FAMILY BUSINESS CASE STUDY
FISHERMAN KRUSHO’S FAMILY BUSINESS
European Business School London
MA Candidate: Gojko Dakovic
Module: EMG464
Student ID: S00504053
Module Leader: Edward C. Gonsalves
22nd March 2013
Student ID: S00504053
TABLE OF CONTENTS
INTRODUCTION
3
EARLY BEGINNINGS
GENERATED ISSUES
3
4
5
THEORIES & FRAMEWORKS
6
QUESTIONS
7
BIBLIOGRAPHY
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FAMILY PORTRAIT
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Introduction
The foundation of family business under the
name of Krusho (Beach, restaurant and
construction company) dates back from early
1990’s. Krusho started off the business when
he was in his 30s. As a young man he lost his
mother and father, therefore he mostly
depended on help of his grandfather as he
raised him and his brother Boris. His
grandfather Vuk had some land and properties
near the coast but never had the will and
chance to develop a business as he was
working as an engineer at an old boat
construction company. He never believed in the idea of elite tourism and the fact that most
money in that time was invested in hotel construction and mass tourism projects. Therefore
he was pretty strict about selling the land to the new wave of investments taking place in
hotel infrastructure. Krusho’s grandfather was a strict and stubborn man and a person who
was determined in achieving his goals as he was a hardworking man. He did not believe in
luck and faith. Some of the skills Krusho inherited from his grandfather and the most
important thing were the determination and hard work even if everything was against him.
Early beginnings
As Krusho saw the opportunity in an underdeveloped and rocky cove after numerous
attempts to tame the sea in the end he managed to achieve his initial vision – develop a small
remote beach and first class bar/restaurant to attract the tourist visiting the town of Herceg
Novi, in the peak of season. The first years of creating the business were challenging as
Krusho faced both internal and external obstacles like natural hazards and construction
problems. Finally when he managed to open the beach and restaurant to the visitors he started
receiving positive feedback from various guests and the quality of the seafood surpassed
expectations. Moreover he established regular guests and managed to attract a huge amount
of tourists to spend their holidays on his beach. As the business developed further Krusho
opened a second restaurant and established plans to create a private marina to accommodate
yachts. In order to do so he partnered up with his brother who owned a small construction
company. Later on they merged companies and divided the shares equally.
Although the business was starting to grow Krusho was faced with several challenges from
the family perspective. Given the fact that he was already in his late 60’s, he had to develop a
retirement plan. However his major problem was that he only had one daughter Alexandra at
the age of 24 who was studying abroad and was not interested in continuing the family
business. On the other hand his brother had two sons who were both interested in working for
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the joint-venture. Boris’s desire was to buy Krusho’s shares and pass them on to his sons. The
reasoning behind this was to ensure a secure future for his children by increasing the
revenues they receive. Nonetheless Krusho still had hopes that he could convince his
daughter to return and join him. The lack of support from Alexandra considerably affected
him especially because as an orphan he had often felt lonely. It was as if history was
repeating itself…
Family portrait
Krusho – His entrepreneurship skills were broadly recognized as well as his ambition and
determination. These competences were self-formed as a result of the tragic loss of his
parents at an early age. Involuntarily by having his grandfather as a role model he also
developed a sense of stubbornness as it was reflected in his refusal to accept Alexandra’s
non-involvement in the family business. His pride to having succeeded in the business
environment created tensions on a personal level generated by the frustration of not being
able to enforce the succession plan.
Boris – Following his brothers footsteps Boris also became an entrepreneur. However his
determination to create a company surfaced due to different reasons. Unlike Krusho who was
driven by his ambition Boris was forced by the environment as opposed to his personal skills.
After losing his job and remaining unemployed for a year, he found an opportunity to
penetrate a niche market, that of the small construction companies. His previous experience
in the domain provided the necessary expertise to achieve success in a short period of time.
Another difference between him and Krusho was that he was not very fond of his legacy but
rather viewed it as a way to generate revenue. His sole purpose was to financially support his
family whereas Krusho’s main goal was to develop his business and keep it in the family.
Alexandra – Is currently studying law in Berlin and she wants to follow a career in this
domain. Her aspiration is to practice in a metropolis which offers extensive job prospects and
international environment. Her opinion is that a restaurant is a short term business which does
not add value to the managerial skills. Moreover she does not view this as a challenging
project but rather as a hobby. The message that she tried to convey within the family is that
by bringing external management she would still profit from the revenues and invest her time
in building a proper career. Alexandra understands the importance of keeping her father’s
legacy and is against selling the company but she does not see the point of family
involvement in the business.
Marko – Is Boris’s younger son. He is 21 years old and has no business background.
Although he is currently studying economics he does not have the natural flare for business.
His behaviour is that of a typical student who is still engaged in parties and has not yet
developed proper work ethics. Nonetheless his father wants to involve him in the company as
soon as possible since he believes that work experience will make him a more responsible
person. Krusho on the other hand is not in agreement with this decision because he
disapproves of Marko’s irresponsible behaviour. Furthermore Krusho believes that Marko is
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not passionate about the company. Instead he sees inheritance as an easy transition into the
business world.
Milos – Is Boris’s oldest son. He is 25 and has an MA Degree in International Business. He is
eager to take over the company and turn it into an international concept. Krusho sees him as a
good fit for the company but disagrees of his expansion plans. He thinks that the company is
not solid enough to cross the Montenegrin boundaries to the extent that this will lead to
possible bankruptcy.
