In a Lecture Organized by the Family Business Center in Cooperation with Asharqia Chamber
Dr. Alwuhaibi Lectures on the Philosophy and Strategies of Growth in Family Businesses
The Arabian Center of Family Business (Awuael currently), in cooperation with Asharqia Chamber, organized a lecture entitled "Philosophy and Strategies for Growth in Family Businesses" at the branch of Asharqia Chamber in Qatif on 23 December 2014.
The lecture was delivered by Dr. Sami Alwuhaibi, the founder of Awuael Holding and an Assistant Professor of Strategic Management and Family Business at King Fahd University of Petroleum and Minerals.
Dr. Alwuhaibi explained that the lecture highlights the concept of growth on family businesses by discussing the meaning of growth and its multiple causes, each of which is a philosophy that the business family may adopt in choosing the appropriate strategy for the growth of their family business.
He said that the lecture targets current and future leaders of family businesses and aims to raise awareness of the growth in family businesses and develop leadership and planning skills in these companies.
And he added that the lecture includes a number of themes, including the concept of philosophy and strategy, the philosophy of growth in family businesses, and growth strategies in family businesses.
He also said that business families in the Arab region are able to break and overcome the challenges of their reality, through knowledge-based planning and hard work that seeks to realize their dreams and the hopes of their generations.
Dr. Alwuhaibi stressed the need for a special philosophy in family businesses, in which it determines its growth options and answers all questions related to "growth, its price, scope and size" if it wants to continue its growth and business continuity.
He said that the concept of family business is those that are owned, operated or the strategic dexisions are controlled by a family, explaining that strategic decisions mean managing competition, managing excellence, and painting the future.
He added, in front of an audience of businessmen and interested parties, family businesses witness interplay between the social entity (family) and the profit entity (company and investment). This overlap gives strength to the company through a focused and continuous vision through the generations of the family, who are often willing to support that vision with the lowest costs and even sacrifice for it, and the company is supported by funds and family members for growth and competition. This overlap also gives strength to the family, where the company gains a lot of benefits, including the preservation of the family's heritage and history. The company is the best system for the continuity of the family across generations and contributes to deepening the ties between the family members, as well as that the company provides jobs for the family members, so there are several advantages for family businesses that should be preserved.
Dr. Alwuhaibi explained the concepts of “growth, philosophy, and strategy”. Growth means expansion and development, which is an indispensable thing, and cannot be stopped. Philosophy is “the rational attempt to formulate and answer questions”, while the strategy is "to identify and select the appropriate options for success at the long run”. These options are necessary to deal with the competitive situation, so it must be clear and not contradictory; it is not true, for example, if a company that seeks creativity to work with centralization. He also pointed out that the strategy is the visible part of the company, while philosophy is the invisible part, and each family has a special philosophy, does not necessarily mean the best. They are like trees, a tree produces dates and others produce apples.
Then he went on to talk about the philosophy of growth in family businesses, which is the title of the lecture, and a part of the activities of the Tawteen and Investment Center in Asharqia Chamber. He said that there are fundamental questions for growth, which should be answered: "Why we grow, where to grow, what size of growth, and what is its price?" It is known that the goal of growth is to achieve need, and needs are sequenced (according to Maslow's hierarchy of needs), there are organic needs (air, food, sleep and water), security needs (body, soul and job), social needs (love, friendship and belonging), and psychological needs (achievements, appreciation and respect), followed by the need for meaning in the top of the pyramid is (self-realization) and here the need seeker does not consider himself but the other so you find it inclined towards giving and charity, and this hierarchical hierarchy as applies to the human, applies to the company or family that should be located In the pyramid, they grow to achieve one of these needs, which vary from one family to another.
The second question, according to Dr. Sami, is "Where do we grow?" There are several entities within which the family moves (family, investment, non-profit charity). These are all areas of growth that the family should define. Does the family move for the family only or for investment? Here the family business should determine where to grow, and accordingly, they determine the size of growth, which is a third question, should be answered. There are small families want to grow, and there are families do not want to grow up.
Then he moved to the price of growth and said that there is nothing without a price, except that some pay the price and are not satisfied, and another pays with all satisfaction, and the price may be equal to the gain, and may be less, and here there should be a balance.
He talked about growth options and said that there are several options for companies including horizontal integration, i.e. growth within the company's existing industry, through acquisitions and mergers, or the establishment of new companies (such as a mall that opens several branches or integrates with other similar centers) This option has advantages and challenges. It reduces cost, limits competition and gives the company bargaining power with customers and suppliers, but it faces the different culture of the merged companies, and cause damage to market freedom due to integration, which lead to consumer damage and state intervention.
The second option for growth is back-to-back integration - the acquisition or establishment of a supplier company, such as a restaurant that controls meat or potato companies. And there is the option of vertical integration, which is the acquisition of buyers' companies, both of which have the advantage of increasing product quality through supplier control, controlling the scheduling and time of product manufacturing, but including challenges of increasing cost structure and changing technology.
The fourth option is the convergence strategy of entering a new industry related to the company's current industry, such as the entry of Aramco into the petrochemical industry. The fifth option is the divergent diversification strategy of entering a different industry that has nothing to do with the company's current industry. The latter is least important, because of a state of dispersion and lack of focus, which lead to increased cost.
In conclusion, Mr. Abdulmohsen Alfaraj, a member of the Board of Directors of Asharqia Chamber, honored Dr. Sami Alwuhaibi with a trophy.