FAMILY BUSINESS: SYTEM, GOVERNANCE and CHALLENGES Part 3
3.Challenges
Various factual findings that the paper suggested in previous parts seem to indicate that the family business still strongly persists in Indonesia. The persistence of all family firms should not be considered as the consequence of a supposed incapacity of Indonesia or other local entrepreneurs to understand and adopt the managerial models of the American modern industrial corporation. Instead, the enduring presence of this particular form of business organization, especially specialized family business and modem family conglomerates, can be seen as an alternative demonstration of its efficiency and rationality against a defined institutional framework, rather than as a failure.
However, given today’s climate of falling trade barriers and increasing globalization, local family firms face an onslaught of foreign competition. They will face tremendous pressures from a variety of sources. They must restructure themselves if they want to survive in a changing economic, financial, and technological landscape. Family firms will be continually challenged on how to efficiently raise funds from the capital market and commit to good governance; how to accumulate and develop their own technology under the pressure of information communications technology (ICT) development; along with how to foster their professional talents. Building a strong organization that benefits the family as a whole, and other stakeholders in the business is especially encouraged.
The company’s main advantages of the family:
- Have an entrepreneurial nature that is superior
- Decisions can be taken faster / more efficient
The family business in Indonesia has a better procedure in terms inheritance effort. Although only 27% of the overall succession plan and is well documented (vs the world 16%). And 80% of family businesses in Indonesia have procedures to handle disputes / clashes between members of the family (equivalent to Family business world: 83%)
Based survey in 2014 concluded a company referred to as a family company, if a majority shareholding in the hands of the founder or family members (spouse, parent, child or heir) who acquired the company, at least one family member who is involved in the management or administration of the company. For a public company, Founder of the acquiring company or the person (or family) had a 25% rights to the company by investing at least one member of the family in management (board).
With a GDP equivalent to Turkey and the Netherlands, as well as the annual growth rate of Indonesia which is in the range 5.8 – 6.4%, Indonesia is predicted as an economic power the 4th largest in the world in 2050. With rapid industrialization, Indonesia is also more attractive to foreign capital. More than 95% of business in Indonesia is a family owned. In Southeast Asia, 60% listed company is a family company and the passing of leadership is regarded as one of the company’s priority.T here is a 25% contribution to GDP in 2013 consisting of USD 130 T with 40,000 people or equal to 0.2% of the population who own family business
Sources :
- PWC Survey 2014
- Foza
- Thai Journal
- momentum.uqbs.com
- indonesia-investments.com
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