A family business established in 1865 in Europe dealing in furniture and developed today into a fairly successful mid-sized company with revenues of about €700 million as of FY 2017 and an asset base of €1.2b.
The firm has a diversified product portfolio that ranges from small portable medical devices, home furniture, and appliances, to real estate. In the last year, portable handheld medical devices have seen the biggest increase in growth although it only represents 1% of total revenue contribution.
It must be noted that in order to survive as a business, the firm has had to adapt and change its product portfolio over the years. This, however, has never been a move into a completely new sector. In the early parts of the 1950s a move towards real estate saw the revitalization of the firm’s fortunes and now a move into the medical device sector looks promising.
The notwithstanding, competition across the various sectors remains extremely competitive and therefore a need to be more creative and innovative has become even more relevant. Here, the appetite for risk remains relatively low, yet failure to adapt and innovate will most certainly lead to pressure on overall performance.
The core furniture business has evolved but remains true to the heritage and is the second largest by revenue representing 30% of the total revenue. This is further evidence that the move into real estate was right as it offers the largest contribution by revenue to the firm.
The firm is faced with a few challenges, that include-
The chairman who is now 85 years old is coming up for retirement by the end of 2020.
The governance system although in existence [Board of Directors etc] remains relatively reliant on the direction of the chairman. With three sons all interested in taking over, a formalized system needs to be in place as well as communicated to all
A lack of harmony within the family on the overall direction of the firm- especially, investment in the handheld medical devices.
The internal conflict between nonfamily members of the management team and family members within the management team.
Task
The board has tasked you to provide a 2500-word brief and 5min video to assist them to address these underlying challenges. The board is keen to understand how to address the succession question, the issue around continued diversification and specifically which options may be considered to achieve this with minimal risk exposure.
Issues of conflict, succession and governance are also at the top of the agenda for the board to address. The board is also keen to understand the merits and any pitfalls of organic growth vs mergers and acquisitions- especially as a strategy for diversification
To do so, they expect you to provide justification and evidence of how this can be addressed, especially how to plan for the estate
Your ability to rely on how other family businesses resolved similar challenges will be vital. Use of relevant comparisons is encouraged as well as rational assumptions to better address some of the issues above.
Recommendations can be made based on assumptions- scenario options
Supporting information
The firm has a weak governance system and has mainly relied on the chairman of the form to provide strategic guidance (the chairman is now 85 years old and semi-retired). He will retire officially at the end of FY 2020
ACADEMIC INTEGRITY
Any work submitted by a student in this course for academic credit must be the student’s own work. If you present, as your own idea, any material copied, paraphrased, or extensively drawn upon, you are plagiarizing—unless you give full citations for your sources. Of course, you may make full use of ideas, arguments and information obtained from books etc. but you must make clear which portion of your paper is not your own and provide a detailed reference to the original source.
Assignments which violate Honor code may not be revised. In the first instance of plagiarism, the plagiarized assessment will be given a grade of zero and will result in automatic Disciplinary Probation. You may also be required to rewrite the plagiarized assignment for no additional credit.
Subsequent violations of the Honor code are assessed on a case by case basis before the Academic Standards Committee and may result in sanctions up to and including dismissal from the program.
You are responsible for ensuring that you have read and understood the section entitled “Academic Integrity” in the Student Handbook. If you have any questions about that material, please speak to your instructor.
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