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Assignment for international business
Topic: “ Influence of globalization on a family business”
Student 1521222
The influence of globalization on a family business.
In our century everybody are talking about the globalization and her influence of every aspect of our life, in my assignment I am going to look on the influence of globalization on a family business and if there is an influence, try to understand if it is more positive or negative. At first we have to give the definitions what does the globalization and family business mean.
There is no strong definition about what does the globalization mean itself. See ap1 However we can assume that the globalization is developing of market and economy involving new members in this process. Now we should give the definition of a family business and here we can see that there are a lot of definitions and a lot of theories how we should look at this problem. See ap 2
Actually if we compare two companies one is owned by a family, and the second one is just an average one. We will see that there are not so many differences however there are some particular problems in family owned companies. For example struggling over the person who is making a decision and taking over of business see ap3. In this work we will be looking at the whisky producing companies and see how globalization deals with them
But to understand how does the globalization influences family business and small companies we should look at the instruments that globalization uses. There are three of them the first one is WTO the second one is IMF and the third one is World Bank. “Look at the three main institutions that govern globalization : the IMF the World Bank and the WTO”1“ The IMF and the world bank become the new missionary institutions, through which these ideas (free market) were pushed on the reluctant poor countries that often badly needed their loans and grants”2 So that give us the right to say that globalization was born in 1944 “When the Bretton Woods Agreement was reached”3 and for Europe the main data was on 25 march 1957 year see ap 5 . . Nonetheless there are different interpretations the main idea is that This organization was establish to protect the economy from a crisis and also to make it more stability . Also we need to mention the internet, because this is a part of globalization, may be not as strong as WTO IMF and world bank but all in all it became the part of our life we do not even mention how deeply it integrated in our life. And if when we say globalization we usually mean economy in the case of internet we can talk about globalization of information and cyber culture.
Now we shall look at the relations between family owned companies and globalization. However as I have already mentioned there are not so many differences between family companies and average enterprises. And it is mostly impossible to look at all family business companies because there are a lot of them and they go through the globalization, it will be a mistake to compare a ford motor company to a pub somewhere in Scotland. At the same time they both will be the family owned companies. That was a reason why I decided to look at some Scottish whisky producing companies.
As an example of the company, I decided to take Scottish whisky distilleries owned by family for example Glenfiddich , , Cutty Sark , Springbank, etc. At first because these are the typical family business companies and they also positioned themselves in this way see ap 6. The second reason because the hole history of Scotland is deeply intertwined with a history of whisky, and also because Scotland has got the absolute advantage in producing of uisge beata what means the water of life if we translate it from Gaelic. Because according to a scotch whisky act only whisky that were produced in Scotland might be called Scottish see app. 7. So it is possible to call the whisky Scottish liquid gold because no country in the world is allowed to produce this drink and the only way to buy a real whisky-is to by a Scottish brand.
