1. CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURS. 1.Commitment, determination and perseverance: Total dedication to success as an entrepreneur can overcome obstacles and setbacks. Sheer determination and an unwavering commitment to succeed often win out against odds that many people consider insurmountable. A willingness to mortgage one’s house, take a cut in pay, sacrifice family time, and reduce one’s standard of living.

2. 2.Drive to achieve: –Entrepreneurs are self-starters who appear to others to be internally driven by a strong desire to compete, to excel against self-imposed standards, and to pursue and attain challenging goals –High achievers tend to be more moderate risk takers. They examine a situation, determine how to increase the odds of winning, and then push ahead. As a result, high risk decisions for average business person often are moderate risks for the well prepared high achiever.

3. 3.Opportunity obsession: –One clear pattern among successful growth minded entrepreneurs is often their focus on opportunity rather than on resources, structure or strategy. They are aware of market and customer needs. –They are goal oriented in their pursuit of opportunities. –Setting high but attainable goals enables them to focus their energies to be selective in sorting out opportunities, and to know when to say no. –Their goal orientation also helps them to define priorities and provides them with measures of how well they are performing.

4. 4.Initiative and responsibility: –Historically the entrepreneur has been viewed as an independent and highly self-reliant innovator. Effective entrepreneurs actively seek and take the initiative. –They willingly put themselves in situations where they are personally responsible for the success or failure of the operation. –They like to take the initiative in solving a problem or in filling a vacuum where no leadership exists. –They also like situations where their personal impact on problems can be measured. –This is the action-oriented nature of the entrepreneur expressing itself.

5. 5.Persistent problem solving: Entrepreneurs are not intimidated by difficult situations. Their self-confidence and general optimism seem to translate into a view that the impossible just takes a little longer. If the task is extremely easy, entrepreneurs will often give up sooner than others. Simple problems bore them; unsolvable ones do not warrant their time. Although entrepreneurs are extremely persistent, they are realistic in recognizing what they can and cannot do and where they can help in solving difficult but unavoidable tasks.

6. 6.Seeking feedback: –Effective entrepreneurs are often described as quick learners. –Unlike many people, however, they also have a strong desire to know how they are doing and how to improve their performance. –In attempting to make these determinations, they actively seek out and use feedback. Feedback is also central to their learning from their mistakes and setbacks.

7. 7.Internal locus of control: Successful entrepreneurs believe in themselves. They do not believe that the success of failure of their venture will be governed by fate, luck or similar forces. They believe that their accomplishments and setbacks are within their own control and influence and that they can affect the outcome on their actions. This attribute is consistent with high achievement motivation drive, the desire to take personal responsibility and self-confidence.

8. 8.Tolerance for ambiguity: Start-up entrepreneurs face uncertainty that is compounded by consistent changes that introduce ambiguity and stress into every aspect of the enterprise. Setbacks and surprises are inevitable, lack of organization structure and order is away of life. Yet successful entrepreneurs thrive on their fluidity and excitement of such an ambiguous existence. Job security and retirement generally are of no concern to them.

9. 9.Integrity and reliability: These two are the glue and fiber that bind successful personal and business relationships and make them endure. Investors, partners, customers, and creditors alike highly value them. Integrity and reliability help build and sustain trust and confidence. Small business entrepreneurs in particular find that these two characteristics are crucial to success.

10. 10.Tolerance for failure: Entrepreneurs use failure as a learning experience. The most effective entrepreneurs are realistic enough to expect difficulties They do not become disappointed, discouraged or depressed by setbacks or failures. In adverse and difficult times, they look for opportunities. Many believe to learn more from their failures than from success.

11. 11.High energy level: The extraordinary workloads and the stressful demands faced by entrepreneurs place a premium on energy. Many entrepreneurs fine-tune their energy levels by careful monitoring what they eat and drink, establishing exercise routines and knowing when to get away for relaxation. 12.Creativity and innovativeness: Creativity was once regarded as an exclusively inherited trait. It is however not fully accepted this to be a genetic. Research shows that creativity can be learned.

12. 14.Vision: Entrepreneurs know where they want to go. They have a vision or concept of what their firm can be. Not all entrepreneurs have determined visions for their firms. In many cases, this vision develops over time as the individual begins to realize what the firm is and what it can be. 15.Self confidence and optimism: Although entrepreneurs often face major obstacles, their belief in their ability selfdom wavers. During these down periods they maintain their confidence and let those around them know it. This helps the others in sustaining their own optimism and creates the level of confidence necessary for efficiency growth effort.

