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‘The next gen as marketing brand building tool’
The impact of a family business generational transfer on branding strategy
MSc Business Administration– Marketing Track
UVA
Kim Berger (11397284)
Supervisor: Roger Pruppers
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Statement of originality
This document is written by Student Kim Berger who declares to take
full responsibility for the contents of this document
I declare that the text and the work presented in this document is
orginal and that no sources other than those mentioned in the text and
its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the
supervision of completion of the work, no for the contents.
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Table of content
1. Introduction: From the face of the organization to putting the organization before the face ... 1
1.2 Linking generational transfer to family brand strategy 2
1.3 Problem definition 3
1.3.1 Problem statement and research question 3
1.3.2 Subquestions 4
1.3.3 Delimitations of the study 5
1.4 Contributions 6
1.4.1 Theoretical contributions 6
1.4.2 Managerial contributions 7
1.5 Structure of the thesis 7
2. Theoretical frame ... 9
2.1 The nature of family businesses 9
2.2 The CEO as a crucial factor in the family business 10
2.2.1 Characteristics of a successor and family business success 11
2.2.2 Summary 13
2.3 When the next generation takes it over 13
2.3.1 When and under what circumstances does a generational transfer occur? 13
2.3.2 The process of generational transfer 14
2.3.3 Generational transfer strategies 16
2.3.4 The relationship among transferor and successor 17
2.3.5 Summary 19
2.4. Branding of family business 20
2.4.2 Consumer brand perceptions of family businesses 21
2.5 Changing environment 27
3. Themes and core questions ... 28
3.1 Defining the themes 28
3.1.1 Branding strategies 28
3.1.2 Roles 28
3.1.3 Marketing communication 29
3.2 Relationship variables 30
3.2.1 RQ 1: What is the impact of generational transfer on branding strategy? 31 3.1.2 RQ 2: What is the core purpose of a change or continuation in branding strategy? 34 3.1.3 RQ3: How is generational transfer communicated using marketing media channels? 37 4. Method ... 41
4.1 The sample 42
4.2 Research instruments and procedures 43
4.3 Research strategy 44
4.4 Quality criteria 46
5. Results ... 47
4.1 Generation transfer causes changes in family branding strategy 48 4.2 Generational transfer roles influencing branding strategy 60
2 4.2.2 More generational transfers influence modern strategy 62 4.2.3 A strong relationship forces the continuation of the branding strategy 64
4.3 Marketing communication and branding strategy 66
6. Discussion ... 73
6.1 Family branding strategies 73
6.1.2 Large strategic changes 74
6.1.3 Brand identity, modern vs. authentic 75
6.2 Generational transfer roles 76
6.2.1 Involvement 76
6.2.2 Relationship 77
6.2.3 Number of generational transfers 77
6.3 Marketing communication 78
6.4 Implications and limitations 79
6.4.1 Theoretical implications 79
6.4.2 Managerial implications 81
7. Conclusion ... 84
7.1 Summary of the research questions 84
7.2 Results and discussion 85
7.2.1 Generational transfer’s impact on an organization’s brand strategy 85 7.2.2 The roles impacting on innovation or continuation 86
7.2.3 Branding strategy communication 87
7.3 Limitations 88
7.3 Research contributions 89
7.4 Recommendations for further research 90
Literature list ... 92 Appendices ... 98
Appendix 1: Generation transfer process 98 Appendix 2: List of characteristics respondents 99
Appendix 3: Semi-structured interview 101
Appendix 4: Link Interview questions and theoretic concepts 104 Appendix 5: Legend questions liked with answers participants 105
Appendix 6: First code three 112
Appendix 7: Definitive Code three 113
Appendix 8: Themes linked with interview questions 116 Appendix 9: Strategies and characteristics (Linked with interview, used in results) 119 Appendix 10: Characteristic branding strategy per company 123 Appendix 11: Overview roles and strategy per company 127
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Abstract
Family businesses are unique in the sense that the link between family and business is hard to copy and can result in a competitive advantage. The owner can make significant contributions to the family business, this makes it extra important that the successor is smartly chosen. Therefore, insights of the impact on family businesses after CEO change is important, the question rise whether it is possible to keep this strong linkage between business and family and therefore to keep this competitive advantage. This study conceptualizes the three research concepts of generational transfer, family branding strategies, and marketing communication into one construct. It explores whether generational transfer impacts on strategic direction, influencing the manner in which the business communicates this to its customers. As family businesses can apply three different types of branding strategies, generational transfer may be a transformational factor as regards strategic direction. This link between generational transfer and family branding strategy has not been made in existing studies: other researchers have focused on internal relationships and processes for continuing the business, while this study attempts to find explanations and discover patterns in generational change in family
businesses. Qualitative research is conducted to explore the correlations of 10 family businesses that have undergone a generational transfer. The respondents, who consist of previous and current generations are interviewed by a semi-structured format. Based on quality criteria as: amount of generation transfer, years of leadership and industry, these companies are selected by heterogeneous purposive sampling. Relevant themes which derive from the literature as; identity, culture and history are used in the interview and divided in coherent theme’s as family marketing positioning, marketing communication and specific family business characteristics, these are researched before and after the transfer. The application of theme analysis produced the following results: most businesses show changes to become more innovative after a generation. Strategic continuation is visible when there is
2 substantial involvement from the predecessor and a strong relationship. Unexpectedly, most families like to communicate about consistency; however, they do not apply a consistent strategy, but rather innovate the company. This innovation is most strongly visible outside the family business than inside. Most new owners innovate the appearance of the family business and attempt to retain its values and culture, though they forget to renew their internal
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1. Introduction: From the face of the organization to putting
the organization before the face
According to researcher Van Gils (2018, pp.1), “family businesses don’t focus on renew of their company culture and are way too often dependent on their founder for new ideas”. The article in ‘Financieel Dagblad’ mentions that this needs to change in order to survive (De Heide, 2018). Evidence for this statement can be seen from the fact that only 12% of family businesses survive to the third generation (Fernández-Aráoz, Iqbal, & Ritter, 2015).
The considerable dependence on the founder and the expected culture of the rest of the
employees in the family business. The founder is often seen as the “brand” of the organization and is the critical factor in its continuation.
