History/description of the family business

The history of very successful family owned businesses began around the 1870S and 1890s during the industrial revolution. This period ushered in an unprecedented amount of technological innovations such as the railroad, the steam engine, and eventually, the automobile. Each of these items help to foster a greater ability to transport goods and services without the need for excessive manner labor. The concept of total factor productivity was introduced during this period. Here TFP was synonymous with efficiency gains that correlated to higher productivity gain as a result of capital investment (Barnes, 1976). Capital investment was critical to the well-being of the country at this time. The ability to not only to use capital investment to enhance productivity, but also the use the financial systems to invest in these goods was critical at the time. Also, during the period capital intensive industries began to gain prominence. Examples include, chemicals, electric products, transportation systems, petroleum re?ning, metals, cigarette making, and more. The industrial revolution created an extreme demand for not only family owned businesses but businesses in general. However, because the industry at the time was in its infancy, it was able to grow from a very small base. This exponential grow allowed smaller family-owned operations to make inroads within the markets of their choosing. They started businesses with the intention of supplementing their salaried income. Instead, they were able to grow their income into many multiples of their expectation, due to the economics of capitalism. The industrial revolution provided large amounts of capital for entrepreneurs to expand their operations and created value for society overall. Even more meaningful was the untapped potential of the country (Colli, 2003). Road, bridges, railroads, and other infrastructure assets were not constructed. Airports and other firms of transportation had not been devised. This also triggered the birth of some ?rst movers who were able to establish enduring success in their ?elds and to gain long-standing leadership in national and international markets (Dyer, 1986).

Family ?rms were in the absolute majority during the ?rst industrial revolution, as well as in the pre-industrial period, going from the urban artisans workshop to the famous Medici Bank, to the sophisticated commercial and trading company of Andrea Barbarigo, Merchant of Venice, and the sibling partnerships common in the same period among the merchants of the Adriatic Sea Republic. The family owned business, even today, holds a significant place in the overall American economy. Many of these businesses are smaller and rely heavily on specialized knowledge that can not be easily displaced by the internet. These businesses rely heavily on individual skills as oppose to automated services and in many instances are owned by minorities. Dynastic principles typically dominate these firms, particularly in western civilization. Here property and control resonate with the family. Here the organization is typically small or medium sized with a flat organizational structure. The business typically relies on internal succession planning and is heavily influenced by self-funding. These organizations also typically abstain from traditional sources of financing which consist of much more public oriented features such as IPOS and so forth. Inevitably the history of family firms revolves around the ability to be a first mover in a specialized filed of operations (Gomez-Mejia, 2001). The Italians accomplished this through higher quality goods which ultimately built an international brand for French goods. Food, fashion, clothing and wine from Italy, for example are universally considered higher value that other products. Switzerland did the same thing with watches and banking. Germans did the same thing with cars and automotive products. Here in many instances, a small family owned business was the first mover and established a critical brand that resonates with consumers even to today (Ghoshal, 2005).

ef?cient family ?rms are found not only in the craft-based, traditional, and labor-intensive industries, but also in scale-intensive industries and especially in specialized, customer-oriented industries (Ewing, 1965).

Moving to the internet age, many of the advantages afforded to the family owned businesses where demised. Craft based enterprises were replaced with automation which provide similar quality products with much more speed and accuracy. Labor intensive businesses where also replaced with technology that lowered the need for the labor. For example, self-driving trucks will eventually eliminate the need for many professional truck drivers and their corresponding family-owned operations. Family owned fast food restaurants will need to compete with the technology and self-services options of competitors using various technologies to enhance their product offerings. Family-owned craftsman will be adversely impacted by technologies such as artificial intelligence which could make their operations obsolete. All of these factors diminish many of the advantages discussed above for family owned business. For example, as discussed above, family owned businesses have the advantage of a long-term commitment to a particular goal or ideal, they possess a large degree of trust between family members, and they possess a particular skill that is difficult to replicate by other competitors. During the internal and information ages, many of these advantages are mitigated. For one, due the speed of information flow, companies are now mch nimbler in their ability to course correct. Data is now becoming the next great frontier. As a result, larger, public companies have much more of a competitive advantage than family-owned businesses. For one, they are better able to fund capital investments, they have more access to the capital markets, and they are often able to attract higher degrees of talent. This ultimately allows them to be successful as they can leverage data to provide goods and services quickly and more efficiently. The family owned carpenter for example may be able to make custom pieces by hand. Their competitor however uses technology to make products much more quickly and efficiently as they often have the capital through the public markets, to invest in property plant and equipment to achieve their goals. This ultimately erodes the position of the family owned business within the technology age.