13. CONCEPT OF ENTREPRENEURIAL LEGACY. These are material assets and intangible qualities passed on to both heirs and society. Part of the legacy is the contribution of the business to the community. A worthy legacy includes a balance of values and principles important to the entrepreneur. Errors in choosing or applying goals and values can create a defective legacy. Building a legacy is an ongoing process that begins at the launch of the firm and continues throughout its operating life.

14. INTEGRITY AND ENTREPRENEURSHIP. –The hall mark of integrity include such values as honesty, reliability and fairness. –Integrity is as much about what to do as it is who to be. –The notion of integrity is closely tied to ethical issues which involves questions of right and wrong. Such questions go beyond what is legal or illegal and entrepreneurs must make decisions regarding what is honest, air and respectful. –Individuals facing ethical issues are sometimes tempted to place self-interest and personal financial gain ahead of the reasonable and legitimate interests of others. –Most people who show integrity in their business lives do not weigh the economic benefits before deciding how honest and forthright they can afford to be.Instead they live by the highest of standards simply because it’s the right thing to do.

15. APPLICATION OF INTEGRITY TO VARIOUS STAKEHOLDERS GROUPS. Issues that challenge the integrity of small business relates to Customers,Competitors,way company treats its employees decisions about layoffs, workplace discrimination, fairness in promotions etc). Entrepreneurs must consider the interests of a number of groups when making decisions:-Owners,Customers,Employees and the Community. Promoting the Owners Interest High standards of integrity require an honest attempt to promote the interests of all the owners which include a commitment to financial performance and protection of the firms reputation. Respecting Customers. Customers are one of the most important stakeholder groups that a company must please and since they are central to the purpose of any business, the issue of integrity is critical.

16. When making marketing decisions entrepreneurs are confronted with a variety of ethical questions eg advertising content. Sales people must walk a fine line between persuasion and deception. Valuing Employees. The level of integrity in a firm is reflected in the amount of respect given to employees. Issues of fairness, honesty and impartiality are inherent in decisions and practices regarding hiring,promotions,salary increases,dismissals,lay offs etc. Employees are also concerned about privacy, safety and healthy issues and these should not be ignored. Showing proper appreciation for subordinates as human beings and as valuable members of the team is an essential ingredients of managerial integrity. Employees of small firms face pressure from various sources to act in a way that conflict with their own sense of what is right or wrong.Eg a salesperson may feel pressurized to compromise personal ethical standards to make a sale. Such situations are guaranteed to produce an organization culture that fails to promote integrity.

17. In some cases employees may engage in unethical behaviour at their employees expense eg:working too slowly, taking unjustified sick leave. Social Responsibility and Small Business. An ethical business in one that not only treats customers and employees honestly but also acts as a good citizen in its community. Companies have increasingly been accepting responsibility to the communities where they do business. They start with creating jobs and adding local tax revenues. Recognizing a social obligation does not change a profit- seeking business into a charitable organization. Government Laws and Regulations. Entrepreneurs must comply with governmental laws and regulations if they are to maintain integrity. Example of unethical behaviour by small firm management is fraudulent reporting of income and expenses for income tax purposes(tax evasion)

18. THE CHALLENGES AND BENEFITS OF ACTING ETHICALLY Vulnerability of Small companies Because a small firm is at a disadvantage relative to larger competitors that have superior resources, the owners may be tempted to rationalize bribery as a way of offsetting what seems to be a competitive disadvantage and securing an even playing field. Decision making about ethical issues often calls for difficult choices on the part of the entrepreneur.

19. The integrity Edge. The price of integrity is high but the potential pay off is incalculable The entrepreneur who makes honorable decisions takes satisfaction in knowing that he or she did the right thing, even if things do not turn out as planned. Integrity is crucial to business success. Other benefit of integrity is the trust it generates:-customers buy more, Employees go the extra mile and members of the community respond positively.

20. INTERGRITY AND THE INTERNET. Firms using the internet face a host of new ethical issues that arise in the e-market place. Individual privacy is of great concern. The extent to which an employer may monitor an employees internet activity. The issue of intellectual property being copied for free.

