Issues and Solutions for a Family Business - Trung Nguyen

Use The Information To Understand Family Business Issues. Interview a Selected Family Business That You Know ( You Can Write About a Family Business You Know Or Make Up a Family Business And You Name Company a Or b ,The Name Of The Company. Of Course You Can Make Up The Interview) , Identifying Any Issues And Problems Confronting The Family Business, And Provide Solutions For The Problems (Making Them Up Provided That This Information Is Reasonable And Logical With The Reality Of Family Business Area) .

The report reflects on a recognized family business named ‘Trung Nguyen’. A family business is a historical form of business and it benefits the local and global economy. It refers to the inclusion of two or more than two family members and the owner also lies within a business. The family business offers high stability as a family position typically determines the individuals responsible for leading the business. The business is operated via the same leadership and offers stability to the organization. The owners show high commitment and it gave rise to a better understanding of the industry, organization, and lay high focus in building customer relationships. It offers high flexibility and decreased cost as family members invest their finance in the business. It often develops conflicts among the family members and disturbs their relationship. These conflicts gave rise to long-lasting bitter fights and quarrels and lay a direct impact on the working environment of the organization. It gave rise to nepotism and often restricts the outside talent to avail of the top position in an organization. The company experiences difficulty in retaining good talent. It lays an impact on the organization’s success. These family business experiences lack of succession planning and issues based on internal hierarchies and rules (Cesaroni & Sentuti, 2014).

Considering the report structure, the initial section involves the literature review on the conflict in the family business. The next section includes information based on the nature of the business, core values, and family roles. The succeeding part involves information based on the outcomes of the interview. The analysis part comprises factors responsible for the emergence of an issue and practical recommendations with the application of the Timmons Model. The key purpose of the report is to focus on the issue of a recognized family business.

According to James Chrisman, Jess Chua, Allison Pearson and Tim Barnett (2012), family conflict influences the firm’s performance. They have developed the use of secondary research to gain insight into the family business. The relationship among the family members develops value and assist in easy business operation. Emergence of minor conflicts between the family members disturbs their relationship. According to the authors, it mainly lead in collaboration with members and the presence of positive relationship is essential to minimize or eradicate family conflicts for the smooth execution of business (Chrisman, Chua, Pearson, & Barnett, 2012). According to Fabian Bernhard and Michael Driscoll (2011), a psychological relation prevails between the owners and non-family employees. The presence of strong psychological relation is highly necessary to minimize interpersonal conflicts in business. The family business conflicts are mainly categorized into four types and it includes Minor Disagreement, Serious dispute, Destabilizing conflict and Warfare. The minor disagreements between family members arise due to different perspective. These are mainly sorted through compromise. The different opinions of the family members gave rise to this form of conflict. The prolonged disagreement is mainly considered as ‘Serious dispute’. It is the result of larger ideological differences, feeling of disrespect combined with blame and defensiveness often develops. These form of family business conflicts need to be worked quickly to minimize the risk of moving to the next level of conflict. It is difficult to seek the solution of destabilizing conflicts as it includes the presence of extreme emotions, high anxiety, and expressed anger. Warfare is the fourth level of family business conflict and it threatens to the existence of an organization and relationship. The parties engaged in warfare conflicts also attack the second party with a motive of revenge. This is often resulted in division of family and permanently damaged relationships. The family relationship is rarely recovers and the only solution of this form of family conflict is separation of financial assets (Bernhard & M. P., 2011).

Company Overview

According to David Deephouse and Peter Jaskiewicz (2013), family firms have a high reputation than non-family firms. The authors have stated that family members show high belongings with their firm as their name is associated with the firm. It motivates the members to devote efforts to raise a firm reputation in the market as it allows them to develop a positive feeling about themselves. The non-family firms do not have a social connection with the organization and their key motivate is to gain monetary gains rather building a firm reputation in the market. They have uses secondary information to raise understanding based on family firms (Deephouse & Jaskiewicz, 2013). According to Danny Miller, Alessandro Minchilli and Guido Corbetta (2012), family leadership is not always beneficial. They have stated that top positions in the family firm are held by the family members. They do not attain the necessary skills and knowledge to fulfill the responsibility of the concern position. It develops the possibility of wrong decision making in the presence of inadequate knowledge of the authority. Therefore, it gave rise to the poor functioning of the family firm in the market (Miller, Alessandro, & Corbetta, 2012).

