Term Paper, 2018
13 Pages, Grade: 1,7
1 Objectives and structure of the work
4 Family Businesses in Tourism
4.1.2 Family Businesses
4.2 History and development of family businesses
4.3 Characteristics of family businesses
5 Family businesses in Germany
5.1 Strengths of Family Businesses
5.2 Weaknesses of Family Businesses
6 SWOT Analysis
7 Development in the future
In the first part of the thesis the most important terms are defined. The focus is on family businesses with their characteristics, as well as the emergence and development of family businesses. In the next part, the work relates to Family Businesses in tourism and deals with their performance. Furthermore, the strengths and weaknesses of tourist family businesses are highlighted. The following section will provide a comprehensive SWOT analysis.
Family businesses are more widespread in Germany than any other form of business. The outstanding importance of this form of enterprise for employment, growth and innovative power of the German economy is repeatedly emphasized in the public discussion. 90% of companies in Germany belong to this form. They generate almost half of the gross domestic product in Europe. The success of family businesses not only depends on the overall economic performance but also, they determine many other factors that are important to our society: sustainability, environmental orientation, ethics, multiculturalism and a strong value-oriented attitude. One of the most important tasks is therefore to strengthen the sustainability of family businesses and to support their corporate development.
Well-known companies such as Volkswagen, BMW and Aldi are also among the top 5 of the 1.000 largest family-owned companies in Germany. The owners are not necessarily active in the business, but for more than 61 percent of the top 1000 companies, the owner is also active as a manager or chairperson. One of the most striking features of German family businesses is their combination of tradition and innovation. The agility and innovation power comes not only from the much-vaunted greater flexibility and shorter decision-making of family-owned businesses. They also invest heavily in research and development.
Also in the tourism industry, especially in the hotel sector, family businesses play an important role. Especially in this industry, Family businesses shine with customer proximity and service. This paper aims to show the perspectives of a family-operated company in tourism as well as to analyze the strengths, weaknesses, opportunities and threats with the help of the SWOT analysis.
In order to answer the research questions, family businesses will be defined. Using the SWOT analysis, the challenges and chances for a family-operated company in the tourism sector will be explained. Furthermore, the perspectives for the future will be worked out.
To get started in this complex topic, it is first necessary to get an overview of the different definitions of the two central terms family business and tourism (cf. Baumgartner, 2009. S. 19).
According to the UN World Tourism Organization (UNWTO), the term tourism is defined in the publication, International Recommendations for Tourism Statistics 2008 as follows: „A visitor is a traveler taking a trip to a main destination outside his/her usual environment, for less than a year, for any main purpose (business, leisure or other personal purpose) other than to be employed by a resident entity in the country or place visited. These trips taken by visitors qualify as tourism trips. Tourism refers to the activity of visitors” (UNWTO, 2008). „Travel refers to the activity of travelers. A traveler is someone who moves between different geographic locations for any purpose and any destination” (UNWTO, 2008).
Family businesses are the worlds’ oldest and most widely used form of business (cf. Frasl, 2007). They are so instrumental in the economic development of a country involved. Characteristic of family businesses is that they are (at least the majority) family-owned and family members influence the company’s management. The leadership of a family business holds great opportunities but also clear risks. As in non-family businesses, organizational structures must be designed and strategies developed. But the ownership and influence of the family brings more features. The connection of a company with the historically grown institution owner family, with its goals, values and manners, unfolds special effects within the family business, which can influence success potentials positively as well as negatively (cf. Frasl, 2007). In particular, the influence of the family through relationships with employees or managers, other companies and other third parties as well as their relationship between each other, has an impact on potential factors that can affect the success of the family business (cf. Frasl, 2007).
Family businesses have always been important in the history of economic activities. They represented a starting point because family, living and working formed a unity. In some industries, such as in agriculture or in some family-run hotels, this pattern can still be seen today (cf. Hennerkes, 2004). As the oldest company in the world was a Japanese family business called Kongo Gumi, which started as a temple construction company and was founded in 578 (Struth, 2011). The oldest German company is the Weihenstephan brewery (founded in 1040) and the oldest family-owned company in Germany is the Hotel Pilgrim-Haus in Soest (founded in 1304) (cf. Mertens, 2009). Especially during the period of industrialization in the 19th century, family businesses played a major role in economic development. The motivation for entrepreneurship was developed in part from the need to escape economic hardship (cf. Mertens, 2009). Family businesses played a prominent role, especially in the early stages of development, because their characteristics were suited to adapt to the prevailing market conditions: simple technology, small sizes, uncertainty, underdeveloped institutional conditions. The need for capital can be covered in the family, there is trust in the family and the employee needs can be covered by the family as well. The development of legal frameworks also encouraged the development of family businesses, for example through inheritance law or the establishment of legal forms such as the GmbH in Germany (cf. Heise, 2005).