As the family business has strong values, history, and a rich tradition, it distinguishes itself from non-family businesses; its culture is authentic and reliable. However, it is not only these factors make the company different from others—there is more emphasis on secondary associations. These associations are not directly linked to the product or service. Family businesses rely more on their place of origin and spokesperson, which in family businesses is the owner (Keller, 1998). These factors are more important because they are seen as part of the family business’s brand identity. Often the place of origin is used in the marketing communication and the owner is face of the brand. Hence, family businesses have unique identities, which makes them interesting to research.
Should the founder want this specific identity and business to continue, this has to be undertaken by a family member, because of the values of the company, and its history in combination with the family name and the long-term commitment and loyalty of the family members (Patel, Pieper, & Hair, 2012). The owner strives for growth and development on the one hand, and stability and continuity on the other (Miller, Steier, & Le Breton-Miller, 2003).
2 This appears to be a contradiction. However, generational transfer need to occur to continue the family business and this is where development and growth and/or stability or continuation take place. This raises the following issue: this dependence on the owner and the brand strategy may change when the next generation takes over. The next generation may change in the current way of operating as members of the younger generation are often more innovative and use digital possibilities wisely. Generational transfer is seen as a crucial point which triggers change, and change is most often linked to innovation. When the owner of a family business quit, the organization appears to be rudderless (Cabrera-Suárez, 2005). Hence, the owner is seen as crucial for the family business, and therefore generational transfer and new ownership is important.
1.2 Linking generational transfer to family brand strategy
The existing literature on generational transfer in family businesses focuses on operational and strategic risks (Morris, Williams, Allen, & Avila, 1997). Researchers provide advice on improvements in internal processes, including concepts such as succession planning,
governance structure, and internal communication (Mazzola, Marchisio, & Astrachan, 2008). Morris et al. (1997) & Sorenson (2000) argue that family relationships are the most important determinant of successful transitions. The role of the CEO is also mentioned in generational transfer studies, in which the link is made the between the successor characteristics of CEOs as innovative capability, stability, involvement and fit of experience and qualities with the success of the family business (D. Miller et al., 2003). Their capabilities may impact on the corporate direction of the company. Researchers often do not make the link to branding strategies in such cases and primarily focus on the broad strategic direction, they elaborate on vision, mission, goals and objectives (Denison, Lief, & Ward, 2004; Mazzola et al., 2008). Innovations in brand identity, appearance, values and cultures are not mentioned. Such factors
3 are especially important because a family business highly distinguishes itself with its branding strategy and therefore its proposition (Craig, Dibrell, & Davis, 2008). The effect of the change in the CEO on the branding strategy is forgotten; while research shows that for example the CEO could be seen as brand of the family business (Carrigan & Buckley, 2008). Miller et al. (2003) describe new ownership in family businesses as generating a substantial age and experience gap, which may cause dysfunctional reactions. Therefore, it is expected that this will influence the branding direction of the family business.
1.3 Problem definition
1.3.1 Problem statement and research question
Thus far, there has been minimal explorative research into generational transfer in family businesses and the impact of this on the organization’s branding strategy. This explorative case study adds information on the matter of next-generation transfer and explores what critical factors affect this change—or consistency—in family branding strategy after a
transition. At present, no other studies have been found which focus on the next generation in family businesses as a brand-building tool.
Family businesses deal with continuity as a factor to a greater extent than normal businesses; this is observable in the fact that only 12% of the family businesses survive to the third generation (Patel et al., 2012). However, its future existence may be unsure since family members are not always able to continue the business in a successful manner. These are only achieved when the next generation takes over the company and leads it in the right direction. However, the new owner may decide on a new strategic direction for the firm, which may be not in line with that of the predecessor. The generational transfer pattern could show
consistency or innovation (Miller et al., 2003). Moreover, research shows that the greater the number of generational transfers in a family firm, the higher the rate of innovation (Hauck &
4 Prügl, 2015). Innovation appears to contrast the authenticity of family forms and the feelings consumers have for them. Most of the time when younger generations take over, they feel the need to change the status quo and look for ways of doing things differently (Miller, Mcleod, & Oh, 2001). They could impact on the strategic direction of these family businesses, and implement these family factors—history, company name, and values—differently, creating an apparent contradiction between authenticity and modernity.
Branding strategies following a transition may vary according to the family and the business, from being wholly linked to not being linked at all. How this generational transfer impacts on the strategic direction of the family business has not been researched; however, that there is an impact is a certainty.
within light of these factors, the following research question arises: What is the impact of generational transfer on a family business’s brand strategy?
1.3.2 Subquestions
The abovementioned research question may be usefully separated into three subquestions: Q1: What is the impact of generational transfer on the continuation or innovation of the three different family branding strategies?
Q2: What is the core purpose of a change or continuation in branding strategy? Q3: How is generational transfer communicated using marketing media channels?
These questions are researched by conducting qualitative research on generational transfer in family businesses. Family firms have some specific characteristics in common and must all manage this continuity factor. An detailed overview of the research construct can be found in chapter 4.
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1.3.3 Delimitations of the study
This research can be separated into three interlinked aspects: generational transfer roles, family branding strategies, and marketing communication. Though this research limits itself to the three roles discussed here, there may be other factors that influence changes in branding strategy. However, literature regarding family relationships discusses the most important ones that directly influence innovation or continuity (Rangus, 2016); moreover, the combination of these roles encompasses the most important widespread variables that impact on branding strategy. Studies from Schwass & Glemser, (2016); Hall & Nordqvist, (2008); Sorenson, (2000), mentions other roles as; possibility of the father to teach his son or early exposure to the company, qualifications and leadership style having an influence on the success of the transmission. Whether these themes show uncertainty if this impact continuation or
innovation. In addition, the more roles there are the more difficult it is to research all of them in depth. The second delimitation concerns brand elements, though the research does not focus on specific brand elements before and after the transition. Rather it considers strategic changes and their effects. However, specific family brand elements and secondary
associations are used to indicate the strategic change, and hence they are a component of the research—though they are not specifically mentioned and researched separately, as they are not the focus of the research. Third, marketing communication is an important component. Due to time constraints, the research only takes into account the new and old owners and not the perceptions of the consumers regarding this branding strategy.
A total of 15 interviews were conducted. These are not equally divided between new and old owners, which may result in a distorted picture. As it was not always possible to talk with the old owner, due to sickness or old age. However, analysis shows that family businesses which interviewed the old and new owners show conformity. This means, that the new owner does
6 not give a lot of different information, when asked about the leadership from the previous generation. This information is mostly in line with the old generation.
