family business case study phases 1-3 final

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FAMILY BUSINESS CASE STUDY

FISHERMAN KRUSHO’S FAMILY BUSINESS



Student ID: S00504053

TABLE OF CONTENTS

I NTRODUCTION 3

EARLY BEGINNINGS 3

FAMILY PORTRAIT 4

GENERATED ISSUES 5

THEORIES & FRAMEWORKS 6

K NOWLEDGE TRANSFER AND SUCCESSORS DEVELOPMENT 8

SUCCESSION AND BUSINESS PERFORMANCE 9

QUESTIONS 7




Introduction

The foundation of family business under the

name of Krusho (Beach, restaurant and

construction company) dates back from early

1990’s. Krusho started off the business when

he was in his 30s. As a young man he lost hismother and father, therefore he mostly

depended on help of his grandfather as he

raised him and his brother Boris. His

grandfather Vuk had some land and properties

near the coast but never had the will and

chance to develop a business as he was

working as an engineer at an old boat

construction company. He never believed in the idea of elite tourism and the fact that most

money in that time was invested in hotel construction and mass tourism projects. Therefore

he was pretty strict about selling the land to the new wave of investments taking place in

hotel infrastructure. Krusho’s grandfather was a strict and stubborn man and a person who

was determined in achieving his goals as he was a hardworking man. He did not believe in

l k d f ith S e f the kill K h i he ited f hi df the d the t




the joint-venture. Boris’s desire was to buy Krusho’s shares and pass them on to his sons. The

reasoning behind this was to ensure a secure future for his children by increasing the

revenues they receive. Nonetheless Krusho still had hopes that he could convince his

daughter to return and join him. The lack of support from Alexandra considerably affected

him especially because as an orphan he had often felt lonely. It was as if history was

repeating itself…

Family portrait

Krusho – His entrepreneurship skills were broadly recognized as well as his ambition and

determination. These competences were self-formed as a result of the tragic loss of his

parents at an early age. Involuntarily by having his grandfather as a role model he also

developed a sense of stubbornness as it was reflected in his refusal to accept Alexandra’s

non-involvement in the family business. His pride to having succeeded in the business

environment created tensions on a personal level generated by the frustration of not being

able to enforce the succession plan.

Boris – Following his brothers footsteps Boris also became an entrepreneur. However his

determination to create a company surfaced due to different reasons. Unlike Krusho who was

driven by his ambition Boris was forced by the environment as opposed to his personal skills.

After losing his job and remaining unemployed for a year, he found an opportunity to

t t i h k t th t f th ll t ti i Hi i i




not passionate about the company. Instead he sees inheritance as an easy transition into the

business world.

Milos – Is Boris’s oldest son. He is 25 and has an MA Degree in International Business. He is

eager to take over the company and turn it into an international concept. Krusho sees him as agood fit for the company but disagrees of his expansion plans. He thinks that the company is

not solid enough to cross the Montenegrin boundaries to the extent that this will lead to

possible bankruptcy.

Generated issues

Given the fact that both families are facing

decision making problems and have to decide

how to continue successfully running the

business, it is questionable how and what

strategy Krusho and Boris will decide for their

f ili A it i k th t K h t t




split equal shares between his sons as he leaves the future managerial actions to them. His

plan is to get ready his sons professionally and academically for the task of running the

construction business. Furthermore he wants to be sure that his sons are ready to learn by

doing and he will guide them by working together in the company for three years. After that

he will leave the company and the sons will be in charge in the entire decision making

process. He will provide no assistance even if his sons’ strategies lead to bankruptcy. As

Boris stated in one of his discussions with Krusho:“ I want my sons to learn through

experience and failure. Ever since I got fired I had troubling times and many attempts to

succeed but only after painful failures did I manage to succeed. Because of this I will initially give full support to my sons to a certain extent where they should develop their own

managerial skills. As a child I did not have parent supporting me and I had to fight for my

own existence. After my sons finish their education they should work in the company and face

tough decision making and experience what is it like to run a construction company with 25

employees”. (Boris, 2010)

Needless to say the brothers had opposed opinions as to the future of the company. Krusho

regretted that the joint venture decreased his autonomy in decision making. Therefore it

created a problem and struggle between the two brothers. Krusho is reluctant to sell the

business to his brother Boris because he does not want to let go the idea he was building on

for 30 years. Also he is facing problems in succession planning as his daughter Alexandra

opposes the idea of business continuation on her own and has plans to involve external

t i t th O th th h d t f B i tti d f




Figure A. Relationship between demographic variables and intensions

OFFSPRING

Age; gender;

geographic

origin;past

involvement in thebusiness; birth order

PARENT-OWNER

Difficulty leaving the

business; age

BUSINESS OWNER

Size; Generation

Intensions to

oin

Intensions

to take over




from experience and not involve external managers to organise the firm? What framework

could be introduced to assure a better decision-making and strategic planning agenda to

maintain a healthy relationship between these two independent firms and maybe create a

multiplicative effect on future ventures?

Frameworks

In order to better understand the problem that many family business firms face today it is

important to note that family business as an academic issues is newly adopted and it is widelyresearched nowadays. Therefore today are few frameworks who can efficiently explain and

try to solve problems arising in the family business world. Moreover there are numerous

theories developed on investigation on different family businesses.