Thankfully, particularly in America, there is always room for the family owned business to flourish, albeit at a diminished level. Currently, family owned businesses comprise roughly 21% of all small businesses in America. This are often termed mom and pop stores and are characterized by small operations. Although technology has inhibited many of the smaller family owned businesses from flourishes, others have innovated and adapted according. They businesses typically rely on a specialized niche or technology that can not be disrupted by the internet. Hersheys is a family owned business that can not be disrupted by technology. The candy bar is very unique in that many are often brand oriented products are successful. In addition, there is little change in the preferences of other as it relates to candy bar consumption. As a result, as a family owned business, Hersheys has benefitted from consistent and stable growth in its operations. This has allowed the business to flourish over long decade and periods of time despite the decline in family owned businesses. As the internet continues to permeate throughout society larger, publicly traded tech firms will continue to dominate. Currently, 25% of the market cap for the S&P 500 is dominated by just four firms. Each of team, Amazon, Apple, Google, and Facebook, each have dominated and market leading positions. They have a strong growth trajectory and they each show no signs of slowing down. As a result, their growth inhibits the growth of other smaller family owned businesses. It is nearly impossible for a family owned business to compete with Amazon. As a result, they must use the Amazon platform to compete. They must use the platform to sale their goods or risk losing access to one of the largest networks in the world. The same apply for many other small businesses operating in the space. Although the future is unknown, family-owned businesses will always play a significant role in America and in the world (Danco, 1975)

Company description and history - products/services, financial performance, etc.

The family business that I am personally familiar with is Crenshaw Supply Company an Atlanta?based scaffold and shoring company. Here the company has been in operations since 1984. It has been founded and still operated by David Jackson. He has successfully taken the company from just 10 employees in 1984 to over 200 now. As a private company financial performance is not readily available. However, the company has noted that it has nearly $50,000,000 in revenue growing well in excess of the industry overall. The company has heavily benefited from the increase in construction activity throughout the southeast region. As these markets is where the company is primary focused, its operations have likewise grown with this increased activity. The companys primary focus in with commercial and residential construction. Here, through increase activity in the construction industry, the company has flourished. It has expanded its operational capabilities while also expanding its product lines beyond scaffolding and shoring. The company is currenting developing roofing, window, and door products to help supplement its other product offerings.

Currently, the industry is experiencing supply chain disruptions due to the delta variant and its impact on manufacturing firms. As a result, housing demand has not kept up with supply. This has created a unique position for the company as demand for its products has increased dramatically due to supply chain disruptions from foreign competitors. Due to COVID-19, the company, as a domestic...

…of the incumbent. Through this ability to erode the market position of the product, the industry itself begins to become commoditized. This lowers returns, profitability and reinvestment opportunities for the family-owned business. Likewise, it increases competition with the industry that as originally pioneered by the family owned business. In many instances the reliance on one singular product can be a detriment to the future profitability of the enterprise. As a result, family owned businesses must continually innovate in order to improve the ability of the business to continue as a going concern. Innovation doesnt necessarily mean an entirely new product, but can also mean product extensions. Brown Forman is a publicly traded family owned business. The company initially started with liquor beverages under the Jack Daniels name. However, new competitors entered the market and erode the large returns generated by the company. Low cost Chinese products entered the market. High prices European products entered the market. Third party providers also offered similar priced products. The barriers to entry for the business were low along with the overall switching costs of changing alcoholic beverages. As a family owned business, the company was forced to changed as new competitors entered the market. The business eventually expanded into other product extensions such as Jack Daniels Honey and Jack Daniel Apple. It acquired new businesses, provide new premium products and even changed its operations. All told Brown Forman as a family operated business still flourishes today. The critical lesson here is to continue to evolve as the market warrants. In addition, it is important to recognize when a new product category can be developed and invest heavily into it. This will ensure that the business can continue as a going concern, while also increasing revenues and overall profitability. This profitability can then be plowed back into the business to further improve returns on invested capital. As a many family owned businesses are private, the company can invest in these operations without fear of analyst or other short-term oriented investors lowering the overall stock price (Chrisman, 2005).

The final lesson learned for both my career and life relate to the capital markets. Many family-owned businesses are private. This affords them a very unique set of circumstances that allows them to better matriculate the capital markets. Publicly traded frms often have to meet quarterly earnings forecast. Analyst often rely on these quarterly forecasts in their overall earnings reports which are viewed by the public at large. Because the public relies so heavily on these forecasts, it is important for them to be accurate. The more accurate the analyst report is the more people tend to follow the advice of the analyst. The analyst though their recommendation can ultimately impact the perception of a particular stock. As a result, companies have an incentive to appease the analysts and their forecast to make sure they keep recommending the stock to their clients. If earnings guidance is continually met, the investors relying on the analyst information feel validated. In return the analyst and their company can continue to charge higher fees for their information and expertise. The investors pay the higher fees as they believe the analyst is more accurate with their predictions and ratings and is therefore more trustworthy than competing products. The cycle continues as long as all interested parties hold their end of the deal. However, when economic reality deviates substantially from the norm of Wall Street, problems can occur. For one private family owned businesses do not have to deal with the constant analyst and investor presentations of public companies (Anderson, 2003). This allows them to focus heavily on the operations of the business without the distractions of being a public company. They can better focus on core constituents, and not solely depend on a profit motive. In addition, they can defer higher profits in the short term for higher future profits in the future. This allows many families owned companies such as SC Johnson, Brown Forman, Walmart and others to survive for long periods of time. The lesson learned here is to focus on long-term value creation instead of short-term value creation which can be fleeting. In addition, it is important for family owned businesses to align themselves with people who are like minded and long-term oriented. This allows for businesses to proper throughout various economic cycles and circumstances. This is very important as the business climate and environment is very uncertain (Astrachan, 2003). Due to this uncertainty, businesses and owners must be conservative in their overall approach to business operations. By being conservative, the company will relinquish short term profits to be better positioned for long term success. The lesson is to be very patient…