There are various kinds of business entities that add and add value to the financial growth of the country. In Malaysia business possession can be categorize into three types that happen to be sole proprietorship, relationship and corporation. Each kind of these business entities has different way of possession and operating style.
Basically the sole proprietorship is a business owned and operated by a person. The owner functions the business by his or her own or may have employees to help them operate the business. The owner has the control on the business enterprise liability and in charge of the company operation and financing including of the business enterprise profit and reduction. The business taxes are paid to the government by the owner through his / her personal income tax return.
Partnership
A relationship is the business owned by more than one person and the utmost number of folks allowed in a partnership is 20. Matching to Malaysian Partnering Act, partnership is thought as romantic relationship subsisting between individuals carrying on business in keeping with a earnings objective. Relationship can be labeled into three categories that are standard partnerships, limited partnerships, and limited liability partnerships. Not the same as singular proprietorship the revenue, damage and managerial tasks are shared on the list of partner and each spouse is liable to the relationship bad debts. Most decisions for the business required the contract from majority of the partners and the change of business character required consent by all lovers.
Corporation
Corporation is thought as the legal entity that is available independently of the person who created it. Company can be either privately owned or operated or government had and it can be categorize whether for income or nonprofit company. The profit corporation specifically for a privately owned or operated can either be privately held or publicly organised. Usually a revenue corporation's shareholders will elect a mother board of directors to point the organization and employ the service of its managerial personnel. Companies in Malaysia are governed by the firms Act 1965, which helps to protect the privileges and hobbies of shareholders and shareholders, and provides polices for the incorporation of companies, the formulation of company constitutions, management and closures. When a corporation fails, shareholders normally only stand to lose their investment, and employees will eventually lose their jobs, but neither will be further responsible for debts that remain due to the corporation's collectors.
Anglo Saxon
Anglo Saxon is a linguistic term that still used as a term for the original West Germanic element of the modern British language. In the 19th century the term "Anglo-Saxon" was broadly found in philology and sometimes used to make reference to peoples descended or associated for some reason with the English ethnic group. So in the context of this writing Anglo Saxon can be relate to the company successor since it was forward from one relative to other members of the family for the business enterprise to continuously preserve and making earnings.
Family Business
Base on different business possession and categories available in Malaysia the decision how to perform the family business can be basic on benefit and disadvantage of every type of business structure. Your choice how to run the business also needs to predicated on advice from the specialist as well as legal services. That is important because the right decision and path for the family business structure will ensure the business can carry on for a long-term over the decades.
According to article 'A Curse Upon Family Enterprises' by Jean Lee and Hong Li(2008), Family business is the most common business all over the world and 40% of the world top enterprise are had and run by people which donate to the gross home product (GDP) and job opportunity in the united states. In US, 1 / 2 of the GDP and job opportunities were contribute by family enterprise and same routine was seen in THE UK which 50% of the country's workforce was the employees in family business. In Germany, family companies have created 66% of GDP and 75% of the total national job. In Southeast Asian countries the GDP contribute by family organization was the following with Korea reaching 48. 2%, Taiwan 61. 6% and Malaysia 67. 2%. In producing countries, almost all of the private corporations are family owned.
DEFINITION AND BACKGROUND
Family business can be summarize when business own by a number of families members straight or indirectly and have significant ownership and dedication toward the business enterprise well-being. Family business can be contain numerous mixture of family such as husband and wife, parents and child, long family and also multiple generations such as grandfather, father and child. These members of the family also play assignments as stakeholder, board members, working companions, consultant and employees for the company.
Most of the successful business on the planet started with family managed business. The exemplory case of family business in Malaysia which were famous and successful are Kerry Group, IOI Group, Genting Group, YTL Group, Tan & Tan, Royal Selangor and MK group. This shows that although a company was controlling by family members it's for a few circumstances can be a huge and successful as any non family business. The business enterprise was manage properly and can sustain throughout generation. For the family business to build up into an excellent company they need to inculcate a certain rules, practices and idea. Besides keeping a good relationship among the family members they need to balances between family and business things.