Regarding the succession planning and developing on the issues it is regarded to be one of the

most important problems in family businesses today. Therefore the problem of knowledge

transfer is crucial to understand in order to continue on successfully managing the family

business and not lose the connection between the substances (in this case two existing firms

owned by the brothers) and the predecessor’s ability to adequately maintain and improve the

organisational performance of the firm. Why the knowledge transfer and the successor’s

development is important it will be explained in the following chapter.

K l d T f d S D l t




Source: The Succession Process; Katiuska Cabrera-Suarez, 2001, p.40




Seen from the Figure 1 it is important to note that tacit knowledge and non-articulated

knowledge as well as experiential training and early exposures to business can greatly help

the successor in gathering valuable experience for replicating it in the real world business.

Therefore joining the firm after obtaining experience elsewhere proves valuable for the

family business. Moreover by doing so tacit knowledge is progressively transferred and

results in better understanding of the business and allows the successor to protect his ideas

from possibly appropriation by the competitors.

Succession and business performance

The business performance is generally interlinked with the ability to successfully execute the

business succession plan. If that is achievable then it is possible to circumvent issues of failed

succession stories by not having a strong performance inside the firm. As recent surveys

show that majority of family business that were owned and instructed by predecessors (the

finding showed that incumbent’s mentoring is correlated with successor effectiveness) are

more productive and have a significantly better relationships with their fathers (Goldberg,

1996)

Moreover in the previous statement it is clear that family transitions happen more smoothly

when their offspring’s are qualif ied and better prepared. Therefore the relationships in family

must be harmonious and constructed through a healthy compromise and discussion. In order

to explain this phenomenon in the context of family business succession we must identify




As seen from the Figure 2 we can identify and acknowledge the main factors that force a

succession planning path. First the process of preparation where the subject is trained or

learnt how to pass on the knowledge inside the new firm, second most important thing is the

nature of relationships among family members which can be determining factor of a fail or

success in the future and the third factor is developed on Planning and Control Activities

which are important for the start of decision making inside the firm when the successor

regains power of making managerial and strategic decisions.

Moreover the business performance in the family business is mostly identified after the Post-

Transition process where we can clearly see how the company stands against the competitors.

In this phase it is crucial to note that the growth of the business is linked with the fact that the

business is small and owner-managed or it is a large business owned by numerous family

members. This can determine the future growth of the family business firm by simply

evaluating the ratios and figures of such a venture. However it is difficult to measure the

initial successor performance inside the firm because it involves a large number of different

aspects and dimensions. In reality ownership transition is a long process, starting from the

founder and his will to pass on the business secrets and ownership (such as shares etc.), also

there is the emotional factor of stepping down which can create problems in generational

change. Considering the previous stated facts and definitions it can be inferred that the real

succession experience can be highly subjective and complicated, therefore very difficult to




Bibliography:

Radovic, K. (2010), Interview with Krusho Radovic, Herceg Novi, Montenegro

Radovic, B (2011), Interview with Boris Radovic, Herceg Novi, Montenegro

Eleni T. Stavrou (1999), Succession in Family Business: Exploring the Effects of

Demographic Factors on Offsprings Intentions to Join and Take Over the Business,

Available from:

https://docs.google.com/file/d/0B6izIOGg3wLbYjg3OTRiMjAtZjUwMS00MGViLWEwM2

EtZTJiMmRhM2Y5MWY4/edit?authkey=CNGj7ZsG [Accessed: 21st March 2013]

Yong Wang, David Watkins, Neil Harris, Keith Spicer, (2004), The relationship successionissues and business performance – Evidence from UK family SMEs, Available from:

https://docs.google.com/file/d/0B6izIOGg3wLbNzcwZjg0NWEtYWIyMy00MTgxLWFhYj

AtYzY4NTNkMjA5YTNl/edit?authkey=CJfMz_cP [Accessed: 21st March 2013]

Katiuska Cabrera-Suarez. (2001). The succession Process from a Resource- and Knowledge-

Based View of the Family Firm. Family Business Review, Sage Publications. (14), p37-47.

https://docs.google.com/file/d/0B6izIOGg3wLbYjg3OTRiMjAtZjUwMS00MGViLWEwM2EtZTJiMmRhM2Y5MWY4/edit?authkey=CNGj7ZsG



https://docs.google.com/file/d/0B6izIOGg3wLbNzcwZjg0NWEtYWIyMy00MTgxLWFhYjAtYzY4NTNkMjA5YTNl/edit?authkey=CJfMz_cP









APPENDIX A

Family Tree

VUK MARIA

MIRKO

MILO SVETLA

DANIELA

KRUSHO MILENA

ALEXANDRA

VIOLETA BORIS

MARKO MILOS



APPENDIX B

Family Genogram

Vuk

b. 1909

D. 1988

Maria

b. 1912

D. 1980

Mirko

b. 1931

D. 1961

Milo

b. 1907

D. 1980

Svetla

b. 1910

D. 1986

Daniela

b. 1934D. 1965

Krusho

b. 1955

Milena

b. 1958

Alexandra

b. 1989

Boris

b.1957

Violeta

b.1961

Milos

b. 1988

Marko

b. 1992

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