A family owned business, or a family business for that matter is may be defined as that business that is started and run by members of a given family lineage. It’s started with a vision shared in the family, and employs mainly members of the family, as well as other professionals to manage the business. Generally though, a family business is run mainly to meet the shared objectives of the family, and also for the benefit of the family.
In most cases, family businesses are managed by one of the family members, who may be advised by professionals and other technical advisors but generally, the idea of having a family member at the helm of the company is to ensure that the company is managed for the interest of the members as well as ensuring a smooth succession in the fateful loss of the manager. This ensures that the business core values and shared culture is maintained and retained for the lifetime of the business (Albert,2003).
However, it must also be noted that in this kind of arrangement, appointments of higher leadership positions can still be left to the people not related to the founders of the business, but this will be subject to the key adherence of the values and promises the company has promised to stand for in the particular business niche. In other words, all the positions in business enterprise with this unique form of ownership are not preserved for the family members in the aforesaid generation, but at times the hiring of talent goes beyond family ties as the business grows (Albert,2003).
Pros and cons of family businesses
Pro’s
There are quite a number of advantages that accrue to the ownership of a family business and these include ease of decision making, enterprise customization, retention of control, ownership of profits and the maintenance of family values and interests as explained below.
Decision making
Unlike in a listed company, or a partnership where decision making is a shared issue, a family business decision making process is a simple affair. The management of the business is aware of the command structure and decision making process and therefore decision making is a simple process, which makes it easy for business processes to proceed without the bureaucratic decision (Albert, 2003).
Customization of the enterprise
A business is formed and meant to operate on a particular niche where customers have varied expectations. Like any other thing in the world, customer expectations will chance die to change of certain variables, sometimes favoring the business, exposing it on other times. However, this is not the same or other business arrangements as the presence of several decision makers will out rightly prevent this (Albert,2003).
Profit retention- Most family businesses are normally owned and controlled by the family and by extension; the profits made in these businesses are retained by the owners. This is a major advantage as the profits do not need to be shared with other parties, and after paying the relevant expenses, the owners are left with a substantial amount for their profits.
Control
Since the business is owned and controlled by the family, there is minimal risk of insolvency as there are not many other people who have claims on the business and this is actually the major reason why family businesses remain for years, even centuries in the family circles.
Cons
Funding of this business
It has been a well established fact that most of the people aspiring to start businesses may do so with inadequate capital to fund all its operations. This means the business will be seeking every possible opportunity to expand its capital base for this will assure increased profitability, hence better assurance of maximizing the owners’ wealth (Albert,2003).
Furthermore, providers of capital will be in the need to safeguard the money they have invested in any business trading on different situations. At some points, this will give the business owner a chance to choose between funding the business with string shoe budget of inviting financiers who will settle for a participative position in the enterprise (Albert,2003).
Dynamics of the trading environment
It has been said time and again that all things change, including change itself. Currently, with innovation driving businesses to greater heights, ways in which businesses operate have changed tremendously. Taking example of computers and advanced communication, technology has rendered some ways ineffective. When management of a business remains the same for a considerable period of time, it will be forced to play by the rules of the owner, who is deemed to have the final say on what to do. This means that in different ways, the business enterprise will be outmuscled by its peers risking irrelevance in the market if no technology is embraced (Albert, 2003).
New ideas
Ideas are the heartbeat of a business, and the beauty of ideas comes from brainstorming. Contrary to the statement, it has been a habit of many leaders not to listen to other stakeholders like employees and financiers due to different reasons. This has the effect of exposing the business since one person’s ideas are not sufficient to run a business entity in this information age (Albert, 2003).
Dangote Group
Company profile
The Dangote group is a conglomerate of businesses spanning different industries and owes its humble beginning from a down to earth entrepreneur Alhaji Aliko Dangote, a fifty five year old man born in rural Nigeria. The group is a diversified and fully integrated conglomerate that has an annual turnover of more than N450 Billion (US $3 billion). The group has quite a number of interests in Nigeria and all across Africa. The major investments are mainly in cement, sugar pasta, beverages and real estate as well as salt among others. The company also has quite a number of oil projects coming up. Others are oil and gas, telecommunications, fertilizers and steel sector.
The company’s main goal however is to provide local and value added products and services that are designed to meet the needs of the populace. The groups major aim is to construct and build the local capacity for manufacturing so as to ensure that the country gets self sufficient in the production of local commodities.
At the helm of the company management is Alico Dangote himself, the founder, chairman, president and CEO of the Dangote group. He oversees the global strategy of the business as well as offering leadership to the business. The vice president is his kin, Sani Dangote, a clear indication that theirs is a close knit family affair. Other executive members of the management include Abdu Dantata, group executive director, Joseph Makoju who is a special; advisor to the president and CEO.These people have worked together to ensure that the company grows to become the leading company in the continent.
Macro environment in Nigeria
In analyzing the macro environment of Nigeria, we shall explore the Political, Economic, social and technological environment.
