What Might Succession Be A Critical Point in the Development of the Family Owned-And-Managed SME - Essay Example

What might succession be a critical point in the development of the family owned-and-managed SME? Discuss the strengths and liabilities of family-owned SMEs. Table of Contents Introduction 3 Discussion 3 Strengths of family owned SMEs 3 Liabilities of family owned SMEs 4 Conclusion 4 References 6 Introduction The family owned small and medium sized enterprises are commercial organization that is related by marriage or blood and resolution creation is entirely influenced by several family generations.

It is believed to be oldest system of business organization that has advantages of commitment to quality and focus in long term. It is critical for understanding circumstances that leads to unhealthy and healthy family SME. The prime purpose of the report is to provide vital points for the improvement of family owned SME. Discussion The family owned SME is considered as common and oldest model of economic business organization. There are massive majority of companies from multinational listed and corner shop listed administrations that can be regarded as family owned small and medium sized enterprises (Machado, 2013, p.48). The five critical points that involves at the development of family businesses are social capital, human capital, patient financial capital, low cost of governance and survivability capital.

The inner circle and human capital is considered as first resource and primary element (Millar, 2008, p.81). In the form of external relationships and networking, the valuable social capital has been brought by the family members. The threat of liquidation is lessen by effective family relationships with managers and investors. The firms have opportunity to provide emergency loans and free labour for survivability capital of their family members. Strengths of family owned SMEs In perspective to infrastructure dimension, the strengths of family firms are innovative, informal, entrepreneurial and flexible.

The organizational structure is believed to be effective and simple. This is primarily because the hierarchical position of family owned SME is simple. Family members have better understanding between each other. This enables to family businesses to expand globally. Most of the family owned small and medium sized enterprises are considered to have compact informal training (Basu, 2014, p.55). The mixture of younger and older individuals adds something new to the family business operation. The family members involved in SME are believed to be more committed towards to help business grow and survive.

The employee relations for family businesses are better. Liabilities of family owned SMEs On the other hand, the weaknesses of family SMEs in case of infrastructure dimension are lack of management development, indecisive, confusing, unclear, lack of organizational charts and resistant towards change. This creates lack of objectivity and struggles to separate family and work. There is a risk that family interest can hamper corporate interest (Turner, 2011, p.16). It is believed that some of the family members can be more conformable towards running their business.

This could heavily impact the performance the employees. Furthermore, this results in to lack of budgeting and formal planning for sustainability. Another primary liability of family firms is lack of openness. Most of the family businesses include few outsiders (Cunninghum, 2004, p.45). These outsiders can have more skills and knowledge that could have been implemented in the business process. Conclusion This can be concluded that family based small and medium enterprises is described as communication between family and business with connected and two separate systems.

It becomes difficulty for family members to keep aside family issues out from the business. The uniqueness of family SMEs can be effectively agreed by evaluation of weaknesses and strengths. It is believed to be idiosyncratic and unique organization that is controlled and owned by family members. References Machado, C., 2013. Effective business operation management in small and medium multinational corporations. London: Routledge. Cunninghum, M., 2004. Knowledge management in SMEs. New York: Springer.

Turner, G., 2011. Business operation management. London: Sage. Basu, P., 2014. Small and Medium enterprises. London: Kogan Page. Millar, R., 2008. Doing Business in Global Markets. New Jersey: Pearson.