1.4 Contributions
1.4.1 Theoretical contributions
This study combines three streams of literature into one construct. It fills the research gap between generational transfer and branding strategies. While the literature on generational transfer currently focuses on risks and relational factors and processes (Mazzola et al., 2008), this study views as a competitive advantage the unique combination of family and business, which changes to more modern brand identity following generational transfer. The specific distinction between internal branding and external family branding becomes clear following this process of generational transfer. The existing literature (Gallucci, Santulli, & Calabrò, 2015; Micelotta & Raynard, 2011) describes different family branding strategies; with family history, values and identity. It investigates this communication of the family nature through family-based branding strategies. In addition, this research provides a broader definition of these branding strategies and specifies how important characteristics such as the family name, and the fact of the owner as the brand of the organization are linked to these strategies.
Furthermore, such branding strategies have not been previously explored in a situation where the next generation takes over. Moreover, this study links the branding strategies to their implementation by means of marketing communication. Authenticity is one characteristic of family businesses; however, it has not been previously researched in terms of the marketing communication of generational transfer and the degree to which this is in line with the branding strategy.
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1.4.2 Managerial contributions
Owners and managers of family businesses could take this research into account during their transition processes in order to forecast the impact of the generational transfer. This research primarily provides new insights to the new and old generations about how their generational transfer could work out. This research aims to create awareness for the family business, specifically on how certain internal next-generation characteristics affect their corporate strategy and therefore their branding strategy. They would be able to prepare for a strategic transition or even steer in a strategic direction in manipulating the different “roles.” The research may also assist strategic consultancy firms to better advise family businesses during a transition and not only focus on internal structural process issues or external visual elements of the firm. While most consultancy firms focus on processes and procedures, this study provides insight into the fact that strategic change in a family business comprises inside innovation and outside innovation. This is especially the case where the branding strategy of the family business has focused on history, culture, and values and, on the other hand,
appearance and communication in the family business. Firms should take both components of the business in consideration. To keep the authenticity of the family business, everything needs to keep being real and aligned with each other.
1.5 Structure of the thesis
This began by discussing the most important themes in the literature. The key themes within this theoretical frame are family businesses, generation transfer, and branding. Chapter 2. Theoretic frame starts with explaining the 2.1 The nature of family businesses. Because the CEO is of more importance in family businesses, and have a big influence on the company, this is discussed under the chapter 2.2. To continue the family business, the CEO needs to be replaced, the younger generation takes over, here is where the theme 2.3 generation transfer
8 will be discussed. The last theme is about 2.4 branding of the family business, the important different branding strategies and their link between business and family is clarified. The branding chapter is divided in branding strategies, brand perceptions, brand
identity/personality and brand loyalty. The last short part is about the 2.5 changing environment, where integrated marketing and different media are central. Following the theoretic frame, the research construct is discussed in chapter 3: the relationships between the themes and roles are explained and some expectations are considered. The method chapter (4) follows this, discussing the sample group (4.1), the research strategy (4.3), and the quality criteria : validity, reliability and generalizability (4.4) The second part (5) concerns the results: the characteristics of family businesses are discussed and ordered according to the branding strategy, then the roles, and communication. The discussion chapter (6) discusses the unexpected outcomes and draws conclusions (7). The thesis closes with a references and reference list and the appendixes.
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2. Theoretical frame
2.1 The nature of family businesses
Family businesses play a key role in the global economy, where they account for almost 80% of all businesses (Fernández-Aráoz et al., 2015) Family businesses are
characterized by family involvement (e.g. as shareholders or in leadership) in the firm and are therefore perceived to have higher levels of consumer service (Gallucci, Santulli, & Calabrò, 2015). Most researchers define a family business as one in which the family controls
ownership and/or the day-to day-management. (Gallucci et al., 2015; Lambrecht, 2005). However, in this study, the definition of the European Commission provides guidance, where they highlight that the family business is where one family member holds the biggest amount of the company, so they have a direct influence. The family must be formally involved and the company must be legally transferable (Flören, 1993).
Family involvement in the company fosters commitment and trust and hence results in better performance and unique resources that other companies lack (Patel et al., 2012). The overlap between business and family creates a degree of interaction which results in synergy. This degree of interaction differs and depends on the strength of the family’s involvement. When the influence of the family is strongly visible in the day-to-day management and in the norms, values, culture and appearance, the family’s involvement is high (Sharma, 2004). However, not all studies concur on the matter of synergy as combining families and
businesses may result in compatibility problems (Hollander & Elman, 1998). However, most researchers agrees that linking family to business creates a multi-disciplinary universe and that this combination is structurally the most complex form of business (Morris et al., 1997; Schwass & Glemser, 2016).
10 Usually, the family history that has been formed from the beginning of the company to the current generation makes the company unique. This shared history defines the business culture because the facts, observations, and stories are transmitted from generation to generation. This entire history creates a uniform culture in the company and embodies its family values. Usually, this culture is recognizable in some typical, uniform values in family businesses: hard work, respect, trust, honesty, and humility (Schwass & Glemser, 2016). These results in better performance and service. In particular, the relation between strategic control and ownership can result in better performance than in nonfamily businesses (Patel et al., 2012). Such family strategic control and ownership is only possible when family members are able to continue the business.
The family concerned would prefer the business to be continued by family members. Much of the time, family leaders are in charge for several decades, which creates a stable environment and sets a authoritative guideline for future generations (Schwass & Glemser, 2016). On the other hand, such guidelines can cause inflexibility, making disruptive change difficult. This results in family business being in a difficult and unique position, and facing problems with, on one hand, continuity in the form of generational transfer and maintaining their unique family values and history, and, on the other, being innovative and adapting to the time. This is one of the fundamental dilemmas inherent in family businesses (Lambrecht, 2005). Hence, it is important that the next CEO is chosen wisely, as he or she could have a significant impact on the company.