In Malaysia most family run their businesses in small level enterprises which are still been able by the creator with the amount of employees varies from 51 personnel and below. The business enterprise activities centered on production, retailing and building and the business enterprise were started by the individuals having six. 5 years or even more working experience. This demonstrates the trending of family business in Malaysia were commend by people that contain appropriate experiences to perform the related business that related with their working experience.
PROBLEM STATEMENT
The development of family business survival through generation
Through out enough time the family business will face the new problem because of the changes of business, politics and socio-economic in Malaysia. Only few family businesses that are prepared to move with the changing times have survive among others simply slip into obscurity without even achieving the second or third technology. The exemplory case of family business that not even last for second generation is the famous sawmiller Ong Kian Teck of the 60's and 70's. This family business fell apart at this time of the founder pass away credited to feuds between the family members. Instead of cooperated to support and continue the business they became entangled in quarrel and today the business reduced to a tiny supplier of creating materials.
One of the oldest surviving family businesses in Malaysia is Royal Selangor International Sdn Bhd which is made on 1885 by Yoon Koon. This company is the maker of globally renowned pewter that survives more than 125 years and currently headed by the third technology Yon Poh Kon. Other successful family based businesses are YTL Group with the Yeoh Cheng Liam as the creator, who had transformed the small timber concern of the 1920s into a development company in the 1950s. Later his son Yeoh Tiong Place went on to obtain a Class A status from the federal government in 1955. Presently YTL Group handles by third generation leader Francis Yeoh who projects diversities business such as property, manufacturing, hotels, power technology, water treatment, information technology and abroad business.
Genting group also among the successful family businessas with the Lim Goh Tong as the creator. This company is the internet casino operator that started out the business enterprise in 1971 and later traverses to his kid Lim Kok Thay in 2003. Genting Group has diversified into a great many other industries such as plantations, property, paper, power generation, oil and gas exploration and cruise trip boat establishments.
Before the launch of open public limited company system in Malaysia the companies basically are had by specific and family. Sometimes business was handling by the members of the family who aren't expert running a business management. The family business management usually comes from founder natural ability and their encounters in business during the child. Generally there are three different periods of family business had opted through for the business to progress from inception to maturity. Different skills are required in each level and family issues might happen when the business moving from one stage to some other stage.
The first level is called as start up stage where in fact the business continues to be new and varies from 1st to 5th calendar year following the company started to project their business in the market. The course and business target is clear since it more centered on the creation of the new business. The culture is in revolutionary change since everything is new and everything needs to be created first. Family and ownership is not an issue since the founder dedicated all available time for you to developing the business enterprise. Bringing up the startup capital is the critical hurdle since the business might face the threat of undercapitalizes during the initial amount of business initiation and the family members are an important way to obtain fund and business advice. Inadequate estimation of first capital, functioning cost and stream revenue will contribute to cash flow problem beginning with the start of the business began.
The second stage is success and stability level where in fact the related period is between 6th to 15th years following the business was started. During this period the company needs to combine and structure their business function and area credited to rapid development and positive cash flow. The culture is evolutionary stage since it building on what founder has created alternatively than changing tremendously. The possession become important to a tiny number of family members however the newer generations have a tendency to break free and create their own route rather than submission to the founding generation.
The third level is success stage where the business had been working for 16 season and above. During this period the business enterprise will traverse to a different generations and there may be several hundred of family members who already inherit share available. The ownership becomes to the fore since the family members with minority possession tend to ponder about their jobs available since they don't work available and not sit on the board. They might want to market their share and invest the amount of money elsewhere for themselves.
The business might also face a hard decision in how they would like to manage the company if they should continue working the business according the old ways as determined by the creator or adjust to the new market needs and need. The culture during this period can be evolutionary, innovative or the mix of both. During this time period almost all of company will growth and expend their capacity or business. Sometimes the company will disregard the financial planning, control procedure and contingency arrange for worst case circumstance. If the crises occur it could cause some loss of credibility and subjected their weakness to the clients and shareholders.