Looking at the relations
At first we should look on globalizing processes through the lens of this distilleries. As we already put the advantages that gives us economic union we can assume that for companies that producing whisky these are very positive moments. Because the inner British market is limited. And to be honest whisky it is not the most popular drink in England however in Scotland itself the market is much smaller. According to the data there are something around 6000 millions people living in Scotland at the moment. And again nonetheless the Scottish traditions are dying see ap 8, whisky is steel a traditional drink but Scotsmen usually do not always drink this spirit, they keep a bottle of good whisky in the cupboard and that’s all . As we understand it does not bring huge profit to whisky makers. At the same time entering the economic union has given a huge market for Scottish distilleries to conquer. At the same time if we compare the situation on a Russian market we can see that the average difference in the price of production is 2,5-3 times bigger in Russia than in Europe and of course people do not by this spirits because of the price however if we were in the union the price would fall down and we would be able to by this products for normal price and again the distilleries will get the new market. And also nonetheless the tradition of drinking whisky is dying in Scotland, at the moment, people abroad can still bring profit to distilleries. Because the traditional way to think that the real whisky can be made only in Scotland and people like to have some noble traditional made drinks in their own bar. Or they (distilleries) can position their product as a drink for cocktails Like Jack Daniels whiskey did, and again make profit. The question is what marketing efforts do they targeting see ap 9 what categories of customers the company singles out as the main .So we can see now that globalization and entering the economic union give the opportunity to the companies to sell their products on a new market without any barriers from the national governments of other states. And the only thing they have got to do now is just to make the good marketing reserchment, advertising campaign and choose a good way of economic development. However in a case of Russia they still have to deal with protectionism. That prevent the company to develop on the market itself. And also, we might look at these situation through the marketing point of view. As we know if the company wants to be successful in selling it has to follow the “four Ps” rule see ap 9. So now we can compare two countries one is an average European country and another is Russia. And in this case we see that even if the company makes everything right – promote the product in the market ,controls the availability of the production in the shops it will fail in a question of a price in Russia, and this “ P” will prevent the company from success. After this case we can assume that this company would like Russia to enter at least WTO so the producer could avoid a lot of problems with protectionism, having his product cleared by the customs e.t.c.
As a second we need to look at the second aspect of globalization. An this are shops that give the opportunity to the companies to sell their products. Not the small shop on the corner but the multinational big storages that supply thousands of people with products. Imagine how is it easy now to make only one agreement for example with spar and sell them your production. Unfortunately it is hardly possible to find any information how many bottles is selling to storages by for example Glenfiddich but we can assume that a lot or we can also compare the quantity of bottles in the small shop and Tesco for example. Usually in small shops there are from 2-3 bottles on the shelf however in Tesco when I have asked if it was possible for me to by 20 bottles the manager answered yes . At the same time if we think about how many agreements is necessary to make with small shops to reach the same selling level we will easily understand the positive things about these moment.
The next thing we are going to look at is going to be internet. Because might be seen as a globalization in the area of information. And again we can establish that internet gives the big advantages for this companies. If we look particularly at the Glenfiddich web site we will see the opportunity to by their products from the internet some rare ad expensive products ( of course it is also possible to by and average production). But not only can we buy the product we also can read about it. And is not it god for a company to promote their product avoiding big costs on doing it in different sources like TV radio and newspapers. They steel must advertise their products but Now it is possible to make a reference on a web-site and people will go there read the information about the product and understand it. Using the interne they can keep in touch with the customers, research the attitudes of their customers because if you want to be register ,to get the last news from the company you have to go through a questionnaire but even if you do not registry you still leave the information about your age. It means that for the company it is easier now to collect the data give it to the department of marketing and analyze it.
In the conclusion we need to say that on the example of Scottish whisky distilleries there is a positive influence of globalization on this particular family business however we also need to mention that there are different types of family enterprises and it is mostly to possible to apply my assignment in all the cases. In my assignment we see that the globalization and entering the economic union brought these companies to the opportunities to go further their own countries and sell their products everywhere inside this union without any restrictions and it means more customers and more customers means more profit and the more profit company the better for the company. There are no evidences that might bee interpret as negative influence. Starting from this we can assume that in this area of family business globalization brings the positive aspects. And the last thing about the family whisky distilleries- They are proud of being traditional Scottish company that was founded by their family but they are enjoining going global. But it might be fair only regarding to the companies we have researched, because as I have already mentioned there is a big variety of family business companies and if we look at the other companies the influence of globalization might be different.
