Question

How does being family-owned (as compared to being publicly owned) affect a firm’s strategic management?

Answer 1

Family owned and public owned firms operate under different contexts. As a result, managers in both types of firms often have to deal with different constraints while selecting the strategic management policies. In a family owned or private sector, the three critical strategic factors influencing strategy formulation are:

· External market environment

· Internal organizational capabilities

· Products or markets

In the private sector, the strategic management objectives are driven more by financial parameters. On the other hand, public sector is generally driven by the need to do public good. The ownership and accountability of management policies is not very complex in the private sector. Also, policies can be implemented quickly and efficiently once it has been decided by the top management. Moreover, in the private sector, strategic management is driven by explicit standards and performance measures leading to greater focus on output controls. There is greater discipline and resources tend be more utilized more efficiently.