21. INTERNATIONAL ISSUES OF INTEGRITY. Every country faces questionable behaviour within its borders,but some must deal with very serious forms of illegal business activity. Criminal gangs engage in business operations that might better be characterized as evil,rather than unethical Issues of paying customs employees or well connected helpful individuals in another country(is this a tip,bribe,consulting fee or extortion?)

22. BUILDING A BUSINESS WITH INTEGRITY To build a business with integrity,management must provide the kinds of leadership,culture and instruction that support appropriate patterns of thought and behaviour. Business practices that a firms leaders or employees view as right or wrong reflect their underlying values. Actual behaviour provides the best clues to a persons underlying system of basic values:-not verbal posturing. Entrepreneurs who care about ethical performance in their firms can use their influence as leaders and owners to urge and insist that everyone in their firms display honesty and integrity in all operations.

23. The personal integrity of the founder/owner is key to a firms ethical performance. Integrity in a firm requires a supportive organizational culture. An ethical culture requires an environment where employees at every level are confident the firm is fully committed to honorable conduct. The firm should formulate a code of ethics expressing the principles to be followed by employees.Employees should read and sign it and should establish the foundation of business.

24. ENVIRONMENTALISM-COST OR OPPORTUNITY Environmentalism:-the effort to preserve and redeem environment affect business organizations. One source of pollution has been the industrial discharge of waste into streams,contaminants into the air and noise into areas surrounding the operations. Some business leaders have consistently worked and acted for the cause of conservation eg landscaping Some businesses have benefited from the general emphasis on ecology.eg firms whose products are harmless to the environment being preferred by customers over competitors whose products pollute. Some firms are involved in servicing pollution-control equipment eg auto repair shops.

25. However some firms are adversely affected by efforts to protect environment.eg cement plants are vulnerable to extensive environmental regulation and the cost impact is severe and sometimes leads to closure. While environmentalism represents a cost to some small businesses it opens great opportunities for others. Startups have come to life precisely because of environmental concerns.eg one current environmental challenge is disposing of used tyres and several start ups have recognized they can turn this into cash through recycling

26. BUSINESS OPPORTUNITY. IDENTIFYING STARTUP IDEAS. To qualify as agood investment opportunity,a product or service must meet a real market need with respect to its function,quality,durability and price.Success ultimately depends on convincing consumers of the benefits of the product or service. Fundamental requirements for judging whether a new business idea is a good investments opportunity includes:- Market Factors.Product/Service must meet a clearly defined market need and the timing must be right.Even when the concept is good,success requires a window of opportunity that remains open long enough for an entrepreneur to take advantage of it.

27. Competitive advantage.This exists when a firm offers a product/service that customers perceive to be superior to those of competitors.The business must be able to achieve an edge that can withstand challenges from rivals. Economics.The venture needs to be financially rewarding,allowing for significant profit and growth potential.The profit potential must be sufficient to allow for errors and mistakes and still provide acceptable economic benefits. Management capability.There must be a fit between the entrepreneur and the opportunity.A business idea is an opportunity only for the entrepreneur who has the appropriate experience,skills and access to the resources for the ventures growth. Fatal flaws.There must be no fatal flaw in the venture- that is no circumstance or development that could in and of itself make the business unsuccessful.

28. REASONS FOR STARTING A NEW BUSINESS FROM SCRATCH RATHER THAN BUYING A FRANCHISE OR EXISTING BUSINESS Having a personal desire to develop the commercial market for a newly developed product/service. Tapping into unique resources that are available such as an ideal location,new equipment technologies Avoiding undesirable features of existing companies such as unfavorable policies,procedures and legal commitments. Wanting the challenge of succeeding(or failing) on your own.

29. TYPES Type A Ideas(New Market) Concerned with providing customers with a product/service that does not exist in a particular market but exists somewhere else. TypeB Ideas(New Technology) Involve new or relatively new technology. Type C Ideas(New Benefit) Based on offering customers benefits from new and improved ways of performing old functions. This accounts for the largest number of start ups. DIFFERENT TYPES AND SOURCES OF START UP IDEAS

30. SOURCES OF STARTUPS Personal experience. Primary source of startups ideas is personal experience,either at work or at home. Knowledge form a present or former job often allows a person to see possibilities for modifying an existing product,improving a service or duplicating a business concept in a different location. Hobbies. Sometimes hobbies grow beyond being leisure activities to become business. Accidental Discovery. This involves serendipity,or the seeming ability to make desirable discoveries by accident. Anyone may stumble across a useful idea in the course of day to day living.