1) Joseph Stiglitz ,globalization and its discontents, penguin books 2002 page 10
1) Joseph Stiglitz ,globalization and its discontents, penguin books 2002 page 13
3) Michael R.Chinkota et all, international business, 7 th edition, Thomson south-west 2005, page 230
1) Appendix
Discussions of definition of family business
1)”globalization the process by which governments sign away the rights of their citizens in favor of speculative investors and transnational corporations”1
a) A typical - but restrictive - definition can be taken from the International Monetary Fund,[citation needed] which stresses the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology 1-a
b) Globalization – the growing integration of economies and societies around the world 1-b
c) globalization refers to fundamental changes in the spatial and temporal contours of social existence, according to which the significance of space or territory undergoes shifts in the face of a no less dramatic acceleration in the temporal structure of crucial forms of human activity 1-c
d)“Globalization reflects a business orientation based on the belief that the world is becoming more homogeneous and that distinctions between national markets are not only fading but, for some products, will eventually disappear . As a result, companies need to globalize their international strategy by formulating it across markets to take advantage of underlying market, cost, environmental, and competitive factors.” Czinkota 380
“globalization is the watchword that increasingly looms large in all walks of life, not only in our entertainment, our fashion, and the products we buy, but also in our morals, belif systems, and our very sense of being a human species. Foe the firs time in history, the availability of international products and services has reached beyond the elite to become the reasonable expectations of the masses. The global market is inevitable, inescapable, and here.” Czinkota 18
“International business consists of transactions that are devised and carried out across national borders to satisfy the objectives “ Czinkota 5 1-d
These examples show us that there are different points of view on the globalization especially if we look into the antiglobalists web sites. But in these sources usually there are a lot of emotions and very small knowledge that’s why I do not bring here their opinion.
2)A Family Business. Litz (1995) identified family businesses conceptually based on ownership, management, and intention to transfer. He developed a nine fold typology of business types and identified four of the nine business types as family businesses or potential family businesses. Although his conceptual work further developed definitions of family business, the definitions were not applied to empirical data. Handler (1992) has identified four ways in which theorists usually define family business: degree of ownership and/or management by family members, degree of family involvement, potential for generational transfer, or multiple criteria.
3)There are two particular things that single out the family business from other kind of business. The first one is the struggling over the person who is making a decision . And the second is the big problem about the overtaking the business.
So there might be a disagreement and even conflict about what decision to make based on a different experience, education etc. However in a family owned company the situation when a junior employee for example son has got a straight impact with the boss that is also a his father is more likely to happen than in average company. “ My dad is from the old school and I am from the new. I went out and bought business cards, charging it to the business. He started giving me a stink about it. So I paid it myself” page 59 Paul C Rosenblatt et al 1985 “The Family In Business “ In This example we can see that not only is it a conflict but also a self initiative order with money. It is an example that can prove us that junior family members working in the family business might not observe hierarchy it might lead to the situation when other workers will not respect the boss because they might think that he is not confident -1anymore.
1-“It is difficult to single out all criteria that makes a person the leader , however “ some current selection criteria for senior management positions seem to reflect a prevailing belief in some traits. Example include:1- the ability to solve the problems and see how they fit into the wider scheme of things 2- a strong desire to achieve.3-self confident and self – disciplined 4- the ability to listen and to communicate effectively 4- stability of emotion and positive attitude toward other members of the organization, especially subordinates 5- analytical and intelligent ( but not to intelligent)” “Managing organizations” Robert H Rosenfeld et al 1999 page198. And it might destroy an authority of the Boss
However in the average company (not family ) according to another case study we see the different situation . If we look at Yue Gee Ling case we can see following situation “ Gee Ling felt too junior to confront his bosses directly with his criticism. Instead he decided on what he felt would be a more subtle approach” page 2 Yue Gee Ling case University of Stirling Department of management and organizations Hand Book. As we can see in the second example the behavior of a junior manager is completely different and also we can not blame the cultural factor in the Yue Gee behavior. Because nonetheless he is from Asia region he studied in the UK. And also there is one more problem wherever you have got a conflict with a member of the family either on work or inside the family it will affect both things. And also it is more difficult to fire your relative and especially the relative of your companion, because it might affect your own relations and as the result business itself.