Generated issues
Given the fact that both families are facing
decision making problems and have to decide
how to continue successfully running the
business, it is questionable how and what
strategy Krusho and Boris will decide for their
families. As it is known that Krusho wants to
maintain the family business and has the
vision of continuing in expanding its ventures
further, he faces problems with his daughter as
she is not interested in continuing the
business. Moreover Boris has issues with one
of his sons as Marko is still not prepared for efficiently taking over the business and Milos
has aspirations to take over the company as he is an ambitious and determined person. His
vision for the company is conquering the regional and international market with expansion of
its subsidiaries in key markets.
Krusho’s vision clashes with that of Boris’s family as he wants the business staying in
Montenegro. He sees potential in updating the business so that it meets the demands of elite
clientele which expects quality service and food with access to the beautiful scenery.
Therefore he believes in expansion and up scaling of the business model inside the borders of
Montenegro. He also mentions that: “I believe that the future lays in elite tourism, given the
fact that Montenegrin coast is small but full of attractive beaches I have the opportunity to
build a strong customer base and be competitive in the hospitality industry. I personally do
not believe in expanding the business internationally as the strong competition will pose
threat to business given the fact we operate in a small environment” (Radovic, 2010)
Boris’s vision is that he sees his construction company evolving around his sons and plans to
give them the full power of controlling the future of strategic decisions. Therefore he plans to
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split equal shares between his sons as he leaves the future managerial actions to them. His
plan is to get ready his sons professionally and academically for the task of running the
construction business. Furthermore he wants to be sure that his sons are ready to learn by
doing and he will guide them by working together in the company for three years. After that
he will leave the company and the sons will be in charge in the entire decision making
process. He will provide no assistance even if his sons’ strategies lead to bankruptcy. As
Boris stated in one of his discussions with Krusho:“I want my sons to learn through
experience and failure. Ever since I got fired I had troubling times and many attempts to
succeed but only after painful failures did I manage to succeed. Because of this I will initially
give full support to my sons to a certain extent where they should develop their own
managerial skills. As a child I did not have parent supporting me and I had to fight for my
own existence. After my sons finish their education they should work in the company and face
tough decision making and experience what is it like to run a construction company with 25
employees”. (Boris, 2010)
Needless to say the brothers had opposed opinions as to the future of the company. Krusho
regretted that the joint venture decreased his autonomy in decision making. Therefore it
created a problem and struggle between the two brothers. Krusho is reluctant to sell the
business to his brother Boris because he does not want to let go the idea he was building on
for 30 years. Also he is facing problems in succession planning as his daughter Alexandra
opposes the idea of business continuation on her own and has plans to involve external
management into the company. On the other hand two sons of Boris are getting ready for
taking over the business in the construction company, as their father sees them as successors.
He also has difficulty in deciding on two of his sons as they are different personalities and do
not have the same ambitions.
Theories & Frameworks
Succession plan
As succession is vital for the continuation of family firms it is not a quick process as it
involves different individuals and takes place at numerous events. It is important to
understand family members intensions before they join the business, in order to generate a
better strategy for the human resources issues. Therefore to have a successful succession
process we must know that the issue of offspring intensions are measured on how individuals
will behave in an event of changing roles in family business. As stated “Accordingly,
offspring intensions to join and take over their parents’ business, especially if viewed as part
of the succession process, can serve as a strong indication of the future behaviour of the
offspring. Therefore knowing their intentions is important to acquiring a better understanding
of the succession process.” (Stavrou, 1999)
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Figure 1. Relationship between demographic variables and intensions
OFFSPRING
Age; gender;
geographic
origin;past
involvement in the
business; birth order
PARENT-OWNER
BUSINESS OWNER
Difficulty leaving the
business; age
Size; Generation
Intensions to
join
Intensions
to take over
However sometimes offspring do not want to take over the business and parents can impose
problems in reluctance to let go. In most cases entrepreneurs and first generation founders of
business such is the case in Krusho’s pick their future successors carefully because they want
to be sure that the next generation continues on developing their vision and not pose risk to
the family business in terminating it.
Questions
1. How can issues inside the family business and the succession plan be solved without
damaging the two business units (Restaurant/Beach & Construction company) owned by
Krusho and Boris? Should they make a consensus about keeping the business in the family or
discuss about splitting the shares between the sons and daughter?
2. What are the implications of Alexandra’s proposal to introduce the idea of external
management to the company? Knowing that her father disagrees could he influence her to
change her mind by giving her shares in the company in order to continue managing it in the
future?
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Bibliography:
Primary source:
Radovic, K. (2010), Interview with Krusho Radovic, Herceg Novi, Montenegro
Radovic, B (2011), Interviw with Boris Radovic, Herceg Novi, Montenegro
Secondary source:
Eleni T. Stavrou (1999), Succession in Family Business: Exploring the Effects of
Demographic Factors on Offsprings Intentions to Join and Take Over the Business,
Available at:
https://docs.google.com/file/d/0B6izIOGg3wLbYjg3OTRiMjAtZjUwMS00MGViLWEwM2
EtZTJiMmRhM2Y5MWY4/edit?authkey=CNGj7ZsG, Last accessed on: 21st March 2013
Yong Wang, David Watkins, Neil Harris, Keith Spicer, (2004), The relationship succession
issues and business performance – Evidence from UK family SMEs, Available at:
https://docs.google.com/file/d/0B6izIOGg3wLbNzcwZjg0NWEtYWIyMy00MTgxLWFhYj
AtYzY4NTNkMjA5YTNl/edit?authkey=CJfMz_cP, Last accessed on 21st March 2013
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