Economic
The group (Dankote group) has gone against the odds to thrive in a very challenging environment. In Nigeria, an oil rich West African oil producing and a member of OPEC, poverty has been the narrative in most of the households due to mismanagement of resources. Massive corruption has been behind the unequal distribution of resources, making the gap between rich and the poor widen tremendously. Oil has been one of the most coveted assets since nineteen century, but Nigeria has mismanaged this blessing (Albert, 2003.)
Nigeria remains one of the Africa’s populous nations with almost one hundred and twenty million people, providing firms with enviable markets. Other macroeconomic storms like inflation have stormed the country consistently, leaving businesses vulnerable to both internal and external shocks. It has against this background that Dankote has defied the odds to thrive and built an impeccable background towards becoming a household name globally, and locally (Mitchell,2010)..
Political
There has been a mixture of stable and unstable governments in the course of the business life cyle.The ability if the government to tame insecurity, provision of public goods (transport medium like roads and others) has been a nightmare for most businesses. Policy formulation has been another area where the government has failed to stamp its authority hence failing the citizens. It has been noted that Nigerian government does not protect internal investors adequately from importers through robust regulation, making entrepreneurship among the willing a nightmare (Mitchell,2010).
Economic condition
Economic condition of Nigeria has not been enviable for the most part of time. Economic growth has stagnated despite the vast natural resources ant the disposal of the citizens and the government. Misuse of resources meant for expanding the entrepreneurial base of the nation has killed the business spark among many.
Social conditions
Different aspects emanating from religion has been hindering business growth. The eruption of violence between Christian and the Muslim communities have led to bloodshed, as well as destabilizing the relations among the citizens. The famous book Haram, a terrorist group has made people flee in such for secure areas. Channeling of resources to curb clashes between communities has cost the country opportunity to develop the economy(Levefre,2004).
Technological conditions.
This has been one of the most commendable areas in the Nigerian economy. Most of the people have adopted technology; with social networks like face book topping the list. This has provided businesses with a lifeline as well as an interaction platform (Mitchell,2010).
SWOT analysis of Dangote group
Strengths
The company success is premised on a number of strengths that include a strong financial base, customer and political goodwill, as well as excellent management team.
Strong financial base
Having been successful in business has been helpful in ensuring that the company is able to obtain financial support from all financiers all over the world. This has ensured that the company is not constrained in terms of capital and has managed to invest in almost all sectors that they have been interested.
Customer and political goodwill
As a result of the many years of operations, coupled with great corporate social responsibility policies, the company’s products are widely adopted all across Africa, which has contributed immensely to the group’s growth and profitability.
Excellent management team
The management team at the company has great experience in their various areas of operations and this has come in handy in ensuring that the company makes the most viable decisions in the circumstances.
Weaknesses
Just like any other businesses operating in Nigeria and other parts of Africa, the company faces strong competition from other manufactures and also market share is eroded daily due to the emergence of other players in the industry.
Opportunities
Ever rising population provides ballooning market for the produce.
Emergence of increased funding institutions like banks gives the company opportunities of growth.
Threats.
Exposure to different economic shocks due to the expansion to other nation’s e.g Zimbabwe
Growth of terrorism poses a great danger to the operations of the group, as this has significant impact on the companies operating costs.
System model theory of family businesses
The system theory of business postulates that the business beginning will be traced from one founder who introduces his close people to run the firm for the purposes of realizing its potential. This will involve ensuring that any person who retires is potentially replaced by other competent persons for the position. This will form successive planning, and the company’s strategy will be safeguarded in the short term and beyond (Levefre,2004).
As explained before, the founder and CEO of the company, one Alico Dangote has groomed other members of his family so as to ensure that in his demise, there will be no succession vacuum. This is evidenced by having his close kin as his Vice president. There are other members of his family still in the business and would handily fit into the business in the event that the company’s current leadership retires from the business.
Steward theory
This theory revolves around continuity of the business as a going concern. It states that in the course of business, high growth rate will make management complex, making the entrepreneurs to look for talent outside the family. This ideally will separate the business from its founders, since its vast coverage requires more managers (Levefre,2004).
The Dangote group has implemented this theory by hiring professionals from outside the family. A close look at the company directors will reveal at least three directors of Asian origin and others from other countries other than Nigeria. This means that the management of the company recognizes the need to have outside expertise, which has proven worthwhile in the success of the business.
Methods and collection
In carrying out the above analysis, research has concentrated on the group’s website. Data has also been collected from the Nigerian Bureau of statistics as well as secondary literature. This has been helpful in providing the needed information for the compilation of this paper.
Recommendation
Dangote group has been a successful business due to the effective blending strong planning acumen and hiring the best talents in the global workforce. This has saw the business grow from a small business owned by one person to a conglomerate that has varying owners through acquisition of stakes, meaning it’s more of a global brand than family business.
The future holds great things from this company, and my prediction is that the business will grow from strength to strength earning global recognition. The wide expansion of the business in the recent days means it is in the expansionary stage, with turnover almost growing exponentially.
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