/she succeeded in achieving." (Foreword by Wanda Ferragamo).
D.Kenyon-Rouvinez and J.L. Ward said that families in business know that in order to succeed, they must address several special challenges:
Responsible and unified ownership.
Moreover they analyzed another important aspect such as the "fundamental dilemma", where they explained that "family business are different from other kinds of business because they combine family and business. Both the family and the business have their own needs and goals; it might be helpful recognize that the result of effective families and the rules of effective businesses can be contradictory." In fact, if we think about in general families are governed by equality, inclusiveness and caring feeling; instead business are governed by meritocracy, selectivity and critical analysis. The two authors argue that these fundamental differences can create some conflict in "decision- making regarding employment, compensation, inheritance, reinvestment, and so on". They propose two different solutions for these dilemmas and point out common values that enhance both the business and the family, which include "trust, integrity, the long-term view, modesty, and work ethic". This can be the first brick for a SFM.
Ernesto J. Poza inside the family business book explain that "what differentiates family business from management-controlled business are often the intentions, values and strategy-influencing interactions of owners who are members of the same family." As a result of this is a "unique blending of family, management, and ownership subsystems to form an idiosyncratic family business system". An important aspect that need to be underlined is due to the aspect express before "the family management-ownership interaction can produce superior competitive advantage or it can be the source of significant vulnerability in the fact of generational or competitive change".
Moreover, they analyzed all of these aspects and the point out which are the uniqueness of a family business, such as:
Ownership control (15% or higher) by two or more members of a family
Strategic influence by family members on the management of the firm, whether by being active in management, by continuing to shape the culture, by serving ad advisor or board members, or by being active shareholders
Concern for family relationships
The dream (or possibility) of continuity across generations.
The two authors with the characteristics above define the essence of the uniqueness, but they identify also the quality of distinctiveness of a family firms, for instance:
The presence of the family
The overlap of family, management and ownership, with its zero-sum (win-lose) propensities, which in the absence of growth of the firm, render family business particularly vulnerable during succession
The unique sources of competitive advantage (like long-term investment horizon) derived from the interaction of family, management, and ownership, especially when family unity is high
The owner's dream of keeping the business in the family (the objective being business continuity from generation to generation).
The are different approach for a FB to be successful, one of this can be the Value Chain, in fact Porter utilized this method for "describes the categories of activities within and around an organization, which together create a product or service" (Fundamentals of Strategy 2009). Porter divided the value chain in Primary Activities which are directly concerned with the creation or delivery of a product or service, for example : inbound logistics, operations, outbound logistics, MKT and Sales and Service. For each of these groups of primary activities he linked with the Support Activities, the purpose of the last mention is to help to improve the effectiveness or efficiency of primary activities, such as: Procurement, technology development, human resource management, firm infrastructure.
" the value chain can help with the analysis of the strategic position of an organization in two different way:
As a generic description of activities that can help managers understand if there is a cluster of activities providing benefit to customers located within particular area of the value chain
in term of the cost and value of activities".
The value chain can definitely help families business to understand where be more focus and with the support of the others theories avoid common mistake.
In order to identify a common path for FB to be successful, the research will have to be conducted in two phases, both involving elements of primary research.
The first phase will require various FB firms ( from North to South of Italy) to fill in a questionnaire, where the owner-manager will be asked to fill in figures such as sales, number of employee, net profit, etc. The research will aim to quantify the successful point, the key issues and referring to the value chain method, classifying which are the most common problems and how they solve it. Moreover, compare all the points mention before between the North and South of the country. This method will allow quantifiable market data to be generated. All these data will then need to be analyzed and categorized in order to be meaningful, thus the following steps will need to performed: data reduction, data display, and data conclusions (Miles and Huberman 1994). The aim of this study, it is to classified into the following categories: common key issues, common problems and application of the value chain method. After the first important phase, on the base of the tree different result the most helpful will be chosen, for the second phase of research.
Phase two will be structured in face-to-face interviews with owner-managers of the selected firms. In order to obtain information on how FB are successful, it is important to do exploratory research to accumulate knowledge on existing literature ( see literature review). Furthermore, the interview will help to avoid stereotype and underline differences on the different way, FB (North and South) manage the business and the different difficulties they come across.
Practical and Ethical issues
In conducting this research a variety of issues will be raised. Firstly since the only source for obtaining information will be the business sector, the owner-managers can be reluctance to give the correct figures because the competitive nature of the business. Moreover, another important aspect identify a comparison between the two part of the country it will be difficult if they use a common path for be successful, because of this it may raise caution resulting in the ineffective interviews.
The above figure demonstrates the project plan.