The second pillar is that a CFB has a 'dominant family head'. Paternalism, a key feature of Chinese culture and CFBs, causes a high degree of centralisation. The result being leadership of businesses tend to be long lasting and stable, allowing for the accumulation of deep knowledge about an industry and the building of strong networks. Another result is that power structures in businesses can be kept relatively simple (Redding, 1995; Luo, 2003). Besides reinvestment, the father-entrepreneur is also able to transfer funds from one line of business to another for lateral expansion and mutual sustenance.
Capital is mobile within the family group of businesses because it belongs to a common, unified 'family head' budget. Furthermore, the existence of a pool of common family resources can be used to provide security against failure, and to survive an economic downturn if one occurs (Whyte, 1996; Wong, 1985). The use of family roles to organise management also provides a cultural basis for business authority, reducing conflict with the boss and inhibiting strikes and other disruptive behaviour (Whyte, 1996).
The third pillar is that a CFB focuses on 'family obligations and enduring roles of members'. In the early stage of the development of a CFB, from Wong's (1985) phases of development, many enter partnerships, which are notably unstable. There is an element of mutual mistrust and all involved will attempt to increase their portion of ownership relative to the others. Some partners will have an advantage over the other as the usual method is to capture the key managerial positions as these carry extra shares.
Therefore those who have close relatives among the partners will have an obvious edge over others as they can act jointly (Wong, 1985). Family members are likely to stay with the firm even when better paying opportunities arise elsewhere, contributing to continuity in firm management (Whyte 1996). During the latter stages of the development of a CFB, there is competition among sons thus providing an added stimulus to economic performance, and the resulting diversification between them is a competitive asset in itself.
Furthermore, the existence of a pool of common family resources can be used to provide security against failure, through the ability to transfer funds from one subsidiary to another to survive an economic downturn if one occurs (Whyte, 1996). This third section will argue that at the end of the day CFBs place wealth creation above family as they, reluctantly, move away from the CFB model and become more westernised so they are able to compete in the global market. Even proponents for the CFB model admit there are weaknesses.
There is a tendency of such firms to operate with short time perspectives, to engage in questionable business practices, and to raise large sums for research & development investment. However, the primary weaknesses are built in limits on expansion of family businesses, their difficulty in managing succession after the business founder passes from the scene, and their vulnerability to fission (Whyte, 1996). The CFB is often said to be limited both in scale and lifespan. Chinese companies are now adapting to compete in a new Western-led global reality and expand beyond the family's reach.
This demonstrates the willingness to let go of traditional family based structures for the pursuit of global prosperity and profits. The strict Confucian hierarchy of roles and relationships that has characterised the overseas CFB must now accept the new innovative high-tech industries. In these industries the CFB model had to be discarded if to remain competitive. Therefore it can now be seen that many of Taiwan's high-tech companies have moved away from CFB model, placing business success above family (Chen, 2001; Wong, 1985).
The CFB model is in a stage of transition where CFBs are expanding beyond their home markets into globalised markets. However, they have to reluctantly move away from the CFB model as they adopt global business standards and practices for the pursuit of profits. Regulations introduced by the International Monetary Fund have increased transparency and are standardising organisational practices. To compete in the global market CFBs must converge with the Western model for businesses. An example can be seen within Indonesia's Sinar Mas Group.
They have restructured themselves into four separate holding companies and are now listed on the Jakarta Stock Exchange. The organisation is now managed by trained professionals of whom many are not ethnic Chinese. Many of the heads of CFBs now believe to become internationally competitive, CFBs must push for specialised and professional management, and in doing so place the profits of the company above family ties (Chen, 2001). Succession of the CFB has lost its link to family heritage and tradition and now an opportunity for further reorganisation and convergence with the practices of the West.
This is vastly accelerated by the Western professional education now possessed by the heirs of the large conglomerate CFBs. The heirs return to Asia with knowledge and experience but more importantly have been given chance to break away from the traditional tight family network and launch independent ventures, and so placing individual achievement above that of the collective family (Chen, 2001). In conclusion, this essay has examined the case that CFBs main concern is the family and not of business prosperity and profits.
This was evident as CFBs have many structures and methods of doing business that did not lend itself to maximising the success of the business. However, CFBs dominate the corporate world of Asia and so a paradox was created in how a business model that did not place success or profits as its main concern or motive has managed to become so successful and dominate the Asian markets. This was examined and argued that focusing on the family and traditional Confucius values led to extremely successful businesses.
The family was a tool for business success and therefore CFBs did not place family above profit but used it as a mechanism for profit gains and therefore they went hand-in-hand. However, the essay concludes that in today's modern, global market, CFBs that wish to stay competitive and enter the increasingly Westernised and standardised business practices must move away from the CFB model. This is apparent and so concluding that CFBs do not place family above profit as when it comes down to it, CFBs are gradually converging to western practices for the reason of business success and profits.