31. Deliberate search This involves looking for change based opportunities though may take other paths. Useful because it stimulates a readiness of mind which motivates prospective entrepreneurs to be more receptive to new ideas. Other idea leads:-tapping personal contacts with potential customers,suppliers,coworkers etc;Visiting tradeshows,research institutes;Observing trends related to emerging technologies,recreation,personal security,social movements;Reading trade publications,business classified.

32. USING INTERNAL AND EXTERNAL ANALYSES TO EVALUATE AN OPPORTUNITY OUTSIDE-IN ANALYSIS This considers both general environment(big picture) and industry setting in which the venture might do business. General environment Macroeconomic:-changes in the rate of inflation,currency exchange rates. Sociocultural:-social trends that may affect consumer demand,opening up new markets and forcing others into decline. Political/Legal:-Changes in tax law and government regulation may pose a threat to businesses or devastate an inventive business concept.

33. Technological:-most important to small business since development in this segment wipe out many new ventures. Global:-reflects international developments that create new opportunities to expand markets,outsource and invest abroad.Sometimes,developments in the global segment lead to new business opportunities at home. The industry Environment. New Competitors,How easy is it for new competitors to enter the industry? Substitute products/services.Can customers turn to other products/services to replace those that the industry offers? Rivalry.How intense is the rivalry among existing competitors in the industry? Suppliers.Are industry suppliers so powerful that they will demand high prices for inputs thereby increasing the companys costs and reducing its profits?

34. Buyers. Are industry customers so powerful that they will force companies to charge low prices thereby reducing profits? Entrepreneurs who understand industry influences can better assess market opportunities and guard against threats to their ventures. Within the industry environment it is important to determine the strength,position and likely response of rival businesses.

35. INSIDE-OUT ANALYSIS 1.Resources and Capabilities Resources:-basic inputs that a firm uses in its business, including capital,technology,equipment and employees. Tangible resources are visible and easy to measure eg trademarks,plants&equipment.Intangible resources are invisible and difficult to assess eg intellectual property rights such as patents&copyrights,firm reputation. Capabilities:-Integration of various resources in a way that boosts the firms competitive advantage.

36. 2.Core Competencies These are those resources and capabilities that provide a firm with a competitive advantage over its rivals. They emerge when a company learns over time to use its resources and capabilities in unique ways that reflect the ‘personality’ of the enterprise. Entrepreneurs who can identify core competencies and apply them effectively can help their firms achieve a competitive advantage and superior performance.

37. Integrating Internal and External Analyses. A solid foundation for competitive advantage requires a match between the strengths and weaknesses of a business and current opportunities and threats.This integration is best revealed through SWOT analysis(Strengths,Weaknesses,Opportunities,and Threats) which provides a simple overview of the firms strategic situation. Outside-in and inside-out analyses come together in the SWOT analysis to help an entrepreneur identify opportunities that match the venture. Most promising opportunities are those that lead to others(offering value and profitability over the long run,promote the development of additional skills that equip the firm to pursue new prospects,and yet do not provoke competitors to strike back. Conducting outside-in and inside-out analyses and integrating their results builds a solid foundation for competitive advantage.With that foundation,the entrepreneur can begin to create a strategy for achieving superior financial performance.

38. SELECTING STRATEGIES THAT CAPTURE OPPORTUNITIES. A strategy is a plan of action for coordinating the resources and commitments of a business to boost its performance. Strategy selection should be guided by the firms situation,rather than past choices,latest industry fad or whatever feels right at the moment. BROAD-BASED STRATEGY OPTIONS. 1.COST-BASED STRATEGY. Requires a firm to be the lowest cost producer within the market.Sources of cost advantage are varied eg low cost labor,efficiency in operations. 2.DIFFERENTIATION-BASED STRATEGY Emphasizes the uniqueness of a firms product or service(in terms of some feature other than cost)

39. For the strategy to be effective the consumer must be convinced of the uniqueness and value of the product or service-whether real or perceived. A wide variety of operational and marketing tactics ranging from promotion to design can lead to product or service differentiation.

40. FOCUS STRATEGIES A plan of action that isolates an enterprise from competitors and other market forces by targeting a restricted market segment market niche). Focus strategy is attractive to a small firm trying to escape direct competition with industry giants while building a competitive advantage. Focus strategies can be implemented in any of the following ways:- 1.Restricting focus to a single subset of customers. 2.Emphasizing a single product or service 3.Limiting the market to a single geographical region 4.Concentrating on superiority of the product or service.