Challenges faces by family business
The family business can be described as two contending system which is family and business. Since the relationship between your family members is unique with uncertain boundaries and different rules the issues might arise anticipated to overlap of the roles such as siblings, husbands and wives, parents and children, expanded young families, and multiple generation functions in company. The framework between the business and family also different where the business concentrate more on profitability and efficiency while family more encourage for nurturing and approval. Beside that individual communication within the family members also might be inappropriate in business situations.
The pressure will are present between their personal life and job quest for the relative where the personal matter and discussion may bring over into work environment and cause detriment to the business. Including the couple who is a partner in a firm might not able to make a good business decisions without marital problems turning the conversation into a disagreement. They may confuse their assignments of business spouse and partner. Other example is when mother work with her son in the same work area where this two different people need to manage two relationship concurrently where she actually is the mother/ boss dealing with her boy/employees.
Rules are essential strategy whether at the work environment or in the family. The issue arises when the family guidelines is incompatible once they are transferred to the business system. For instance in family framework the nurturing, tips giving and considerate by parent are accepted guidelines apply at homes. Yet, in the business framework the parenting style guidelines might be embarrassing to the kids as the employees and this will disrupt their productivity and working romance between the parent or guardian and child.
The guideline and certification for family to enter into and working at the family business will cause the issue since a few of them aren't qualified credited to lack of skill or skill to squeeze in the task position and make useful contribution to the business. Once work with it was difficult to open fire if they are troublemaking members of the family that cause a problem to company such as decrease the desire of other employees by display a poor frame of mind and cost the company money since it require unique relationship.
When this conflict occur bringing in and keeping nonfamily employees will be difficult to the company although outsider can offer good and impartial perspective on business concern that can stabilizing drive in family business. For the example employees might find it difficult to deal with family issue in the work because the special treatment was accorded to the family and the opportunities for improvement may also be limited. Some family may also resent the outsider and purposely make thing difficult for nonfamily employees to preserve in the business.
Another obstacle for family business is the issue such as money, personalities and trust. For the money in family business it involved the repayment of salaries and dividing the revenue among the family member who take part in the company. In order to growth the company needs to use quite large ratio of the earnings for expansion specifically for small business company. However some members of the family who will be the owner however, not employees of the company need to be convinced about the value of investment for company future and just why they receive little bit of dividend cause by the expenses.
In term of personalities and trust it involves the succession of the family business. As the founder of the business he needs to determine who'll dominate the command and ownership of the business to continue their legacy when current era retires or dies. Without proper planning current technology to step down it could cause a jealousy among the family. If it not handled sensitively when deciding who will be the successor and CEO it could result the issue and hostility on the list of siblings on final decision and it has a potential to split the family harmonies and eliminate the business. Beside that whenever the succession is postponed the more aged family who still continued to be in the family business have a tendency to maintain at their position quo and resist to change and take the chance although this frame of mind can inhibit the progress of business.
Why family business cannot maintain in the generation
Conflict is inevitable in virtually any business and in family business it was one of the major factors that donate to the destructive behavior to the company and family. If the discord is not control properly it'll disturb the rationality of decision making, adequate planning and in the most severe case situation it will donate to the mortality rate of family business. Although the majority of individual growing up in a family group it doesn't signify they are a specialist in fixing family problem. This concept is same for family business problem since almost all of the individual have poor and insufficient skills for conflict management and resolution among the members of the family it will donate to too many conflict to happen. Major resources of conflict included rivalries among creator, siblings and family, lack of guide for career enlargement, differences status and power between family an non family employees, and unfair succession process.
The key success for the family business is a good management especially in financial management and ready to take risk to be able to accomplish business success. Poor financial management was the primary reason for the family business inability and as the owner should try to learn how to ensure it fulfills their financial obligation. Beside that poor functional management that affecting day to day working of businesses was also the failure ascribe from overwhelmingly owners.