2.2 The CEO as a crucial factor in the family business
Continuation of the family firm is highly dependent upon having the right people and right qualities. Research by Fernández-Aráoz et al. (2015) draws a comparison between leadership in family and nonfamily businesses. Their research shows that the most successful family
11 firms “establish good governance as a baseline, preserve family gravity, identify and develop family and nonfamily talent, and bring discipline to top-level succession” (p. 85). Noticeable here is the fact that they mention management rather than ownership when discussing real leadership and success in a family business (Mazzola et al., 2008). The official governance structure implies that there is a supervisory or instituting board in which, normally,
approximately 50% of the board consists of family members. The matter of family gravity may be compared to that of the role model in the company: one family member who represents the overall values and vision. The most critical aspect of CEO succession is the selection of senior execute candidates—research shows that cultural fit is of the greatest importance (Cabrera-Suárez, 2005; Fernández-Aráoz et al., 2015). Family businesses often make the mistake of choosing a leader too quickly and simply. While corporate businesses list candidates and conduct interviews to find the right person for the position, in family
businesses a powerful family member choses the successor (Morris et al., 1997; Fernandex-Aroaz, 2015). As the article writes: “The best family firms find their future leaders early and invest in them” (Fernández-Aráoz et al., 2015, p. 87).
2.2.1 Characteristics of a successor and family business success
The most important issue in family firms is finding and training new leaders. Not having the right leadership capabilities in the family makes it difficult to ensure success in the long-run. In family businesses, the successes and failures of the CEO and/or leader are related to those of the company more than in normal businesses (Cabrera-Suárez, 2005). This is because, in the end, the CEO makes the important decisions in the company; this is especially the case in family businesses, where the firm overly relies on a single decision maker. In addition to such decisions, the characteristics of the family are important because they affect the quality of the relationship and the level of family commitment to the business (Cabrera-Suárez, 2005).
12 Zahra (2005) demonstrates that family ownership and involvement promote
entrepreneurship. Moreover, the same research shows that the longer the business has been in existence and therefore the greater the number of generations from the same owner-family, the greater the firm’s focus on innovation. However, Kellermanns, Eddleston & Barnett (2008), argue that in order to protect the business, family leaders may become too
strategically conservative. Risk aversion and lack of strategic stability are traits that diminish innovative behavior that would allow the family firm to grow. More specifically, Kellermanns et al. (2008) studied the characteristics of CEOs that have an influence on entrepreneurial behavior—characteristics such as length of tenure, the number of generations of the family in the firm, and control variables such as organizational size and the gender of the CEO. The leader of a family firm who has had a long tenure may show less entrepreneurial behavior; many become more resistant to change. Furthermore, unlike normal businesses, the age of the CEO has no impact on his or her entrepreneurial behavior. However, why would the
entrepreneurial behavior of the CEO be of such importance for the family firm? Such behavior is seen as an important element for the survival and growth of the family firm as it has a positive impact on profitability and, hence, long-term success (Kellermans & Eddleston, 2006).
The CEO influences not only the innovative capacity but also the implementation of strategy in the firm. Every company decides on strategic goals and tactics; however, the family business usually distinguishes itself by specific goal-setting that is more focused on family-centered issues. The control of the family makes not only the goals but also the
strategic processes different. They emphasize more than do normal businesses the importance of business priorities and innovation in their strategy formulation (Mccann, Leon-guerrero, & Haley, 2001; Morris et al., 1997).
13 As Feltham (2005) argues, the CEO tends to remain in power longer than CEOs of nonfamily firms. In addition, the younger generation already being involved in day-to-day business operations may be a predictor for change. Therefore, this could also have an impact on the final decisions by the CEO. Especially when the younger generation leads the
transition process, they are often busy with special relational benefits rather than specific functional aspects or learning about management. However, in the post-transition phase, they find the educational and relational benefits more important (Mazzola et al., 2008) .
2.2.2 Summary
Family businesses are characterized by direct family control and influence. Having the right leader in the company is critical, as this has a direct influence on the overall company culture, mission and vision, and its employees. The cultural fit of the leader with the company is seen as being more important than having qualifications. Innovation in family businesses is much needed and is caused by change. Therefore, the more often leadership transfers occur, the higher the innovation rate. In addition, the strategic direction influences the company and is directly influenced by the CEO. Hence, the CEO of a family business has a greater impact on the business than he or she would have in a normal business.
2.3 When the next generation takes it over
2.3.1 When and under what circumstances does a generational transfer occur?
Leadership within family businesses is a critical factor for innovation and an indicator of certain business and family outcomes. The CEO of a family business has a greater impact on the company than in non-family businesses, especially as regards his or her cultural fit with the company, and characteristics such as building trust. This is what makes family businesses stand out.
14 The CEO’s characteristics and strategic decisions have an impact on family and
business outcomes and can contribute to innovative strategies. Such innovative strategies are of great importance for the family firm (Zahra, 2005). However, especially in family
businesses, the company has to deal with the continuation of the firm. Generational transfer is therefore important for the long-term future of the family firm. However, choosing from among the next generation is a difficult and emotional process that owners may prefer to avoid (Schwass & Glemser, 2016). Lee, Lim & Lim (2003) researched the family’s choice of a specific successor. As mentioned above, it is difficult to find a worthy successor as the company is dependent on the qualities of some members of the younger generations of the family. The leader of the family business would prefer to choose less qualified or experienced family members to continue the business than to hire a better-qualified outsider. As Miller et al. (2003) point out, this is matter of the importance of the stability of the firm’s past and present. The younger generation frequently choose new paths for the company or blend the old with the new, while success rather concerns finding a relationship between the past and present. However, the younger generation is not always keen on a position in the family firm; the firm therefore needs to stimulate and train the younger generation for a leadership
position. Early engagement with the company fosters leadership capabilities and creates knowledge about the firm. In family businesses especially, leadership is more about cultural fit than specific competences. Developing the right competences can also be very difficult (Cabrera-Suárez, 2005).
2.3.2 The process of generational transfer
The research by Lambrecht (2005) renders the transition process more understandable, defining six stepping stones for the transfer of the family business. This model comprises: entrepreneurship, studies, formal internal education, external experience, a written plan and
15 agreement, and the actual start of working in the family business (Appendix 1, figure 1). The first step concerns knowledge transfer; other researchers refer to the socialization process, which entails becoming familiar with the company culture and overall structure (Cabrera-Suárez, 2005). Studying is mentioned because case studies show that most successors enter a family business with an advanced diploma in the specific field of the family business. In combination with outside experience, the successor will gain confidence and adequate overall experience. Written plans are not seen as a necessity in family firms, for example, Lambrecht (2005) maintains that these are costly for such a business. Other researchers, however,
consider plans a necessity, pay much attention to the need for formal succession plans, and describe early estate planning as extremely important (Morris et al., 1997). Lambrecht (2005) constructed an explanatory model to explain generational transfer. The model is dynamic and may be considered as describing a continuous process from generation to generation
(Appendix 1, figure 2). As the individual may be seen as part of the family, and the family is part of the business, the figure shows that planning is thus not a necessity. In the circle, he clearly states that what is most important is the strength of the link between family and business, as the family is recognized for its business name, symbols, and values.