According to Wenyi Chu (2011), family ownership lays a direct impact on firm performance. They have opted for a secondary research to focus on the relationship between family ownership and firm performance. The author states that the organization's position is strong when the family member serves as Chief Executive Officer, Top managers, and directors. The active control and management of the family members assist in developing a firm position. The firm position becomes relatively weak in the presence of a low association of family (Chu, 2011).  According to Franz Kellermanns (2012), the generational ownership dispersion, family management involvement, and family member reciprocity influence the firm performance. The author stated that these factors are responsible for raising the firm performance and vice versa.  The high collaboration of family members will enable the ineffective management of business operations and allows in fulfilling the key objectives. The emergence of poor relations among the family members will give rise to quarrels and misinterpretations. It gave rise to a negative work environment, poor word of mouth and often develops the possibility of business division (Kellermanns, 2012).

According to Francesca Cesaroni and Annalisa Sentuti (2014), the role of women in the ownership, management, and direction of a family business is gradually increasing. They play a marginal role but they were not recognized and rewarded in terms of job titles and salaries. They are holding a strong position in the market and it is minimizing stereotyping and gender discrimination. The authors developed the use of primary (interview) and secondary research to gain information about the women s role in the family firm (Cesaroni & Sentuti, 2014).

Nature

According to Maheshvar Prasad Yadav (2015), Timmons Model is considered an entrepreneurial success model.  According to this model, an entrepreneur seeks an opportunity and shapes the opportunity by drawing up a team and gathering the essential resources for initiating the business operations to capitalize on the opportunity. The entrepreneur should attain creative thinking to recognize the opportunity through environmental scanning. He should communicate the opportunity to the resources and develops the use of the right leadership style to manage the team for the successful implementation of the opportunity (Yadav, 2015).

Trung Nguyen is a multinational coffee brand based in Vietnam. It was founded in the year 1996 and it has nearly 1000 franchisee coffee shops. It is the first domestic business to turn raw Vietnamese coffee beans into a beverage product to serve the population of Vietnam. Trung Nguyen has added more values to the product and engaged in the export of raw bean. It serves customers in multiple countries including the USA, Japan, Singapore, Thailand, China and Poland. It is the largest company in Vietnam and forms part of the manufacturing and trading industry (Vietaz, 2020). The key competitors of the organization are Berryviet Coffee, Highlands Coffee, Cubao Coffee and Cubes Asia. It offers a variety of customers to fulfill the diverse needs of the customers. It includes Arabica, Robusta, Chari and Catimor. It offers a quality product to the customers and it is reflected via 4.3 ratings from the customers on the Amazon website (Amazon, 2020).

The annual profit of the company is around US$34.4 (Talkvietnam, 2018). The company avails its raw material from multiple suppliers and it includes Lucky Shing, Century Distribution System Inc., and Damco Vietnam (Panjiva, 2020). It serves its customers via the digital platform as well as brick and mortar. On digital platforms, it sells its products on multiple recognized websites like Amazon (Amazon, 2020). Its key stakeholders are employees, customers, suppliers, shareholders, and government.

The core values are the fundamental beliefs of an organization. These are the guiding principles that allow the organization to follow the right path for the fulfillment of long term objectives.

Absolute truth: The Company aims to follow the right path without considering the circumstances prevailing in the internal and external environment.

Serving without self-interest: It will not minimize the product quality to gain high financial benefits. It shows a high preference to offer a quality product for the fulfillment of customer's needs.

 Supported by mankind: It will be engaged in the production of a commodity that will be favorable for the customers and society.

 Stable biz-finance: It focuses on achieving finance in a credible manner (Trungnguyen, 2020).

Dang Le Nguyen Vu was the founder and chairman of one of Vietnam's largest coffee company named Trung Nguyen. He was also an entrepreneur, president and general director of the company. His four children also attain a role as they have shared in the company (Truong, 2018).

Ms. Le Hoang Diep Thao was the co-founder and co-owner of the Trung Nguyen group and she attains a key role in developing a domestic brand into the world-recognized coffee brand. She is the Chief Executive Officer of Trung Nguyen International (leading coffee group). She has high knowledge about the history of Vietnam coffee. She has high understanding based on cultural symbol, desires, and fantasies relating to coffee and it has enabled her to raise the demand for Trung Nguyen Coffee in Vietnam. The new brand of Trung Nguyen named King Coffee (launched in the year 2016) was also under her control. She has targeted international customers for King Coffee and develops the use of global friendly packaging. King Coffee was introduced to 60 international markets two years after its launch. This clearly states that she has a strong and high position in the Trung Nguyen Group (Prnewswire, 2018).

