The emergence of Covid-19 has brought many challenges. Businesses around the world have had to react in agile and decisive ways. All activities, commercial and personal, came to a halt worldwide starting in early 2020. The pandemic has impacted every aspect of life, be it working at the office, face-to-face meetings, studying in classrooms, dining at restaurants or travelling and many more.
Change can be tough, especially when one is unprepared. Today, with the help of intelligent technologies, most things are carried out online. With the availability of Covid-19 vaccines, there have been calls for things to go “back to normal”, but do we really want to? For example, wouldn’t we rather attend a meeting online instead of battling an hour of traffic just to be physically present?
Shopping is another example. Online shopping is not something new. In fact, the downfall of Forever 21, the family-owned, US-based fast fashion company that filed for bankruptcy in 2019, was partially due to its failure to respond to consumer trends. While consumer behaviour had shifted to e-commerce, the Chang family was still aggressively expanding by opening flagship stores. Waning sales, coupled with a shift in consumer tastes and habits, eventually led to the business being saddled with long leases and huge losses.
Those familiar with Chinese metaphysics may have heard of “Period 9”. As explained by several famous metaphysics gurus such as Datuk Anthony Cheng, Datuk Joey Yap, Jessie Lee and Louis Loh, Period 9 denotes fire energy — an energy that mostly has to do with technology but at the same time can be volatile and drive changes.
Although Period 9 is a 20-year luck cycle supposedly occurring between 2024 and 2043, energy shifts over time and does not come in an instant. As such, as we go through the last few months of 2021, we shall continue to observe the significant rise of e-commerce, online learning, artificial intelligence, digital currency, blockchain technology and more.
What does all this mean for family businesses? Family businesses are known for their dedication and commitment to long-term generational success. Most notably, these businesses uphold family legacy, family values, family culture, family heritage and family tradition. Therefore, they need to be adaptable to ensure long-term sustainability. The first step is to accept that change is inevitable. Family businesses need to find a balance between maintaining family values and adapting to the ever-changing business landscape. They should consider the five points outlined below.
Adapt and embrace change
A family business that is passed down generation after generation is a form of change, and such change when done consciously leads to growth. Change does not mean the business loses its identity by discarding family tradition or values, but instead it strategises change by adaptation. Take, for example, Al-Sattar Enterprises, a fourth-generation family business in Pakistan that deals in chemicals and paint, packaging and labelling, and the control shed business. Sheikh Sufiyan Sattar, a fourth-generation family member and managing director of the company, explains, “Owing to the pandemic, difficulty in deliveries and distribution of raw materials such as chemicals and paint had caused a shortage in the market and led to the increase in product pricing. Such a situation had caused price wars between competitors, and it was hard for many distributors to maintain their position in the market. So, I proposed to my father, Sheikh Arif Sattar, to cut our profit margin for a short period of time to maintain the business during these trying times. After much consideration, my father approved my proposal.”
Creativity and innovation
As with change, being innovative does not mean a family business has to turn 180 degrees and come up with products that are different from the existing product line. For example, a family business can retain the production process and craftsmanship that consumers value but come up with different flavours or packaging, or new avenues for selling the products. Innovation does not always have to be radical; family businesses can attempt incremental innovation too. Swastik Rice and Oil Mills is a third-generation family business in Nepal. Swecha Rijal, a family member, explains: “Being in the business of rice and oil, which are staple foods, we have not been affected much by the pandemic, as our production continued to be in full operation. Although we did not need to, we still opted for e-commerce, which was initiated for the first time in almost 70 years of being in business. E-commerce made it easier to distribute the high-quality products produced following the traditional way during the pandemic.”
Be entrepreneurial
Many family businesses have been around for decades and have a rich history, but that should not be the reason to be comfortable and bask in past glory, especially in the times we live in. A second-generation family member of a Sabah-based oil palm plantation family business, says: “Being in the agriculture business, we are lucky to have not been affected by the pandemic. This can also be attributed to the fact that we paid off the loan on the land long ago, in line with our family values not to operate a debt-based business. Despite business operations going smoothly during the pandemic, we are always looking out for new business opportunities. In fact, our latest business venture that started last year is breeding swallows and ultimately supplying birds’ nests.”
Delegate
Family businesses often want to maintain substantial control of their business, owing to the emotional attachment and their striving to achieve the best for the business. This is understandable and admirable, as family members have put in their blood and sweat to establish and grow the family business for generational continuation. Nevertheless, they should consider delegating tasks to experts so the family can focus on the strategic planning of business operations. Take, for example, Alkassim Shipping Company Ltd, a third-generation family business in the shipping and maritime industry in Yemen.
Mohammed Sameer Kassim, a third-generation family member and deputy general manager of the company, says: “The pandemic has impacted the shipping and maritime industry badly, where many small to medium shipping agencies have shut down and filed for bankruptcy, owing to less demand for cargo and shipping around the world.
“Facing the same challenge, our family delegated the critical task of dealing with the situation to our non-family senior manager, Saad Ahmed. With his vast experience in the industry and personal approach with clients, he has not only managed to maintain the current client portfolio but acquired new clients as well. The Covid-19 pandemic forced many vessels to be stranded in territorial waters for a longer period, incurring additional costs. Yet, his contacts with the local ports enabled things to go smoothly for our clients, thus avoiding extra costs.”
Collaborate
Family businesses can be rather reluctant to collaborate with external parties. This is because they have a fear of losing control or having to face a mismatch between values. Despite their potential disadvantages, collaborations are a good way for family businesses to leverage external resources, especially in trying times such as during the pandemic when resources can be scarce. Zubair Bin Bashar, director of Tru Group, a second-generation family business in Bangladesh’s textile industry, says: “My father, [who is of] the founding generation, had great foresight when he built the factory, that is, to have room for the next generation to come in and further grow the business. The pandemic led us, the next generation, to actively seek out new collaborations.
“One is to have external investors purchase a few additional machines and utilize our fully equipped factory. In this way, we can maximize production capacity while the external investor can save time [by not having to build] a whole new factory — a win-win for both sides. Under our business ecosystem, the fabric manufacturer can use our dyeing, printing and finishing facilities to make their product for the market.”
Article Source: https://www.theedgemarkets.com/article/family-business-economic-implications-covid19-family-businesses
