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Chapter 2: Business Models in the Luxury Industry (Family Business to…
Chapter 2: Business Models in the Luxury Industry
Family Business
Oldest and most common type of organization across the world
More than 70% of all companies in some countries
More than 50% of total shares are under control of family members from one family or passed down from generation to another
Development cycle of Family Business
Initial Phase
All dimensions concentrated in one family
Growth Phase
Company grows
Transitions ownership to next generation
Maturity stage
Transitions ownership to next generation
Challenge: Renew and recycle in order for company to continue
Family Business to Conglomerate
Complexity
Complex in terms of governance as emotional and personal relations may come into play
Complications between each other may lead to bitterness, quarrels and legal battles
Difficulty in attracting talents
'Glass ceiling' on upper level positions as topmost spots is usually occupied by family members
Informal Nature
Management training is usually informal, learned through observation with ad-hoc decision making
Poor Succession Plans
Capable offspring may not want to join the company and incapable family members appointed may destroy company's value
No focus on attracting managerial talent succession
Competitive Advantage
Strategic
Common shared values defined by family and not shareholders
Strong commitment and loyalty
Emphasis on long-term creation of value instead of quarterly gains
Organization and Operation
Flexible and responsive decision making
Homogeneity in internal culture
Partnerships with suppliers
Financial
Not answerable to shareholders for every quarter
Decision can be consensus based and not in a hurry to show increases
Moving ahead
Globalization and competition
Increasing diversity of consumers
Family Houses
Incorporate outsides into existing business model to develop strong management
Protect brand DNA
Alternative funding to compete globally
Conglomerates
Retain heritage and tradition bought in by family-owned
Balance long-term brand focus and short-term sales growth targets