The in-depth understanding of Vietnam coffee culture has enabled the members to make Trung Nguyen as one of the remarkable brands of Vietnam. The high recognition in the domestic market has assisted the members to experiment with their products in the global market (Prnewswire, 2018).

An interview was conducted on February 2, 2020, with the key personnel of 'Trung Nguyen'. It is recognized that the family is engaged in this family for multiple reasons. The population of Vietnam shows a high preference for coffee and it has helped the company to easily generate the demand for its coffee.

High recognition: The higher presence of the organization in multiple countries has allowed the owners to gain high goodwill, reputation and social recognition in the global market.

Sustainable long term income stream: The income generated from the business is one of the key sources of income. The company has experienced fine business growth within a decade. It has availed high financial returns from domestic as well as global market (Including Asia and China). The contentious growth has motivated the owners to run the business operations continuously.

Preservation of family financial wealth: One of the key motives behind continued business operations is to preserve family wealth and avail higher returns.

Creation of opportunities for succeeding generation: In the presence of a highly competitive environment, it allows them (family business owners) to develop a strong business for their future generation. Therefore, they do not have to seek a job for financial earning as a family business will offer them employment opportunities and regular source of income.

Long term relationship with suppliers/advisors: The family business attains a strong interpersonal relationship with their suppliers and advisors. Therefore, they do not face difficulty in availing raw material and gaining support in business decisions. It gave rise to smooth business operations and develops a force among the business owner to continue business operations.

Long term stability and security: The family business offers stability and security of earning financial returns. Therefore, it eradicates the fear associated with job loss.

Higher involvement: The family business involves the inclusion of family members and they offer high support in business operations. It develops a motivating force among the owners to continue operating the business.

There are multiple areas in the business and production and sales department of Trung Nguyen as highly impacted by the family conflicts. The business owners were not able to devote attention to the deteriorating product quality.  It has gradually laid an impact on the reputation of the family business. Additionally, the initiation of disputes among the owners has affected the sale of the product in the market. The divorce among the parties developed a poor effect on the profitability of the family business. This is because it was divided among the owners and it fails to compete with its rivals (Nescafe and Starbucks) in the domestic market. The decision was (division of family business) not appropriate as business should be treated as a separate business entity. The poor interpersonal relationships among the owners have overlapped with the product quality, sales, and profitability in the domestic market.

Reduced profit: From the last years, Trung Nguyen is facing a continuous decline in profit. The Gross profit margin has to 34% in 2017 and 27.9% in the year 2018 (Son, 2019).

Intense competition: There are multiple globally recognized companies offering a similar product (coffee) to the customers. The rising competition with Nestle, Starbucks has minimized the product demand of Trung Ngyung in Vietnam (Forbes, 2017).

Deteriorated prestige: Trung Ngyung is experiencing customer complaints based on the poor quality of the coffee. It is not able to meet the service standard as a reputable business organization. Therefore, it is giving rise to poor word of mouth and minimizing the family firm reputation in the domestic and global market (Tripadvisor, 2020).

There are multiple causes of problems facing the family business of Trung Ngyung. These are described below:

The epic divorce of Dang Le Nguyen Vu and Le Hoang Diep Thao is the root cause of the problem confronting the family business. It led to the division of Trung Nguyen Group into two groups of Trung Nguyen and G7. The G7 brand offers instant coffee products and Trung Nguyen is associated with roasted and ground coffee products. The division of a globally recognized coffee brand has developed has raised competition from its rivals. The G7 and Trung Nguyen division into separate business entities has minimized their scale of operation than their rivals named as Vinacafe Bien Hoa and Nescafe (Depbenvung, 2019).

In the year 2013, a globally recognized coffee house chain named Starbucks has entered the Vietnam market. It has introduced a Vietnam coffee brand of ‘Dalat Blend’ to its coffee outlets. The luxury international coffee brand has gained the attention of a large customer base. It charges an unreasonable price for its wide variety of products including coffee.  It has developed the use of prime locations for high visibility among the customers. It has developed the use of retail and international stores (no franchisee) and it has benefitted in gaining loyal customers. Additionally, it has developed a strong relationship with the suppliers and offered high benefits to its human resources. It has assisted the company to offer a high-quality product at the right time. Therefore, all these factors have enabled Starbucks to attain a strong share in the Vietnam market. It has gradually minimized the demand for Trung Nguyen among the customers of Vietnam (Forbes, 2017).