Succession planning is an extended process where most family business lack of good succession plan and it becomes more crucial in case of sudden fatality of the creator. Bottom part on typical Asian culture usually the son will takes over the family business. The lack of planning from first to second era was the fault of the founder himself so that the result his business dies with him which is why most of family business will not succeed to the next era. Sometimes some owner especially in small and medium venture prefers their heir to become professional and does not encourage the youngster to inherit their business therefore the company was sold and close down.
LITERATURE REVIEW
Base to article 'Gale Encyclopedia of Small Business' by Gale Group Inc (2002), Family based businesses might be the oldest form of business organization and today it was as important and different participants on earth economy. A lot of the family business will face a couple of unique management challenge from the overlap of roles and tasks as the family and business leaders. When the sentiment intrudes in work relationships the inevitable conflicts between family members arise of course, if this happen the business head must intervene and make the objective decisions necessary to protect the passions of the organization.
Base on analysis conducted by Hemalatha Mahenthran in article 'Financial Management Knowledge Among Malay Family Owned Business (MFOBs) Business owners' most of the family businesses fail credited poor financial management and in order to be outstanding companies they need to maintain good balance between family and business concerns. Discord in family business is inevitable since each system has its roles, guidelines and requirement. In order to resolve the conflict they may be have their own style and unique communication that already been practice for years and sometimes it good in family situation but not the best ways to solve the business issue.
Malaysia has a great potential for the growth of family business and the analysis was conducted around Penang with involvement of 100 Malay business people. During the study session the three levels of family business being use as the guideline to conduct the study which are started out with set up level, continue with survival and stableness, and later success level. Base on the research almost all of the respondent remain in start up stage plus more concentrate to growth their business.
Base on Andrea Ganzaroli, Gianluca Fiscato and Luciano Pilotti (Oct 2006) Business succession will need devote 30% of Western firms within a decade and this process could influence about 690, 000 small and medium organization. In 1996 Western european Commission estimated that 30% of the enterprises will disappear because of limited business succession management (Western Commision, 1996, p. 183). However bottom part on recent data demonstrates in Italy about one third of firm have survive to first technology and the quantity falls to 15% from second generation on.
Base on AsiaViews, Vol. II (Dec 2008) by Stephen Ng 'The Success of Malaysian Family Businesses' the three main things he discuss that can contribute the success of family business until second or third generation are succession issue, globalization and branding. He stated that bottom part on writer of 'Success Beyond 3 Decades, ' Dr. Ong Hean-Tatt, blames failure of Malaysian family businesses on the lack of a good succession plan. Legal tussles aren't unconventional within the controlling family available and it sometimes making the succession plan extremely difficult and its own will be worse when the founder is several. To be able to survive the family based businesses have to adapt to new competitive environment and adjust to the challenge of globalization, e-commerce and liberalization.
The biggest disadvantage to family business is when the market leaders amount of resistance toward the change and not ready to adjust to this challenge which has caused the business eventually fail and cannot maintain through the era. Branding is vital running a business since today consumers are spoilt with a lot of choices. Platform on Paul Temporal in his book, Branding in Asia, what's greatly missing is the failure of Asian family based businesses to make strong brands and this is actually what retains some family business still afloat. Some company in Malaysia that make it through through generation anticipated to international Malaysia brand are Royal Selangor pewter and Shangri-la Hotel that managed by the Robert Kuok group. Amount 1 shows the list of tycoons whose second or third technology that have joined them in managing the business.
Figure 1: Set of tycoons whose second or third decades have signed up with them
NAME
COMPANY
Robert Kuok
Kerry Group
Lee Shin Cheng
IOI Corp
Lim Goh Tong (deceased)
Genting Group
Yeoh Tiong Lay
YTL Group
Mustapha Kamal
MK Group
G. Gnanalingam
Westports
F. D. Mansor
Glomac Group
Yong Poh Kon
Royal Selangor
Tan Chin Nam
Tan & Tan
Lim Kim Hong
I-Bhd.
A. K. Nathan
Eversendai Executive Group