Family businesses can be characterized by the fact that one or more corporate families have a significant influence on the company and are involved in the operation (Klein, 2004). Family businesses exist in various sizes and forms of organization, from small medium-sized businesses to multinational corporations. A typical feature of family businesses is their longevity, as they often already exist over one or more generations, which is reflected in the average high age of companies. In almost half of all family businesses a successor generation is already in possession of the company, as a whole or partially (cf. Mertens, 2009). Key characteristics of family businesses are the ownership and decision-making structures and responsibilities, as well as the involvement of family members in the company. Family members may be involved as owners, as executives in the executive board or as simple employees in the company. Most involved are spouses (67%), children (28%), followed by parents (20%). Whereas parents are more often (co-)owners of the business (61%) and children as well as spouses are largely involved as employees in the management (cf. Mertens, 2009).
Value retention plays an important role in family businesses in general, as it influences not only corporate but also employee leadership. The interviewed entrepreneurs cite reliability, honesty, straightforwardness, handshake quality and diligence as the most important values. Thus, three management styles based on those defined by Kurt Lewin were queried among the entrepreneurs. In particular, they refer to the way employees are handled in the organization. The results show that in 56% of family businesses the direct-cooperative style of management is lived, i.e. H. that the decision-making power lies primarily with the entrepreneur himself, but this regularly involves employees in company matters. In one quarter of the family businesses an authoritarian and in 16% a cooperative style of leadership is practiced (cf. Mertens, 2009).
The share of family businesses is particularly high in the hospitality, construction and retail sectors. The highest proportions of family businesses are in the hospitality and construction industries. For example, 97 percent of the companies in these industries belong to the family-owned family business. The hospitality industry is predominantly characterized by small, owner-managed companies in the form of pensions, as well as restaurants, pubs and takeaways (see Figure 1).
illustration not visible in this excerpt
Figure 1: Share of family businesses by economic activity in Germany, Source: Own figure referring to Stiftung Familienunternehmen
The tourism industry is also far ahead in terms of total turnover between economic branches. In the hospitality industry, 80 percent of the economic output is provided by family-controlled companies.
illustration not visible in this excerpt
Figure 2: Share of family businesses by total turnover in Germany, Source: Own figure referring to Stiftung Familienunternehmen
All in all, it can be said that the tourism industry in Germany presents a great performance and therefore the good reputation in the economy can be proven.
Values and attitudes of the entrepreneurial family allow a strong identification with the company, which can have a positive effect on the achievement motivation and the commitment of the employees (cf. LeMar, 2014, Weishaupt, 2015). Above all, the corporate culture perceived by the guest plays a central role, in order to be able to positively influence the image of the business in a sustainable positive way. Furthermore, family businesses are associated with high product quality and good market knowledge based on knowledge accumulated over generations (cf. Rosenbauer, 1994). The fact that capital and management coincide in family businesses allows for the creation of a flexible organization with fast decision-making, which can be seen as strength. The traditional strengths of family businesses, including the entrepreneur's personal commitment and the strong involvement of family members in the company, identify flat hierarchies, flexible structures, short decision-making and communication channels, personal responsibility and team spirit (cf. Kempert, 2008). These are seen as opportunities to be an attractive employer on the job market as a family business. However, they also provide organizational advantages, especially for larger management companies, which in some cases have to invest considerably more resources in employee and customer loyalty measures (cf. Kempert, 2008). Its specific strengths - its proximity to the market, its high degree of flexibility and its considerable capacity for innovation - contribute to the ongoing structural change and process of market economy renewal. But family businesses also play an important role in society. The entrepreneur is characterized by the use of private capital, the courage to take over private risks and the willingness to act independently. In many cases, the owner-entrepreneur associates a closer relationship with his clients, the products or services provided by his company, and the workforce, than is the case with salaried managers (cf. Sobanski; Gutmann, 2013).
Above all, family businesses have a greater degree of confidence in times of macroeconomic crisis than large corporations (cf. Wimmer, 2011a). The family companies have entrepreneurial thinking and willingness to take on risks or their courage to try out new things as well as their motivational power are further advantages over corporations (PWC, 2012). On the one hand, companies are forced to deal with the fundamental issues of markets, products and prices due to increasing globalization. (cf. Hennerkes & Kirchdörfer, 2015). On the other hand, to keep up with the changing times, solutions for the use of new information technologies must be developed individually (Benavides-Velasco et al., 2013). The third area of change deals with the change in values. Family businesses, characterized by basic ideas of work ethic, diligence, thriftiness and safety, are encountering a new, changing environment where the desire for enjoyment and quality of life is growing.
