Specificity Of Family Entrepreneurship

Family business is considered a very important area of small business. Namely, we find it in different forms (in terms of its size, field of activity, number and structure of employees, legal organizational forms, etc.). Family business is a term that collectively describes the involvement of families in the pursuit of certain economic activities for the purpose of profit, regardless of the institutional aspect (enterprise, craft, cooperative, etc.) through which the activity is conducted, managed and controlled (Ora, Šustić, 2009).

Concept and types of family business

Namely, an important area of ​​small business is family entrepreneurship, and there is a lack of papers in the Bosnian literature explaining the role of family entrepreneurship. This form of entrepreneurship is known for reasons for starting a family business, as well as for its many sociological and psychological characteristics. Also, family entrepreneurship creates a tradition and is one of the simplest ways of self-employment with relatively low initial investment costs. To a large extent, successful family entrepreneurship can have a positive impact on the economic development of the micro environment in which a particular business operates. Modern business, the process of globalization, and day-to-day changes and advances in technology are leading to great competition in the business world, and it is becoming increasingly difficult for businesses to gain a competitive advantage. Also, many countries in the modern world have accepted entrepreneurship as a leading force that can contribute to the prosperity of the economic system and positively affect the competitiveness of each country. These principles are guided by many European Union countries and other countries of the modern world (Braut-Filipović, 2017).

Namely, the modern world is motivated by ideas and entrepreneurship has been understood as a leading activity towards innovation. The SME sector provides opportunities to implement modern solutions guided by examples of successful practices. Furthermore, the development of family entrepreneurship also affects the reduction of major microeconomic economic problems of a particular country. Here, particular emphasis is placed on unemployment. Unemployment today is one of the biggest problems in Bosnia and Herzegovina, which significantly affects the economic growth and development of the country and slows down economic progress. There are many factors that influence unemployment, and education is one of the most important. Specifically, the level of education can significantly affect the ease of getting a job and keeping a job (Rocco, 2000).

Therefore, young people who graduate from high school are confronted with the question of whether they should continue their education. enter the higher education system or look for a job. Also, the small business in Bosnia and Herzegovina includes more than 78,000 companies, accounting for 99% of the registered business entities in Bosnia and Herzegovina. If we look at the statistics of unemployed persons, according to the level of education for Bosnia and Herzegovina, they show a higher number of unemployed persons with secondary education, which results from the fact that the majority Bosnia and Herzegovina has completed secondary education, although this trend is gradually changing.

Specifically, education is not only a daily practice, it is also considered a scientific category and covers categories such as economics, technology, sociology, psychology and the like. As emphasized above, the paper emphasizes the need to create an educational system that meets the needs of tourism. Namely, the main peculiarity of such education lies in the fact that at the heart of the tourist educational process is a service-providing person who is educated for direct action. Also, a properly directed activity of a person or a user of the educational process can play a very important role in education and upbringing in relation to behavior and acting in the process and outside the work process as well as in his / her free time.

As mentioned above, this form of entrepreneurship has a very positive impact on the level of employment and increases the efficiency, quality and competitiveness of the economic system. It also has a positive impact on export promotion as well as globalization processes themselves. (Ora, Šustić, 2009)

Namely, the Bosnian economy is known for its large and numerous problems. These problems are most often privatization problems and are related to lack of innovation, technical support, insufficient government tax support, investment in R&D, investment in innovation and similarly. That is why it is often emphasized that the simplest way of self-employment with low start-up costs is family-owned entrepreneurship.

„There are also numerous positive reasons for its founding as a development of the micro environment, as stated above. Companies today face numerous problems in their operations, and the consequences are much more dangerous and greater than in previous years. The consequences are numerous, such as a decline in key business performance indicators, such as the rate of return, the number of innovations, and satisfaction customers and employees, the rate of fluctuation. The work will outline the advantages and disadvantages of family business, as well as the opportunities and potential for development“ (Rocco, F.2000, page: 57.).