41. By selecting a particular focus strategy an entrepreneur decides on the basic direction of the business and this choice affects the very nature of the business and thus referred to as a strategic decision. A strategic decision is a decision regarding the direction a firm will take in relating to its customers and competitors. Focus strategies are popular because they allow a small firm to operate in the gap that exists between larger competitors. Firms that adopt a focus strategy tread a narrow line between maintaining a protected market and attracting competition.If ventures are profitable,entrepreneurs must be prepared to face competition A segmented market can erode if the focus strategy is imitated,the target segment becomes structurally unattractive because demand disapears,the target segment differences from other segments narrow and new firms subsegment the industry.

42. GROUP ACTIVITY Why would a person start a business from scratch and not buy an existing business? Why would a person buy an existing business rather than start from scratch? Discuss the advantages/disadvantages of each form of business

43. FRANCHISES AND BUYOUTS FRANCHISING Franchising is a marketing system involving a legal agreement whereby the franchisee conducts business according to terms specified by the franchisor. Franchising revolves around a two-party agreement whereby one party(the franchisee)is granted the privilege to sell a product or service and conduct business as an individual owner but is required to operate according to methods and terms specified by the other party(the franchisor)

44. FRANCHISING OPTIONS Business format franchising: Entrepreneurs who receive an entire marketing and management system are participating in a broader type of arrangement referred to as business format franchising. A master licensee: Is a firm or individual having a continuing contractual relationship with a franchisor to expand its franchise. This independent company or business is a type of middleman or sales agent. Master licensees are responsible for finding new franchisees within a specified territory. Master licensees are responsible for finding new franchisees within a specified territory.

45. Multiple-unit ownership: is situation where a single franchisee owns more than one unit of the franchised business. Some of these franchisee are area developers – individuals or firms that obtain the legal rights to open several outlets in a given area. Piggyback franchise: refers to the operation of a retail franchise within the physical facilities of a host store.

46. Advantages of Franchising Probability of success since most franchisors are highly selective when granting franchises. Offers training,financial assistance and operating benefits that are not easily available to the entrepreneur starting a business from scratch. Training is invaluable to small entrepreneurs because it alleviates weaknesses in their managerial skills.It permits individuals who have had little training or education to start and succeed in businesses of their own.Subsequent training and guidance may involve refresher courses and /or visits by a company representative to the franchisees location from time to time.The franchisee may also receive manuals and other printed materials that provide guidance in operating the business.

47. Financial Assistance. The cost of starting an independent business are often high and typical enterpreneurs source of capital are quite limited.The entrepreneurs standing as a prospective borrower is weakest at this time.By teaming up with a franchising organization,the franchisee may enhance her/his likelihood of obtaining financial assistance.If the franchising organization considers the applicant a suitable prospect with high probability of success it frequently extends a helping hand financially. Association with a well-established franchisor may also improve a new franchisees credit standing with a bank. Operating benefits. Most franchised products and services are widely known and accepted. An entrepreneur who enters into a franchising agreement acquires the right to use the franchisors nationally advertised trademark or brand name.This serves to identify the local enterprise with the widely recognized product or service

48. In addition to a proven line of business and readily identifiable products or services,franchisors offer well developed and thoroughly tested methods of marketing and management. Limitations of Franchising The costs associated with the franchise namely initial franchise fees,investment costs(renting or building an outlet,stocking etc),royalty payments(based on a percentage of the franchisees gross income)and advertising costs(many franchisors require that franchisees contribute to an advertising fund to promote the franchise.If entrepreneurs could generate the same level of sales by setting up an independent business they would save the franchisee fee and some other costs.However if the franchisor provides the benefits previously described the money franchisee pays may prove to be a very good investment.

49. Restrictions on business operations.Franchisors concerned about the image of their business make every effort to control how franchisees conduct certain aspects of the business.The franchisee is thus restricted in the ability to use personal judgement. The following types of control are frequently exercised by a franchisor: –Restricting sales territories –Requiring site approval for the retail outlet and imposing requirements regarding outlet appearance –Restricting goods and services offered for sale –Restricting advertising and hours of operation

50. Loss of independence: By signing a franchise agreement, the franchisee surrenders considerable amount of independence. This kind of control may be disliked by entrepreneur who cherishes independence. Failure to abide with set regulations, the franchisee may lose the right to a franchise.

