Unsustainable Family Business in Saudi Arabia - The Roadmap Ahead

Anas Alrebdi,Khaliq Ahmad Mohamad

doi:10.37391/ijbmr.090216

Anas Alrebdi, Khaliq Ahmad Mohamad

Open Access

https://doi.org/10.37391/ijbmr.090216

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Abstract

Family businesses play a crucial role in the global economy. The GCC especially the Kingdom of Saudi Arabia occupies a significant place in the global economic pie. It offers many employment opportunities to the Saudi and non-Saudi nationals and contributes a significantly to the GDP. According to the government sources there are an estimated 538,000 family businesses in the Kingdom and together this family business cluster contributes approximately 216 billion dollars to the national GDP and provides employments to approximately 7.2 million workers that constitute about 52 percent of the total workforce. Beside such a great potential there are only a few of them can thrive and survive in the present circumstances in the market. Just a third of family businesses are successful thanks to a new generation of entrepreneurs in command. Future success depends to a large extent on the successive achievements of these newly minted entrepreneurs and sustainability of family businesses of such companies in the past affects the success of future generations of these family businesses. There are many challenges these family businesses are facing once left them unattended may cause them to fail is the focus of this study. Hence there is a need to focus on several attributes of sound management in order to be able to continue and grow to remain sustainable would be contribution of this study. The purpose of this study therefore is to identify the various success factors associated to the question of unsustainability of these family businesses (FB) in Saudi Arabia (KSA). Our understanding indicated that Family Businesses (FB) is short-term oriented. For sustainability these FBs need to create and give more importance to factors such as strategic thinking, to train next of kin to ensure succession planning and sound corporate governance for business longevity. As recommendation the immediate family members and potential business leaders emerging from the younger generations need to be trained for their business continuity and survival.

Highlights

Since the inception of commerce, humans have known the family business model, which is owned by individuals who have a family relationship
The more we studied and spent time in library and read published materials on family business sustainability issues encompassing topics such as conflict resolution, poor relationship management between many stakeholders and ill found corporate governance, lack of innovative ideas, gender equality, presence of ethnicity, absence of key performance indicators of business, less concerns of succession planning, the bad influence of family members, dearth of family capital, vacuum in leadership and overall management, created a natural urge to go into deep to unearth the truth from gold mines of family business in the King-dom
We made by use of Google scholar search engine to locate articles related to factors influencing family businesses sustainability in Middle East and North Africa (MENA) [5] but especially Arab and Gulf countries

Summary

Introduction

Since the inception of commerce, humans have known the family business model, which is owned by individuals who have a family relationship. Based firms represent more than 90 percent of the number of operating companies, employ 60 percent of the workforce and contribute 57 percent of the gross product. Businesses make up 85 percent of the companies in the United Kingdom, contribute nearly a quarter of the GDP, and absorb 50 percent of the workforce in the sector. In the countries of the European Union, the proportion of family firms lies between 70 and 95% of these companies which eventually contribute 70% of the national product. Companies continued because of their control over capital and business knowledge. Companies in the Kingdom represent 95 percent of registered companies, and control nearly 50 percent of the GDP for Non-. According to Al-Eqtisadiah's list of the 100 largest Saudi companies for the year 2012, more than 10 percent of the largest companies in the kingdom are still family or closed companies

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