Advantages and disadvantages of family entrepreneurship

Family entrepreneurship, like any other enterprise, has its advantages and disadvantages, but there are numerous opportunities for development. „Considering that family entrepreneurship is a job that is the simplest, cheapest and most effective way of self-employment, a big advantage is visible. Also, this form of employment is accessible to all strata of the population and it can be seen that any family can be engaged in family entrepreneurship“ (Aminoff, P., Karsma, S. 2006, page: 149.).

Among the other benefits of family entrepreneurship are the following:

  • ⎯ family business provides great transparency in business; is a more efficient and simpler organization,
  • ⎯ Family entrepreneurship creates a tradition that contributes to greater connection and mutual trust among family members
  • ⎯ Family entrepreneurship represents relatively low investment and lower fixed costs as well as lower employee costs,
  • ⎯ family entrepreneurship also contributes to a healthy competitive environment, creates a comfortable working atmosphere and contributes to improved work enthusiasm within the work environment,
  • ⎯ family business provides great transparency in business; is a more efficient and simpler organization,
  • ⎯ in healthy economic conditions, each country has a particular interest in encouraging and supporting family entrepreneurship through tax breaks,
  • ⎯ the possibility of more favorable loans, since each new family business has a positive impact on the environment as a whole, enabling the development of the micro-environment as well as the remediation of certain macroeconomic problems in a particular country,
  • ⎯ it enables a simpler and more expansive arrangement of individuals with adequate jobs and the money earned remains within the family which further enables investment in family business and business expansion.
  • As for the disadvantages of family entrepreneurship, it is evident that they are less than the benefits of entrepreneurship itself, but the disadvantages can sometimes be crucial and thus endanger the entire business.

Possible disadvantages of a family business are:

  • ⎯ very high risk of family business venture,
  • ⎯ possible conflicts among family members, inability to be objective and equal treatment of all participants in the family business, the negative consequences of nepotism, a lesser degree of personal responsibility,
  • ⎯ low level of state concern for the fate of family entrepreneurship,
  • ⎯ inability to self-finance development as well as ongoing operations and use of various benefits of economies of scale, a pronounced pursuit of business security, thereby reducing entry into riskier businesses that may lead to business development,
  • ⎯ the possibility of major business mistakes that are extremely difficult to repair in a small business
  • ⎯ high level of competition in the target market, which requires investing in innovations or adjusting to lower market prices,
  • ⎯ inability to influence external factors related to government policy, taxes, business legislation, entrepreneurial infrastructure and more (Rocco, 2000).

When looking at overall management, it is conceptualized on the enterprise paradigm. This company is a closed system where the basic principles are efficiency and control. Management has undergone a number of changes in the late 20th century, driven by the development of information technology and networking, and have had a drastic impact on the running and management of businesses. In humans, the notion of a paperless and humans-free enterprise has emerged, that is, computer-integrated manufacturing and computer-integrated enterprise. The basic management challenges of today's organizations are reflected in achieving and maintaining competitiveness and taking responsibility for 'global' engagement in developing the necessary knowledge and skills necessary for professional performance and business success in the global cultural - plural market. Communication must always be defined by the consumer, and when formulating the message it is important how the message will be conveyed and how the message will be communicated. While information messages provide consumers with information about the features and characteristics of a product and service, transformational messages focus on image and benefits.

Creating some of these messages can be, and often is, creativity a key factor in the success of communication. In it, top management from the command and control center will direct him towards the future. However, such a vision was not realized because employees are the main factors in the flexibility and creativity of an enterprise. Also, effective integration is possible by transitioning from a steep hierarchy to a shallow network in which there will be a certain hierarchy, but the mode of operation will be different in terms of qualitative. Managers' success in global business conditions therefore depends on their adaptability and openness to values, behaviors, opinions and attitudes. Management is the process of designing and maintaining an environment in which individuals, working together in groups, effectively achieve their chosen goals. (Ora, Šustić, 2009)

Decision making and conflicts in family businesses

„Successful business operations of every company, including family, is almost impossible without a proper decision-making process and good management that enables the subject to respond in new situations and leads him to achieve the set goals“ (Schwabe, I. 2016, page: 251.).