51. EVALUATING FRANCHISE OPPORTUNITIES Having made the decision to get involved with a franchise system of business, the entrepreneur needs to carefully select the right business to join. The source of such franchise system could be found in newspapers, journals, personal observation or advertising. Investigating the potential franchise: What should be the prospective entrepreneur’s first step in evaluating a franchising opportunity? Basically, three sources of information should be tapped:

52. Independent, third-party sources of information: State and federal agencies are valuable sources of franchising information. Franchising are legal entities and are registered in with the government. Business publications are also excellent sources of franchisor ratings. Such rating concerns the financial strength and the franchising system’s growth rate and size. The web also provides another source of information (for example, The International Herald- Tribune). In recent years, franchise consultants have appeared in the marketplace to assist individuals seeking franchise opportunities. The franchisor as source of information: The franchisor being evaluated can be a good source of information although such information should be seen a ways of promoting the franchise. This should be done with a view to search for more information before finally making a final decision.

53. Existing and previous franchisees as sources of information: Existing franchisees are at a position to give a potential entrepreneur much information concerning the franchisor. The information should not just be collected for existing franchisees but also from those who have left the system for one reason or another.

54. Why Would an entrepreneur wish to become a franchisor rather than operate only company owned outlets? There are three major reasons that attract entrepreneurs to franchising systems: ii) Reduction of capital requirement: Franchising allows a firm to expand without diluting capital. Through fee and royalty arrangements, the firm involved in franchising in effect borrows capital from franchisees for channel development and thus reduces capital requirements than does a wholly owned chain.

55. ii) Increase in management motivation: Franchisees, as owners, are more highly motivated interest in the business. Since franchising is decentralized, the franchisor is also less susceptible to labor-organizing efforts than are more centralized organization. iii) Speed of expansion: Franchising lets a business enter more markets more quickly than it could using only its own resources.

56. The franchisors also experience several drawbacks associated with franchising. Such are: 1. Reduction in control: A franchisor’s control over the business in reduced because franchisees are not employees. This is a major concern for most franchisors. 2. Sharing of profits: only part of the profit belongs to the franchisor. 3. Increase in operational support costs: The costs associated with such areas as accounting and legal services are generally higher for franchises than for the more centralized organization.

57. Legal Considerations in Franchising: An entrepreneur who is interested in franchising must give careful consideration to legal issues. Of particular importance is the franchise contract. The franchising contract: The basic features of the relationship between the franchisor and the franchisee are embodied in the franchise contract. This contract is typically a complex document running to many pages. Because of its importance as the legal basis for the franchised business, the franchise contract should never be signed by the franchisee without legal counsel.

58. THE FAMILY BUSINESS A family business is a company that two or more members of the same family own or operate together or in succession.The nature and extent of family members involvement vary. Firm is recognized as family business if it passes from one generation to another.Research has shown that around 30% of family business survive into the second generation and less than 16% make it to the third. Family and Business Overlap. Any family business is composed of both a family and business and though separate institutions each with its own members,goals and values they overlap in the family firm. Families and businesses exist for fundamentally different reasons.The family primary function is the care and nurturing of family members,while business is concerned with the production and distribution of goods and/or services.

59. Individuals involved directly or indirectly in a family business have interests attionsnd perspectives that differ according to their particular situations.Individuals may be involved as members of the family,employees of the business,owners of the business and various combinations of these. A family member working in the firm but having no ownership interest might favor more generous employment and advancement opportunities for family members than a family member who owns part of the business but works elsewhere or an employee with neither family nor ownership interest. Differing interests can complicate the management process,creating tension and sometimes leading to conflict.Relationship among family members in a business are more sensitive than relationship among unrelated employees.

60. Competition between Family and Business In theory most people opt for the family. In practice,the resolution of such tensions becomes difficult and despite being motivated by a sense of family responsibility,a parent may nevertheless become so absorbed in the business that he/she spends insufficient time with the children. If a family business is to survive,its interests cannot be unduly compromised to satisfy family wishes. To grow,family firms must recognize that professional management is needed and that family interests must sometimes be secondary. The underlying idea is that family members can contribute to the success of a family business but that membership in the family does not automatically endow them with abilities needed in key positions.The health and survival of a family business require proper attention to both business and family interests as well as a proper balancing of those interests.