Basic technical knowledge, opens to new technologies (especially new technologies on the Internet) and the willingness to invest resources of a temporal and financial nature are necessary in order to optimally prepare and implement the operative implementation of various new media. However, especially in these areas, SMEs in tourism are constantly reaching their limits: money, time and lack of know-how are fertile ground for the lack of acceptance of new ways of marketing (cf. Habig, 2010, Nagel, 2011, Wimmer et al., 2005).
A recent study shows that only one-third of family businesses surveyed have defined growth plans for the future. The prevailing credo is "stability ahead of development" and many companies are pursuing the "continuing the proven" strategy. It follows that only a part of the companies is growth-oriented. These growth-oriented companies are primarily younger, growing, and larger family businesses. The most important measures adopted by companies with growth plans were the acquisition of new customer groups, the addition of their product and service offerings and customer loyalty measures. For companies without precise growth measures, "continue as before" is the top priority (cf. PWC, 2012).
In addition to the numerous strengths of family-run businesses, they also have weaknesses or risks. A major disadvantage of family businesses, especially those active in tourism, is corporate financing. The low equity ratio and liquidity constraints are highlighted as major weaknesses (cf. Habig, 2010). There are often difficulties in obtaining loans. Risk also includes potential family disputes, as this places enormous pressure on the firm (PWC, 2012). Furthermore, family businesses often find it difficult to attract qualified personnel. The threshold for outsiders to work in a family business is often very high (cf. Habig, 2010). Looking ahead to the next twelve months, they are worried about the impending shortage of skilled workers worldwide. The reason is well-known: Due to the demographic development, family businesses are increasingly running out of skilled employees. At the same time, they are competing for the best talent with large corporations, which can sometimes pay more salaries, offer more attractive career prospects or even have their headquarters in more central locations. Already today many companies cannot fill vacancies, often there are not enough qualified applicants (cf. PWC, 2012). They are most careful in their investments and economical with development spending to keep control of the company. Already in the early phase of the innovation process, it becomes apparent that family-owned companies are more likely to approach finding ideas in a shirt-less and operational way, rather than strategically and conceptually (cf. Binder, 2013). The unresolved questions of succession, the partial lack of qualifications of family members working in or for the company, and the difficulties in obtaining fresh capital are also factors. (cf. PWC, 2012). One of the biggest dangers for family businesses can be the family itself. This is especially true when family conflicts are transferred to the company and vice versa (cf. Carlock & Ward, 2001, Plate, 2011). This can change the corporate culture to include mistrust, mutual accusation and strife (cf. Hennerkes & Kirchdörfer, 2015; Mühlebach, 2004).
Nepotism can also cause problems for family businesses. Nepotism occurs when family members occupy a leading position, not because of their abilities, but solely because of their family background. As a result, family businesses suffer from a lack of know-how (Nagel, 2011).
In the past, (family) companies were just as patriarchal and hierarchical as the family itself. Today, the potential dilemma is growing because the former structural similarity of family and business is no longer taken for granted since families are no longer organized hierarchically and the father is no longer the patriarch. [The children] do not want to do the business anymore and no longer think in the tradition of handing over the company. The fathers see [this] as a personal attack on their life's work (cf. Deecke, 1998). Besides, at the present time the divorce rate is high. Even if the families are intact, they are unstable. The family business is also under pressure to keep its own family intact and to gloss over the real situation" (cf. Deecke, 1998).
Furthermore, positive or negative consequences of entrepreneurial decisions directly influence the asset situation of the entrepreneur, the incentive mechanisms of the market can become unfiltered. The unity of property and risk, and the integration of the economic existence of the owner with that of the enterprise, creates a special view that can indeed be called a "culture of self-employment" (cf. Walter, 1998).
Another important internal challenge is the reorientation of organizational structures, which companies see as a critical success factor for future development. After all, they have grown in recent years, but their internal structures and processes barely withstand further development. They must therefore become more efficient.
Master's Thesis, 134 Pages
Research Paper (undergraduate), 69 Pages
Literature Review, 10 Pages
Bachelor Thesis, 59 Pages
Master's Thesis, 79 Pages
Research Paper (undergraduate), 21 Pages
Thesis (M.A.), 74 Pages
Bachelor Thesis, 151 Pages
Essay, 22 Pages
Master's Thesis, 191 Pages
Term Paper (Advanced seminar), 7 Pages
Research Paper (undergraduate), 30 Pages
Research Paper (postgraduate), 58 Pages
Master's Thesis, 160 Pages
Diploma Thesis, 197 Pages
Project Report, 88 Pages
GRIN Publishing, located in Munich, Germany, has specialized since its foundation in 1998 in the publication of academic ebooks and books. The publishing website GRIN.com offer students, graduates and university professors the ideal platform for the presentation of scientific papers, such as research projects, theses, dissertations, and academic essays to a wide audience.
Free Publication of your term paper, essay, interpretation, bachelor's thesis, master's thesis, dissertation or textbook - upload now!