Several definitions of decision-making can be found in the literature, but it is simplest to explain this as a process that involves choosing between two or more possible actions and implementing the selected action in order to achieve a predetermined goal. It is important to note that decision-making is a complex process that is influenced by many factors, which ultimately depend on the final decision, and often there are different disagreements. Thus, one of the characteristics of a business is that there is almost always a conflict of need or desire between two or more parties, that is, a particular type of conflict. Namely, what one party wants is not necessarily or need not be the other party's desire, and it is then necessary to find a way to resolve the obstacles that arise. In order for the decision maker to make the right decision for the well-being of the family business, it is important to analyze the current situation in the family and the company, define the purpose of the family business and the goals to be achieved, and understand and evaluate the effects of the decisions made (Buble, Cingula, Dujanić, 2005).

There can be conflicts in every business, including family. Conflict almost always leads to critical thinking and heated debate. However, there is a good side to the conflict as it brings problems to the spotlight enabling leaders to make informed decisions. Conflict can come in two forms: cognitive and emotional. Cognitive conflict involves disagreements over ideas and assumptions that ultimately lead to a solution. This kind of conflict is good because people openly express their opinions, their views and assumptions, and thus identify weaknesses and problems and pave the way for new ideas. Emotional conflict, on the other hand, involves rivalries and mutual disagreements between different personalities, which results in less effective decision-making processes because participants are not ready to cooperate with one another. Because cognitive conflict is desirable, the goal of the leader is to increase his or her level while keeping emotional conflict low. The five styles of conflict management in family businesses are competitive style, avoidance style, compromise style, adaptation style and collaboration style. Competitive style emphasizes high concern for one's own interests and low cooperativeness, which can be seen in the case of fast and decisive or unpopular actions. The avoidance style is characterized by a low level of self-care and lack of cooperativeness, which most often occurs in situations where problems are trivial; delay due to the importance of gathering more information or when breaking the conflict could cost.

The compromise is characterized by a medium concern for oneself and a medium of co-operation, and in order to reach a mutually acceptable solution, each actor in the conflict must give up something. The style of adjustment most often occurs when people realize that they are guilty, when the problem is more important to others than to ourselves, when social credit is created to be used in later discussions and when maintaining harmony is especially important. A collaborative style allows both parties to the conflict to win, though it may require extensive negotiation. (Ora, Šustić, 2009)

Inheritance in family businesses

Succession is certainly the ultimate test for successful family businesses, since the future of business depends on the succession process. The family business is in many ways different from other forms of business, providing identity and motivation for family members, allowing them to lead long-term interests and educate the children of the existing generation of members by developing a philanthropic sense in them. However, when studying family businesses, and thus inheritance in family businesses, there are some drawbacks, such as the existence of disagreements between the affinities of individual family members and family expectations and desires, which can lead to the stifling of an individual's talent and major problems in cases of a family member's determination to separate from the family and leave the family business. The problems of the inheritance process can also be seen from recent research findings that only 30% of family-owned companies survive the transfer of ownership to another, 10% to a third, and only 3% to a fourth-generation successor. Research has shown that a third of family businesses have plans to transfer ownership and leadership, and most are informal and poorly communicated by owners / founders. Values ​​in family businesses differ significantly from values ​​in other types of businesses, and thus the introduction of new ones is a common way of continuing business. generation of family members to management positions.

According to Schwabe, the specificities and dynamics of family societies cannot be understood if they are approached solely from a legal point of view. Namely, family societies have an additional dimension - the emotional connection and dynamics of the family behind such a society. When business is passed between generations, not only the legal and financial position is transferred to new members, but also a certain system of family values ​​such as trust, loyalty, altruism, fairness and more, which are often translated into the motto of the business of society.

29 April 2022
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