61. Advantages of a family business. Strength of family relationship.Family members have a unique motivation because the firm is a family firm and business success is also family success. Family members stick with the business through thick and thin.A downturn in business fortunes might cause nonfamily employees to seek greener pastures elsewhere but a son or daughter may be reluctant to leave. Family members may sacrifice income to keep a business going.Rather than draw large salaries or gigh dividends,they are likely to permit resources to remain in the business in order to meet current needs. Some family businesses use the family theme in promotions to distinguish themselves from their competitors.This conveys that they have a strong commitment to the business,high ethical standards and a personal commitment to serving their customers and the local community.

62. Other features of family involvement in a firm can also contribute to superior business performance.David Sirmon&Michael Hitt identified the following features of these firms that can offer unique advantages 1.Firm-specific knowledge.They often compete using firm-specific knowledge that is best shared and further developed by individuals who care deeply about the business and who trust one another. 2.Shared social networks.Family members bring valuable social capital to the business when they share their networks with younger members of the family and thus help to ensure the firms future performance. 3.A focus on the longrun.Family managers can take long range perspective more easily than can corporate managers

63. 4.Preservation of the firms reputation.Because they need to preserve the reputation of the family,family members are likely to maintain high standards when it comes to honesty in business dealing,offering quality and value to consumer 5.Reduced cost of control.Because key employees in a family business are related and trust one another,the firm can spend less on systems designed to reduce theft and to monitor employees work habits.

64. THE CULTURE OF A FAMILY BUSINESS Like other organizations family firms develop certain ways of doing things and certain priorities that are unique to each firm. These special patterns of behaviors and beliefs comprise the firms organizational culture. The founders core values may become part of both the business culture and the family code- ”the things we believe as a family”. The total culture of a family firm consisting of the firms business,family,and governance patterns is called the cultural configuration.

65. Common cultural configuration of a family firm include 1.Business pattern:-Eg:- Paternalistic,participative,professional 2.Family pattern.eg Patriarchal,Collaborative,Conflicted. 3.Governance pattern.eg rubber stamp board,Advisory Board,Overseer Board. If a cultural configuration consists of paternalistic business pattern,patriarchal family pattern and a rubberstamp board as governance pattern it simply means family relationships are more impoortant than professional skills,founder is undisputed head of the clan and the board automatically support the founders decisions.

66. Culture and Leadership succession.The process of passing the leadership of a family from one generation to another is complicated by and interwoven with changes in the family business pattern.Changing conditions may render for instance the paternalistic/patriarchal cultural configuration ineffective.As a family business grows it requires a greater measure of professional expertise.Likewise the aging of the founder and the maturation of the founders children tend to weaken the patriarchal family culture.

67. COMPLEX ROLES AND RELATIONSHIPS INVOLVED IN A FAMILY BUSINESS The overlapping of a family and business makes the family firm difficult to manage and the many possible family roles and relationships contribute to this managerial complexity. 1.Mom or Dad, the founder Entrepreneurs who have children think in terms of passing the business on to the next generation. The parent-child relationship has been recognized for generations as the most troublesome 2.Husband-Wife Teams. A potential advantage of the husband-wife team is the opportunity it affords a couple to share more of their lives. For some couples, the potential benefits become eclipsed by problems related to the business. Differences of opinion about business matters may carry over into family life.

68. 3.Sons and Daughters In the entrepreneural family the natural tendency is to think in terms of a family business career and to push a child either openly or subtly in that direction. Little thought may be given to the basic issues involvement eg childs talent,aptitude and temperament 4.Sibling cooperation,Sibling Rivalry. In families with a number of children,two or more may become involved in the family business. Business issues tend to generate competition and siblings may disagree about business policy or their respective roles in the business. 5.In-Laws in and out of business. Some inlaws become directly involved by accepting positions in the family form and rivalry and conflict may develop. For a time effective collaboration may be achieved by assigning family members different branches or roles within the company.

69. Those on the sidelines are also participants with an important stake in the business.eg a daughter married to someone in the payroll,she will see a decision by a parent affecting her husband as both family and business decision. 6.The enterpreneurs spouse. Traditionally fulfilled by the male entrepreneurs wife but more women are becoming entrepreneurs and many husbands have now assumed this role. For the spouse to play a supporting role in the entrepreneurs career there must be communication between them and must be a good listener.

