Many articles have been published about Saudi family firms. My first point is that no such title is recognized in the Saudi law which applies to businesses (Royal Decree 6 on 22/3/1385). In other words, a licensed Saudi family firm goes to the owner’s heirs upon his death. It is a sad thing to see the work and efforts of many years on the part of founders come to nothing as the founder’s heir quarrel and the firm ends up in bankruptcy. The fact is that life is this way — whether of individuals or firms: whatever lives will eventually die. There is nothing new in this.
According to statistics, many firms in the United States last only about 50 years and many others last far less than that. There are, however, a number of firms that have endured for centuries such as the Japanese company, Sumitomo. It is engaged in a variety of businesses including banking, sea freight, light and heavy industries, raw materials, metal and foodstuffs. Let us look a bit closer. At one time in the early 1970’s, Sumitomo Tires had 49 percent of the British market. The other 51 percent belonged to British Dunlop.
That company later sold out to Sumitomo and the company became Sumitomo-Dunlop. Thus, Dunlop as a company by itself vanished from the market. Sumitomo Dunlop has now expanded and is found not only in Japan and Britain but in many other countries as well. Of course Dunlop was not a family firm but a public one which sold shares and had shareholders. In that way, neither the owners nor the shareholders of Dunlop were deprived of profit and income when the company merged with Sumitomo.
One mistake which often leads to a firm’s destruction is paying too much attention to financial returns and neglecting human and ethical factors.
Life cycles include human beings, animals, plants, all living species and even companies. The difference is that the life of a company may be prolonged by innovation, expansion or mergers. The lives of family firms, like all others, can also be prolonged. When and where and how depends upon those responsible for management and their ideas of how to operate the business.
Some economists think that Hewlett Packard, because of its strong financial position, will last forever. This is obviously not true — but why? Analysts say that the reason is that the CEO of Hewlett Packard is moving away from human and moral philosophy that was originally adopted by the founder of this giant firm.
I hope that the Saudi family firms will continue into the future and prosper. May they survive for many years to come.