The second thing we were going to look at was the take-over of the business. And hear the situation is also different from the others companies. And the problem is that in case of a family business the Boss usually wants his relatives to run his company after him. But the difference between average company and the family that in average company the control usually goes to the most clever and experienced worker or other company buys it. However in the family business the relative of the owner does not necessary the best candidate on this role. This fact forces the leader usually father to educate his children by himself by helping them and protecting. To be sure if they are not the best they are also not the worst and when he leaves they will be able to run the company. “ Over the next 25 years, his children joined the company and worked their way up through the management ranks to join the board” “Great Scots in Family Business” Chapter three page 29.
“ The accountancy firm BDO Stoy Hayward estimates that just 24 per cent of family business survive the hand over to a second generation, and only 14 per cent make it to the third. One study of the sector blames the situation on “ failure to manage the complex and emotion-laden issue of succession from one generation to the next”” “Great Scots in Family Business” page 94.
5)”After the second world war there was a reaction against the high tariff policy of the 1930s and significant efforts were made to move the world back to free trade. World organizations (like GATT and it’s successor WTO) have been developed to foster international trade and provide a trade climate in which such barriers can be reduced” 4
“ The IMF was charged with preventing another global depression. It would do this by putting international pressure on countries that were not doing their fair share to maintain global aggregate demand, by allowing their own economies to go into a slump. When necessary it would also provide liquidity in the form of loans to those countries facing an economics downturn and unable to stimulate aggregate demand with their own resources…. The IMF was founded on the belief that there was a need for collective action at the global level for economic stability” 5
“The IMF was conceived in July 1944, when representatives of 45 governments meeting in the town of Bretton Woods, New Hampshire, in the northeastern United States, agreed on a framework for international economic cooperation. They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s.” 6
“On march 1957 the governments of France, West Germany, Italy, The Netherlands, Belgium and Luxemburg signed the Rome Treaty. In so doing they agreed to create what came to be known as the common market or, more accurately, the European economic community” -7 As we know there are different levels of “economic integration” and by these agreement these countries made union that is known as “ Trading Block”. “A trading block is a preferential economic arrangement among a group of countries”-8 There are 4 forms of “ international Economic Integration”- Free trade area “the least restrictive and loosest form of economic integration among countries. In free trade area , all barriers to trade among member countries are removed… Sometimes a free trade area is formed only for certain classes of goods and services”-8 After free trade area goes the customs union “ one step further along the spectrum of economic integration, like the members of free trade area, members of a customs union dismantle barriers to trade in goods and services amongst themselves. In addition, however the customs union establishes a common trade policy with respect to nonmembers”-9 the next stage is “ common market …in addition (to customs union) however, factors of production are also mobile among members. Factors of production include labor, capital, and technology”-9 and the last stage is economic union “ requires integration of economic policies in addition to the free movement of goods, services, and factors of production across bordes”-9.
|
Stage of integration |
Abolition of tariffs and Quotas among members |
Common Tarriff and Quota System |
Abolition of restriction on factor movements |
Harmonization and unification of Economic Policies and Institutions |
|
Free trade area |
Yes |
No |
No |
No |
|
Customs union |
Yes |
Yes |
No |
No |
|
Common market |
Yes |
Yes |
Yes |
No |
|
Economic union |
Yes |
Yes |
Yes |
Yes |
Table-8
6)
A family-owned company
a)Glenfiddich was founded by William Grant in 1886 and is owned by the same family today. We are one of only a handful of Scotch whisky distillers to remain in family hands.10
b) Springbank Distillery is unique. It is the oldest independent family owned distillery in Scotland. Founded in 1828 on the site of Archibald Mitchell's illicit still, the Springbank Distillery is now in the hands of his great great grand son, Hedley G. Wright 11
c)CUTTY SARK family run business and royal warrant holders 12
To be called Scotch whisky, the spirit must conform to the standards of the Scotch Whisky Order of 1990 (UK), which clarified the Scotch Whisky Act of 1988, and mandates that the spirit:
No whisky other than Scotch whisky may be made in Scotland
REFERENCES TO APPENDIX
1) Colin Hines, Localization a global manifesto, Earthscan publications ltd 2000 page 4
1-a) http://en.wikipedia.org/wiki/Globalization
1-b) http://www1.worldbank.org/economicpolicy/globalization/
1-c) http://plato.stanford.edu/entries/globalization/
1-d) R.Chinkota et all, international business, 7 th edition, Thomson south-west 2005 page 380,
page 18, page 5
2)Litz, R. A. (1995). The family business: Toward definitional clarity. Family Business Review, 8(2), 71–81.