Several G7 chains were transferred to Vinacafe Bien Hoa and Nestle. Multiple cafes have illegally borrowed the 'Trung Nguyen' name and logo and initiated offering poor quality coffee and developed the use of distinct roasted coffee in their operations. They have deteriorated the prestige of the company among the customers. It has laid a high impact on brand value and decreased its demand in the market (Vietnamnet, 2014).

Below are the practical suggestions for the family business of Trung Nguyen to gain a strong position in the market.

Opportunity: The family business should seek opportunities in the market and must lay an effort to gain the customer's trust based on product quality. It should seek an opportunity to avail of its benefits. Starbucks offers tough competition to Trung Ngyung, therefore, the company should open more coffee outlets in Australia. The less availability of Starbucks coffee outlets in the Australian market will minimize the competition for Trung Ngyung. It will enable the company to gain high customers, brand recognition, and fine financial return from the Australian market. Besides this, it should also lay attention to retain its prestige and dominate the domestic market (Ghee, 2018).

Team: The family business members named Dang Le Nguyen Vu and Le Hoang Diep Thao should reunite for developing better social relationships and raise the reputation of the Trung Nguyen among the customers. They should specify their responsibilities, roles, and share in the business to eradicate any form of business conflict and quarrel. Their efforts will assist in improving the financial position of the business and minimizing competition from their rivals. This approach will benefit from raising the business to greater heights of success in Vietnam and the international market. The company should lay a high focus on the recruitment of culturally diverse employees. It will offer a dual benefit to the organization. It will enable in fulfilling the corporate social responsibility towards the society and raising its reputation in society. Additionally, they should opt for a team-based organization structure for business management. It groups employees into project teams based on their specific duties. It will give rise to creativity and innovation in the organization. The collaboration of employees with distinct cultural background develops the possibility of creative and innovative business ideas (Ghee, 2018).

Resource: The business owners should minimize and control rather than maximize and own. They should lay prior attention to the management of existing resources to retain their full utilization. The human resource is the core asset of an organization and assists in the fulfillment of organizational objectives. They should devote efforts to developing discipline and leanness in the company. It will enable the employees to devote their full attention to the fulfillment of their duties. They should opt for the appropriate leadership style for human resource management. Additionally, they should offer performance-based financial incentives to their employees. It will develop a motivating force to deliver the best possible outcome to achieve fine monetary returns (Ghee, 2018).

Therefore, Trung Nguyen should open more coffee outlets and rely on team-based organization structure and for effective management of the human resource in the Australian market.

Conclusion

 The report summarizes the recognized coffee company named 'Trung Ngyung' (family firm). From the above discussion, it is assessed that Trung Ngyung is one of the top coffee companies in Vietnam with a high presence in the international market. It is acknowledged that family firms offer high advantages as well as disadvantages. They face ease in availing finance and gains benefits of high flexibility, stability, and commitment. However, it is recognized that the development of quarrels and disputes among the family members lays a direct impact on the business functioning and decreases its reputation in the domestic market and often faces difficulty in recruiting skilled talent. From the author's view, it is recognized that there are mainly four types of family business conflicts and it includes minor disagreement, serious dispute, destabilizing conflict and warfare. The fine relationship among the family members assists in gaining high support and vice versa. The family member lays high efforts to maintain the business reputation as they have a social connection with the firm. It is acknowledged that women also hold a strong position of manager, CEO, and chairman of the family firm.

Trung Ngyung's key values are absolute truth, serving without self-interest, stable biz-finance, and supported by mankind. Additionally, Dang Le Nguyen Vu and Ms. Le Hoang Diep Thao attain a strong role and hold a high position in Trung Nguyen. The interview outcome depicts that high recognition, sustainable long term income stream, preservation of family financial wealth, creation of opportunities, higher involvement, and long term stability and security are the key reasons for a continuing family business. There are multiple causes responsible for the problem and it includes divorce of Dang Le Nguyen Vu and Le Hoang Diep Thao, the entrance of Starbucks, and the deteriorated prestige of the company. It is recommended that Trung Nguyen should seek an opportunity in the Australian market, develops a team of a culturally diverse workforce, and undertake measures for human resource management. Therefore, Trung Nguyen should lay high emphasis on improving his prestige in the domestic market to gain a strong position in the beverage industry of Vietnam and the global world.

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