70. PROFESSIONAL MANAGEMENT OF THE FIRM The need for Good Management. Good management is necessary for the success of any business and the family firm is no exception. Practices of good management include 1.Stimulate new thinking and fresh strategic insights. 2.Attract and retain excellent nonfamily members. 3.Create a flexible, innovative organization. 4.Create and conserve capital 5.Prepare successors for leadership. 6.Exploit the unique advantages of family ownership. Observing these and other practices of good management will help the business thrive and permit the family to function as a family. Disregarding tem will pose a threat to the business and impose strains on family relationships.

71. Nonfamily Employees in a Family firm Employees not family members are affected by family considerations. Their opportunities for promotion are lessened by the presence of family members who seem to have the inside track hence the potential for advancement of nonfamily employees may be limited and may experience a sense of unfairness and frustration. The extent of limitations on nonfamily employees depends on the number of family members active in the business, number of managerial/professional positions in the business to which nonfamily employees might aspire. It also depends on extent to which the owner demands competence in management and maintains an atmosphere of fairness in supervision. To avoid future problems the owner should make clear,when hiring nonfamily employees,extent of opportunities available and identify positions if any reserved for family members.

72. Family Retreats. A family retreat is a meeting of family members usually at a remote location to discuss family business matters. An attempt is made to create an informal atmosphere. Prospect of sitting down together to discuss family business mattes may seem threatening to some family members. Some families avoid extensive communication fearing that it will stir up trouble and assume making decisions quietly will preserve harmony.unfortunately such an approach often conceals serious differences that become increasingly troublesome. Family retreats are designed to open lines of communication and bring about understanding and agreement on family business issues.

73. Guidelines to ensure the success of a family business retreat. Set a time and place Distribute an agenda prior to meeting. Plan a schedule in advance Give everyone a chance to participate. Keep it professional Family Councils. This is an organized group of family members who gather periodically to discuss family-related business issues(values,policies and direction for the future). Functions as the organizational and strategic planning arm of a family. Should be a formal organization that holds regular meetings, keeps minutes and makes suggestions to the firms board of directors.

74. Family Business Constitutions. This is a statement of principles intended to guide a family firm through times of crisis and change. THE PROCESS OF LEADERSHIP SUCCESSION. Task of preparing family members for careers and ultimately leadership within the business is difficult and sometimes frustrating. Available family talent A family firm can be no more brilliant than its leader and the business is dependent on the quality of leadership talent provided.If available talent is not sufficient the owner must bring in outside leadership or supplement family talent to avoid a decline under the leadership of second or third generation family members. Competency is both critical and delicate. Some businesses include mentoring which is the process by which a senior person in the firm guides and supports the work,progress and professional relationships of a new or less experienced employee.

75. STAGES IN THE PROCESS OF SUCCESSION. Sons or daughters do not assume leadership of a family firm at a particular moment in time. A long drawn-out process of preparation and transition is customary and this extends over years. STAGES. 1.Pre-business Child becomes aware of some facets of firm and/or industry Orientation of child by family member is informal. 2.Introductory Child is exposed to business jargon,employees in the business and the business environment. 3.Introductory Functional Child works as part-time employee.Work gradually becomes difficult Includes education and sometimes work for other firms.

76. 4.Functional Potential successor begins work as full time employee Includes all nonmanagerial positions 5.Advanced functional Potential successor assumes managerial position. Includes all management positions prior to becoming president. Management positions involve directing work of others but not managing entire firm. 6.Early Succession Successor assumes presidency Exercises overall direction but parent still in the background 7.Mature Succession. Successor becomes de facto head of company. In some cases this does not occur until the predecessor dies. In best case scenario this begins two to three years after successor assumes leadership title

77. Reluctant Parents and Ambitious Children Founders attachment to the business must not be underestimated. Parents often have a way of seeing their children as immature long after their years of adolescence. Child may be ambitious,well educated and insightful regarding the business and the tendency to push ahead often conflicts with the fathers caution. As a result the child may see the father as excessively conservative, stubborn and unwilling to change. Root of many such difficulties is lack of understanding between parent and child and they could be avoided if a full discussion of the development process took place in advance.

78. TRANSFER OF OWNERSHIP This involves passing ownership of a family business to the next generation. Involves issues of fairness, taxes and managerial control.