Handler, W. C. (1992). Methodological issues and considerations in studying family business. Family Business Review
3) page 2 Yue Gee Ling case University of Stirling Handbook;
Smith, Maurice, 1960 - Great Scots in family business / by Maurice Smith. Glasgow : Lang Syne Publishers for Scottish Enterprise,
1996 ” ;page 59 Paul C Rosenblatt et al 1985 “The Family In Business “
;“Managing organizations” Robert H Rosenfeld et al 1999 page198
4)Svend Hollensen, Global Marketing, a Market-responsive approach, Prentire hall Europe 1998 page 156
5) Joseph Stiglitz ,globalization and its discontents, penguin books 2002 page 12 6)http://www.imf.org/external/pubs/ft/exrp/what.htm#created.
7)Denis Swann , The Economics of the common market Penguin Books eight Edition 1995 preface
8) R.Chinkota et all, international business, 7 th edition, Thomson south-west 2005 page 251
9) R.Chinkota et all, international business, 7 th edition, Thomson south-west 2005 page 252
10) http://uk.glenfiddich.com/world/key_facts/index.html
11) http://www.springbankdistillers.com/springbank-whisky/about.php
12) http://www.cutty-sark.com/origins.htm
13 )http://en.wikipedia.org/wiki/Scotch
14) Neil M Gynn, Whisky and Scotland, Souvenir press 1977 page 48
15) Geoff Lancaster and Paul Reynolds, Marketing, Palgrave MacMillan, 2004 page 34
16) Geoff Lancaster and Paul Reynolds, Marketing, Palgrave MacMillan, 2004 14
Bibliography
1)R.Chinkota et all, international business, 7 th edition, Thomson south-west
2) Geoff Lancaster and Paul Reynolds, Marketing, Palgrave MacMillan
3) Neil M Gynn, Whisky and Scotland, Souvenir press 1977
4) Denis Swann , The Economics of the common market Penguin Books eight Edition
5) Joseph Stiglitz ,globalization and its discontents, penguin books
6) Svend Hollensen, Global Marketing, a Market-responsive approach, Prentire hall Europe 1998
7) ;“Managing organizations” Robert H Rosenfeld et al 1999
8) Paul C Rosenblatt et al 1985 “The Family In Business “
9) Smith, Maurice, 1960 - Great Scots in family business / by Maurice Smith. Glasgow : Lang Syne Publishers for Scottish Enterprise,
10) Yue Gee Ling case University of Stirling Handbook
11) Handler, W. C. (1992). Methodological issues and considerations in studying family business. Family Business Review
12) Litz, R. A. (1995). The family business: Toward definitional clarity. Family Business Review, 8(2)
13) Colin Hines, Localization a global manifesto, Earthscan publications
14) The Literature review made by my group for “Reserchment methods and Dissertation Planning” the topic “ why does the family business is struggle to survive across the generations”
15) http://uk.glenfiddich.com/world/key_facts/index.html
16) http://www.springbankdistillers.com/springbank-whisky/about.php
17) http://www.cutty-sark.com/origins.htm
18) http://en.wikipedia.org/wiki/Scotch
19) http://www.imf.org/external/pubs/ft/exrp/what.htm#created