Other literature (Cabrera-Suárez, 2005) describes a multi-stage process that begins even before the heirs enter the business. In most of the literature, the first phase begins with the socialization process, in the course of which the successors, having been selected, become familiar with the norms and values and the overall company culture; this process is important for integration and a smooth transfer. During this socialization process, mutual role
adjustment across both generations may result in integration sooner as mutual understanding and respect are crucial in this process (Cater & Justis, 2009).
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2.3.3 Generational transfer strategies
As emotional and personal feelings dominate in a generational transfer, the next leader is not always well-chosen. (Miller et al., 2003). There exist some common patterns that explain the different types of generational transfer in terms of three categories, each with its own
symptoms. The patterns all have different strategic approaches focused on change or
continuation relative to the previous generation. The patterns are referred to as conservative, rebellious, and wavering.
Source: Miller et al. (2003, pp 517)
A conservative succession is characterized by little or no change compared to the old, as the successor continues with business as usual, and policies, structures, and goals remain the same. The earlier traditions are well visible in the company and the culture and performance is kept stable. Successors, in this case, are under significant pressure from their parents and find it difficult to establish their own identity, resulting in a lack of opportunity to pursue their own way. Hence, in such cases, a conservative pattern is visible (Kets de Vries, 1996; Kets de vries & Miller 1984).
Wavering successors focus on doing extra things, so grow the business; they want to put their mark on the organization while retaining certain aspects, such as policies and
17 strategies. The consequence is a mix of the old and the new that makes it difficult to transform the organization. Members of the new, younger generation have the feeling that they wanted to show independence; the successor feels willingness to show creativity in doing business, yet still shows respect for the predecessor. This combination is marked in the wavering succession pattern.
Rebellious succession evidences extreme changes compared to the previous generation. Members of the younger generation wish to innovate and make changes in the current way of operating. They change goals, values and strategies, and even operations; and want to show their creative abilities of creativity and rebuild a better business. Where
idealization of the predecessor in the conservative pattern, turns now into strong feelings to be depend, this individuation process can engender rebelliousness (Kets de Vries, 1996; Kets de Vries & Miller 1984; Miller, 1993).
These three types of generational transfer all show different strategic directions,
focusing on consistency, innovation, expansion, and innovation. The conservative pattern may be viewed as strategic consistency; wavering as expansion or growth while retaining
unchanged internal aspects such as culture and values; while the rebellious pattern involves doing things differently. This is a matter of innovation and may occur in combination with company growth.
2.3.4 The relationship among transferor and successor
Central to many studies is the notion that the quality of the relationship between predecessor and successor is a critical determinant of the success in the transition, especially the quality of this relationship during the transition itself. Mutual respect and understanding in this
relationship increase the likelihood that the successor will lead effectively. Especially at the beginning of the process, there needs to be mutual learning, and good communication and
18 feedback. This sound understanding towards each other affect the success of the succession (Venter, Boshoff, & Maas, 2006). Sometimes, however, this may be difficult as there are often feelings of rivalry and a certain degree of tension between, for example, son and father. The son may feel that the father is a rival and, in fact, that he wants to perform better; while, on the other hand, they also have characteristics in common. Their feelings toward each other are often complicated—personal and professional feelings are mixed in such a case. However, what determines the degree of change or innovation of the new leader (Cabrera-Suárez, 2005)? Hauck and Prügl (2015) show that family adaptability and closeness to the business are positively associated with innovation, while family bonds and internal authority are negatively related. Another study discusses the fact that the successor is sometimes willing to show that he or she can perform better, and looking up to the parents is transformed into feelings of conflict (D. Miller et al., 2003). When this relationship between the successor and predecessor is strong there is no need for this conflict. Internal trust and honesty foster a good post-transition performance. In addition, respect and understanding are important in this process. One of competitive advantages of the family firms is the unique knowledge of the incumbent owner-manager of the firm. Another is great commitment to the firm. Unique family knowledge and techniques must be passed on to the next generation. Another outcome of this relationship is visible in the level of motivation of the successor (Miller et al., 2003). High levels of motivation can result in a good, stable performance.
2.3.5 Involvement of the transferor
Lambrecht (2005) studied the soft elements of generational transfer in an explanatory context. Because he tries to show how transfer of the family business towards the next generation occurs. In the study, he discusses the role of the transferor. Good leadership implies letting things go and trusting one’s people; in this case, the transferor needs to trust the successor. It
19 has been shown that the business smooths the path for next generational transfers when the transferor relinquishes control. If the successor is held tightly under the influence of the transferor, this would force continuation, and then when the former gain freedom, he or she can act destructively. However, relinquishing control of the business may be extremely difficult as it has represented a considerable component of one’s professional, personal, and social life and is in addition the lifestyle one is accustomed to. It may therefore be challenging to see someone else lead “your” business; sometimes such people feel they would have done things better and differently. However, not relinquishing control may impact on the successor, and he or she may feel trapped. Such circumstances does not allow them to develop their own capabilities or demonstrate their innovations for the company. The successor may be forced to continue with the business in a manner similar to that of the predecessor as the latter’s
influence remains considerable. Therefore, the predecessor should act as a mentor during the transition process; following this process, he should only act as an advisor when required to do so. He needs to let the successor establish himself as a new leader with his own way of doing business (Rangus, 2016).
2.3.5 Summary
It is difficult for a family business to choose a successor wisely; the latter needs to fit in the company culture and have sufficient capabilities. The company is reliant on the capabilities of the family. Lambrecht (2005) developed a logical process of generational transfer, which outlines the points at which critical steps need to be taken. There are, in the essence, three types of generational transfer: the first focuses on consistency, the second on growth, and the third on innovation (and growth). A smooth generational transfer process is dependent on a number of factors. The relationship between predecessor and successor is the most important as this influences the ability to smoothly continue with the business. Where the relationship between both and trust is also about letting things go. Therefore, the predecessor needs to
20 show low involvement this could increases the likelihood of own identity creation of the new owner and therefore the likelihood of innovation.
