Eastern Family Business Characteristics

Eastern family business especially in Asian region is predominantly influenced by

culture. According to Gupta (2002), the family businesses in Asia are dominated by
male, highly group-oriented within their society and hierarchical practices. This is
due to the fact that a strong relationship in family ties and also within their society
will lead to the basic motive of the family business which is to seek harmony rather
than to maximize profit.

On the other hand, in Chinese firms, it is quite common for the family businesses to
seek to regulate the involvements of others. It means that they will give priority for
those who are willing to sacrifice and be loyal to the family. According to Gupta et al.
(2007), the family businesses in Southern Asia are more likely to seek differentiating
the preparation, involvement, and roles of the different family members. For example
by providing women and younger children with better education and giving them
authority to develop non-traditional opportunities such as introducing new
technologies to be used in the family business operation and also through innovations.

As we can see from the above, culture plays an important role in eastern family
business especially in Asian region even though we noted that the approaches to
family involvement in family businesses are not necessarily the same worldwide.

Therefore, in this study, we will focus on five (5) main characteristics for the eastern
family business that includes culture, gender, finance, undivided family ownership
and also succession planning.

(i) Cultural perspective

First and foremost, as discussed above, culture is inevitably important character in

eastern family business. For an eastern family business, especially of Korean and
Chinese management, the family’s name is very significant that it cannot be changed
or replaced, with an intention to instil the pride to the family members. This
obligation to carry the family’s name has an important role for sustaining the good
name of the family and to show that their family businesses are always prosperous.

Normally, the eldest son is expected to join the family business and he needs to be
developed on every co-specialized knowledge and skills about the family business.
This is very important for him to know deeply about the family business because he
will be responsible to run the business and soon will takeover the business from the
previous successor. This means that the eldest son must acquire the knowledge and
experience from the working field and by non- specialized training.

One important thing about eastern family business, it is not just family run, but also
maintains strong social and business networks within their community which means,
the main objective of eastern family business is actually to seek harmony within their
social community and not about getting the maximum profit. For example, in
Southeast Asian family business, we can see that the culture places an emphasis on
relationships and personal ties, as the basis of working together for a common end.
Furthermore, the family lives and works in the same location hence, it is very
important to maintain the good relationship within their social community.

(ii) Gender perspective

Secondly, gender also plays an important role in eastern family business. We can see
that eastern family businesses are male-dominated especially of Asian. This
domination is actually including exercise of power, leadership, and decision making.
The wives are often included as co-owners of the family business. However their
involvement is limited and just focused on daily operation and other activities that
require social and community outreach. The role of women also can be seen in
regulating the family conflict around family business. As a mother and wife, she will
be responsible to give advice, calm down the stressful situations and to resolve
conflicts that emerged in the family business. In other words, the role that a woman
plays in the family business by acting as an advisor or a counsellor is very crucial. In
terms of decision making rights, the husband will take full responsibility.
Nowadays, the role of woman in the eastern family businesses especially in Asian
region has changed. According to Gupta (2002), women of the family are beginning
to play a more active leadership role in Asian family businesses even though their role
is quite limited. Daughters are traditionally given rights to run the family business if
there are no sons. This is happening today because women are more educated and
capable to run the family business. Conversely, through gender perspective, the role
of women in eastern family business has changed with time and improved education
opportunities, and their capability in running the business will never be questioned
anymore.

(iii) Financial perspective

The third main criterion for eastern family business is financial perspective. For an
Asian family business, the family members will be providing the capital as means for
starting up the business. This implies that they did not get any loan from outside
sources such as financial institution but instead, they only depend on the family
contributions for paid up capital.

Beside that, the financial decisions in their business are less transparent since
manipulations may occur to avoid taxes, and to avoid of painting rosy pictures to the
employees and others as well. This is crucial in order to have a good financial view on
paper to show reputable and pride of the family business because it will promote for
good family’s name.

However according to Nam (1999), the family businesses are increasingly adopting
and adapting international practices for improving operational effectiveness. They are
considering local and global trends for their strategic decision making. This is true in
these days because, it is very important to follow the international standard in doing
business such as Total Quality Management (TQM) - ISO 9000, accounting standard
and so on to make sure that the products are marketable and fulfil the required
standards by the government.
(iv) Undivided family ownership

Another dominant characteristic that we can see from eastern family business is
undivided family ownership. The dominant form of the family business is, in which
the sons, daughters, and wives own joint and undivided share in the family business.
According to Suehiro (2001), she found that the majority of Thai family business
groups have substantially continued to maintain the traditional corporate structure in
which they have control over both ownership and management. This is due to the fact
that, owner families have no difficulties in recruiting able persons from among their
own family members, since most of them are part of the extended family and are well
educated. They did not always need to depend on salaried managers from the outside,
but could groom family members to serve as professionals through investments in
education and on-the-job training at their firms.

However, the trend is changing as there are more family businesses have started to
employ other professional managers to serve as executive and sit on the board of
directors. This is actually a good strategy to ensure that the family business to run
smoothly and more efficient. According to Wailerdsak (2004), although the
ownership and control are still in the hands of the founder and family, they are always
keen to employ other professional managers in key management positions and on
their boards, and based the hiring and promotion on merit. This also implies that it is
not necessary to restrict only the family members to sit on the boards in order to get
better revenues and profits.

(v) Succession planning

Succession planning is also important criterion in eastern family business. This is a
part of the eastern culture especially in Asian region whereby the common succession
model is widely used, the leadership rights will be transferred to the oldest male
successor. This eldest son will have to take the responsibility to run the family
business and continuing the success of the business. Therefore, in order to follow the
male-successor model, to have a son is extremely important for eastern families in
keeping the family’s name in business and the transfer of the leadership rights could
be done.
For examples, we can see the numerous of successful companies that come form
family business in Malaysia such as IOI Corp. which is owned and managed by Lee
Shin Cheng and his family, KL Kepong Bhd which is controlled by Lee Oi Hian and
his family and also PPB Oil Palm Bhd of the diversified Kuok Group owned by
tycoon Robert Kuok.

In conclusion, we can see a clear picture of the characteristics in the eastern family
business which is highly influenced with culture of the locals. The cultural traditions
are very important to raise the family’s name for good reputation, to seek harmony
within their society and to transfer the leadership rights to the next generation. The
strong relationship among the family members and also within the social circles will
show them the right way in running their business. Moreover, loyalty and trust are the
main elements that are ingrained in eastern family businesses until today to run theirs
towards prosperity.

References:

Gupta, V., Surie, G., Javidan, M. and Chhokar, J. (2002), Southern Asia Cluster:
Where the Old Meets the New, Journal of World Business, 37(1), 16–27.

Vipin Gupta, Nancy M. Levenburg, Lynda Moore and Jaideep Motwani (2007).
Organizational Model of the Southern Asia Cluster Family Businesses, The Southeast
Asian Journal Management. Oct, 1-10

Nam, Young-Ho ; Herbert, James I. (1999). Characteristics and Key Success Factors
in Family Business: The Case of Korean Immigrant Businesses in Metro-Atlanta.
Family Business Review, 12(4), 341-352

Suehiro, A. (2001). Family business gone wrong? Ownership patterns and corporate
performance in Thailand. Working paper no. 19, Asian Development Bank Institute,
May 1.

Suehiro, A., & Wailerdsak, N. (2004). Family business in Thailand: Its management
governance and future challenges. ASEAN Economic Bulletin, 21(1), 81–93.