2.4. Branding of family business
2.4.1 Family-business branding strategies
Researchers view the interactions of family and business differently: some researchers see it as highly complex, and others as a unique competitive advantage (Micelotta & Raynard, 2011). This study views it as a competitive advantage because the family identity is mostly used to associate the business with positive attributes such as trust, commitment, and a consumer-oriented focus. These are typically associated with family businesses (D. Miller et al., 2003). Nevertheless, family businesses are dissimilar in their branding strategies. The study of Micelotta & Raynard, (2011) found three distinct strategies by means which companies communicate their corporate brand identity: family preservation, family enrichment, and family subordination. They are identified with the carrier of identity, conceptualization of temporality and the role of the family. The carrier of identity could be the business the product or service or the family. The second is about dealing with the history and the last one is about the relationship between family and business.
The family preservation strategy is characterized by a deep connection between the family identity and the business identity: the company sets the family as a focal item in branding. The marketing communication contains principally information about the family and the history of the family, with pictures and traditions depicted. The family is seen as the face of the company and the brand identity is deeply rooted in the family. As the past of the family plays an important role in the company, the next generation feels forced to continue business in a similar manner. This strategy is strongly linked to the past and will probably block new innovations (Hauck & Prügl, 2015). The family enrichment strategy is similar to
21 the preservation strategy in the sense that family traditions and values are important; however, what is different is the sense that the products and services are central, that is, it is the inverse of the previously mentioned strategy (Micelotta & Raynard, 2011). Members of the next generation are seen as guardians and there is a need to ensure that techniques and experience are passed down to them as the strong foundation of the family business need to be
foregrounded and continue. The family subordination strategy is the opposite: the company has its own identity and is conceptualized as distinct from the family. Visually, in terms of style and layout, the company is modern; such companies want to move forward and
innovate, and their history is not obviously linked to the family (Ghodeswar, 2008). Notable is the fact that the family factor is the driving element in all the strategies as these family connections play a vital role in a firm’s abilities to mobilize resources, and family
circumstances continue to significantly influence the family business. The name of the family firm entails so much more than only a logo or color—it can represent trust and quality. This representation however, depends on the strategy selected and implemented in the family business.
2.4.2 Consumer brand perceptions of family businesses
Some family branding literature talks out the differences between family and nonfamily firms and how they are perceived by their stakeholders. First, concerning a definition of the term “brand,” a brand is defined as “any symbol susceptible to graphic representation that may
serve to distinguish the products or services of one company form those of others in the market.”(Ghodeswar, 2008, pp.4) Brands gives consumers the possibility to identity and bond
to a company. The consumer-based brand knowledge is created in terms of personal meaning, the sources which the consumer attribute to the brand as attributes, personal benefits, thoughts feelings and experiences (Keller, 2003). The perception of the consumers or stakeholders is
22 the core of this subsection, which focuses on image, personality, and brand reputation. A strong brand perception is formed by the existence of a strong family brand that has endured several generations and has deeply rooted history and values. The paper of Bravo, Cambra, Centeno, & Melero, (2017) talks about these family values as unique, potentially, contributing brand differentiation to forming the brand identity. Where the strongest family businesses establish family values as brand values. Brand identity is formed by these characteristics, which are unique to the brand.
Consumers are willing to pay higher prices for the products and services of family businesses and like the family factor of the company. (Carrigan & Buckley, 2008) They acknowledge the fact that the family can contribute to the firm in both the long and short term, an element that is visible to consumers (Gallucci et al., 2015). They are therefore willing to build long-term relationships with the company and generate positive word-of-mouth communication, which is of course good for the family firm (Martenson, 2007). A good family brand name is a powerful tool for communicating strong values and reliability to the consumer. Consumers are able to feel personal connections to the company and believe that they receive special treatment when they connect with the family business. In particular, being different and unique as a family firm makes this type of business model stand out.
2.4.3 Family brand identity
The term “identity” in marketing is usually described as the consistent and targeted
representations of the organization in its managed communication with external stakeholders (Micelotta & Raynard, 2011). Other researchers describe it as the message-carrying
interactions concerning the brand between the brand strategist and the brand internal and external entities (Madhavaram, Badrinarayanan, & McDonald, 2005). This identity concerns the self-image that the organization wants to communicate and promises they make to
23 consumers. The brand strategist wishes to ensure that the brand identity is in line with the brand image (Srivastava, 2011), as the brand image is about how the brand is perceived by the consumers. Managing this brand identity incorporates activities that portray a clear identity to the business’s internal and external stakeholders. According to Micelotta & Raynard (2011), brand in this refers to the distinguishing name and/or symbol intended to identify the
company; they describe this as the visual identity, which entails symbolic representation, including logos and graphics. The second aspect is brand communication, which has to do with the visually presented components of a company. Harris and Decharnatory (2001) identify the various components of brand identity more elaborately and mention some internal features of brand identity, as brand vision, brand culture, positioning, personality, relationship and presentation. They see brand identity as a means to inform, guide, and assist in
developing, nurturing and implementing the firm’s overall integrated marketing communication strategy.
Having a clear, unique brand identity may create a competitive advantage. More importantly, it defines the values the firms attempt to support and show. Family firms have a strong brand identity that distinguishes them from normal businesses. Theirs is long-term value-based approach, with a sustainable growth strategy. This distinction is only possible when a family business applies a competitively oriented approach. A family-based brand identity may have a direct positive effect on performance only when the family firm is competitively rather than product-oriented (Micelotta & Raynard, 2011). If it is able to communicate and leverage its family identity, it may gain a competitive advantage. Its values are formed by tradition and a rich history, and the family identity can bring unique strengths, value, and credibility to the corporate brand.
24 2.4.4 Family brand personality
Brand personality is part of the brand perception—the research refers to it as a set of human characteristics associated with a brand. It concerns consumers’ total impression of the brand. The brand gives consumers the possibility of expressing their identities. It may also be an inspiration for the consumer, referring to the person he or she wants to be (Aaker, 1997). In family businesses, this brand personality is easily to distinguish from that of normal
businesses. Usually family business has an authentic soul, this authenticity is often described as being clear where you stand for and is considered to be the original in contract with fake. A low degree of brand authenticity on the other side implies brand positioning which show no conformity with the identity, so does the brand what it promises (Schallehn, Burmann, & Riley, 2014). Family business are usually characterized as authentic and show a stronger passion for what they are doing; this in turn inspires trust (Bhargava, 2008). Aaker (1997) designed a model that describes five dimensions of brand personality, all of which comprise suitable traits represented in the brand personalities. The five dimensions are: sincerity, excitement, competence, sophistication, and ruggedness. Most family businesses can be directly identified with the sincere personality, where traits of being down-to-earth, honest, wholesome, and cheerful are central. These human-like characteristics are not the only features that are important; in addition, more studies are analyzing organizational culture, which in turn influences the company’s brand values, which are more strongly visible and unique in family businesses. This company culture needs to be well managed in family firms to create a stable brand personality (de Chernatony, 1999).
2.4.5 Secondary associations in family businesses
Except for the abovementioned perceptions of the family business’s brand name, brand identity is a key aspect of brand reputation, which is formed by the outside perceptions of
25 consumers of the specific characteristics of the company (Fombrun & Rindova, 2000) and the signals marketers produce (Veloutsou & Moutinho, 2009). The secondary associations, which are needed in high competitive market to differentiate. Marketers associate their brand in this case with other people, places or things. Linking the brand in this case to something else will affect brand knowledge. These linkages are expected to be stronger in family businesses than non-family businesses. Keller mentions the most important secondary associations as; place of origin and spokespersons (Keller, 2003).
The owner
An important contribution to the secondary association people, is the fact that the brand identity is, according to Törmälä & Gyrd-Jones (2017), also based on the “reputational capital of the organization or the founder” (p. 76). Hence, the founder may also have an important contribution to make in shaping the brand identity, especially in a family business, where the owner is often highly committed and particularly focused on relationship building. This provides the owner of the family business with an even more important role and raises the question of whether and how a change in the CEO can impact on the consumers. Not only the owner but also the stakeholders are important—usually these are family members. Saraniemi & Komppula (2017), point out that stakeholders image and their belonging associations may have a mature impact on brand building and brand management When structures in the stakeholder group change, logically the family business as a brand might also change. The problem with even small changes is that they might have a large impact on consumers. They may lose identification with the brand and cease their relationship. Proper communication can help overcome this. As Srivastava (2011) mentions, frequent changes in brand cues affect brand image like an identity crisis. Considering the core perceptions of family firms, in general, the company image perceived is created by formal company policies, organizational
26 culture, and, importantly, the employees. In addition, the CEO can play an crucial role in designing the image of the company—the long-term success of the family business lies for a large part in the hands of its leaders. It all depends on making the right decisions and, of course, good leadership, because according to Fernández-Aráoz et al. (2015), great leadership is certainly a competitive advantage (Cabrera-Suárez, 2005).
Place of origin
Internationalization in family businesses is a widespread topic outlined in the literature. Several studies confirm the negative relationship between family ownership and
internationalization. The reasons for this are a lack of resources as well as the underlying mechanisms; as lack of money and capabilities, keeping in mind that family businesses are mostly small in size and define themselves as small or medium-sized enterprises.
Internationalizing is difficult and key reason for this is that family businesses lose their strong connection with the secondary association that is their place of origin, or in this case, the city/suburb. Companies link their brand to other people, places, or things to improve their brand equity and create a strong foundation for possible growth. Credibility could, for example, be gained by creating the country-of-origin effect. In the case of family businesses, as indicated, this would be the city or neighborhood, for example, the bakery around the corner (Li & Wyer, 1994). The country of origin effect could have a positive influence on evaluations, and the evaluation of perceived quality is better. This secondary association is stronger in family businesses than in normal businesses as the former are usually more often associated with their place of foundation and the history of this foundational place. This also plays a considerable role in marketing communication. Hence, family businesses often communicate using words such as “since,” “founded by,” and “founded in,” by means of which they directly relate to the place of origin (Schwass & Glemser, 2016; Micelotta & Raynard, 2011)).
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2.5 Changing environment
The great uncertainty associated with the fast-changing environment makes it possible to ruin the reputation of a family business in a few minutes. The ubiquity of social media means that it is no longer possible for companies to control their image; at the same time, consumers are becoming part of the brand-building activity. This could be seen as a huge threat for
companies; however, they should attempt to make smart use of it and use the consumers to spread their brand. Branding by using one media channel is no longer sufficient as consumers now have access to massive quantities of information. The company need a combination of tools rather than for example broadcast advertising alone. Some important brand marketing activities need to be controlled by the marketer and consciously thought about. Because, traditional ways of advertising as magazines and are losing their hold on consumers, and the trend toward digital communication means that marketers and owners should rethink their practices (Keller, 2013).
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3. Themes and core questions
3.1 Defining the themes
Although the issue of generational transfer has been a principal concern of family business researchers, the research has largely been focused on succession and on finding good relationships and values to drive the success of generational transfer. In order to develop a more complete understanding of the effects and hence the implications of generational transfer, a conceptual story is proposed and explored for family businesses. This chapter discuss the important roles, branding strategies, and the implementation of these on family businesses following a generational transfer. Most importantly, the changing or continuation of a branding strategy due to generational transfer is explored.
3.1.1 Branding strategies
Micelotta and Raynard (2011) propose three different family branding strategies, these are used in this study. The study analyzes these branding strategies: family preservation, family enrichment, and family subordination in two perspectives, the change from strategy 1 to 2 and the new branding strategy implemented. This new branding strategy may be similar to the old one, though whether what is expected is consistency or change is dependent on the different defined roles. Because the relational factors are mentioned often as critical factor influencing the strategic direction of the company, the roles focus at relationship between predecessor and successor and involvement of predecessor.
3.1.2 Roles
This study focuses at three roles: relationship, involvement and amount of generational
transfers. Existing studies describe a number of variables that influence a smooth generational transfer; in this study the three most relevant are selected. The first two were selected because almost every family-business researcher mentions that a good relationship within the family is
29 a key to success (Morris et al., 1997). Therefore, for this research the two variables that are directly linked to internal relationships have been selected. The involvement of the
predecessor and the relationship between the predecessor and successor are directly related to each other and are relevant to measuring mutual understandings. The last role has to do with the amount of generation transfers in the company. Where there is expected that more generation transfers influence the innovative character of the company.
As the focus of branding strategies concerns change or continuation, the roles that influence these are especially interesting. Researchers explicitly mention that more
generational transfers influence innovation (Hauck & Prügl, 2015). New ownership regularly results in substantial gaps in age and experience that cause dysfunctional reactions (Miller et al. (2003), therefore researching the number of generation transfers is of particular interest in this model and therefore this research adds this variable to the study
Together the roles of involvement, relationship and the number of generation transfers, show the diversity of the important roles that have to do with the internal processes of the family firm, focusing on the key characteristics of the leader and internal relationships.
3.1.3 Marketing communication
As indicated above, the literature shows that there are three types of generational transfer: conservative, wavering, and rebellious. These specific patterns are characterized by the following implementations: consistency, growth, and innovation (D. Miller et al., 2003). These three options are the strategic implementations that can also be communicated by the company to inform their consumers. This implementation must be communicated by a person who is involved in the in the generational transfer—the old owner, or new owner, or both together. Therefore, the following combinations are defined in the model below, see figure 1: theoretical construct.
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Theoretical construct
Figure (1)
3.2 Relationship variables
Hence, the central concept in this explorative model is the family business’s branding strategy. The literature shows that family businesses are unique in their manner of linking business and family, each using the family factor in their own way (Srivastava, 2011). In this manner, branding strategies are of great importance for these businesses. As indicated above, research shows that there are three types of family branding strategies: family preservation, family enrichment, and family subordination (Micelotta & Raynard, 2011). In this study, these strategies are named and referred to as the family heritage strategy, family values strategy, and modern family strategy. These strategies make the family factor central in their business, though to different degrees, from the family and business being totally intertwined to being totally separated. A direct change in branding strategy following generational
Involvement Relationship between predecessor and successor Number of generation transfers
Roles Branding strategy
Heritage strategy
Value strategy
Modern strategy
Marketing communication
Sender: Old owner What: Continuation
Sender: Old and new owner
What: Growth Sender: New Owner What: Innovation (&
Growth)
Direct change or continuation in branding strategy after transition
31 transfer is expected because the related generational transfer roles discussed in the literature impact on changes to or stability of the branding strategy. Lastly, such strategic change has an impact on the positioning of the family business and could be visible in its approach to
marketing communication. The business, either the old or the new owner, may communicate regarding their innovation, growth or continuation by means of an event or publication in news articles. Hence, a change in branding strategy may be directly related to the firm’s marketing communication approach. It is expected that this implementation would also be directly linked to the roles of the next generation, namely, relationship between the successor and predecessor, the involvement of the predecessor, and the number of generational transfers that have occurred.
Underneath the three research questions and expectations of this study are discussed. These are sometimes divided in sub questions with belonging propositions or expected scenario’s.
3.2.1 RQ 1: What is the impact of generational transfer on branding strategy?
According to research, generational transfer is a critical point in time for changes to the status quo as the younger generation tend to do things differently. Therefore, generational transfer impacts on corporate strategy, which also impact on the business’s branding strategy, which is especially important for family businesses. In this study the branding strategies are called: the family heritage strategy, family values strategy, and modern family strategy. Each make use of the family factor in their own way (Micelotta & Raynard, 2011). In essence, family
businesses employ a family heritage strategy in which history, authenticity, commitment, and superior quality are strongly present. The family is strongly linked to the business, and this is visible in direct contact with the environment, personal connections, and behavior (Carrigan & Buckley, 2008). The literature on family businesses outlines these characteristics of family
32 businesses; however, the culture and dynamics could differ from each other due to the
dynamic environment of today, and this makes the strategic approach of the next generation different from that of the old. Hence, the heritage strategy will probably change to a family values strategy, and the values strategy to a modern family strategy (the various strategic scenarios are described in subsections 3.2.1.1 to 3.2.1.4). This are referred to scenarios because of the explorative character of this research and it is rather an expected story than a hard proposition. In the next sections, these strategic possibilities are therefore referred to as scenario’s. This strategic change is caused by the generational transfer although it is expected that the change from heritage to modern would not be dramatic due to the various related roles. An overview of the characteristics per strategy can be found in appendix 9.
3.2.1.1 Family heritage strategy to value strategy (Scenario 1)
Family businesses with a heritage strategy are characterized by a deep connection between the family identity and the business identity—the company sets the family as a focal item in branding. The marketing communication primarily contains information about the family, the history of the family, with pictures and traditions depicted. The family is seen as the face of the company and the brand identity is deeply rooted in the family. As the past of the family plays an important role in the company, the next generation feels forced to continue business in a similar way. This strategy can be seen as crafting an authentic family identity (Napoli, Dickinson, Beverland, & Farrelly, 2014). It is expected that following the transformation, this strategy will change to a more value-oriented strategy. In this first place because the
uniqueness of a family business is caused by their ownership, governance and management and influences the firm’s goals and strategic direction. The generational transfer is seen as a factor causing change. In the second place because family businesses are seen in the essence as implementing more innovations than non-family businesses (Gudmundson, Tower & Hartman, 2003). The article of Beck, Janssens, Lommelen, & Sluismans (2009) mention a
33 few human related resources that affect the innovation capacity and this are in return affected by the family characteristics of the firm. So, the innovative capability is influence by
characteristics of the firm, organizational members and environmental factors. These characteristics of the firm are for example, age of the company, size, and structure of the company. The study mentioned (Beck, et al, 2009) show that the human-related antecedents are positive related to innovation. Because these human-related characteristics change strongly due to generation transfer to a younger generation, this innovative capability is expected to change to a more innovative company. Therefore, the strategy will change to a more innovative strategy. With the latter strategy, product quality and services are central, and the next generation maintains the most important traditions and operations. The history is more a story that is told than a real presence; however, the norms and values from the predecessor are retained (Micelotta & Raynard, 2011).
3.2.1.2 Family value strategy to modern strategy (Scenario 2)
With the family value strategy, the traditional values and norms are still present in the business and the next generation feels the need to retain certain important traditions of the predecessor. The products and services become more central than the family with this strategy (Micelotta & Raynard, 2011). The company still uses the family as an asset; however, this asset is no longer seen as the most important driver of the company. This strategic approach is expected to change to a modern family strategy due to a generational transfer. The same line of reasoning is used for this scenario as the previous one. Because innovation is the
underlying reason for this strategic change to a more innovative strategy. With the modern family strategy, history and value are more a form of storytelling, and may be visible, for example, on the firm’s website; however, the company becomes a more business-oriented firm. Financial results are more important, and the family-factors are backgrounded. In a
