Harvard Case - Billionaire's Curse: Gun-based Succession Planning for a Bangkok Market
"Billionaire's Curse: Gun-based Succession Planning for a Bangkok Market" Harvard business case study is written by Morten Bennedsen, Brian Henry, Yupana Wiwattanakantang. It deals with the challenges in the field of Finance. The case study is 20 page(s) long and it was first published on : Mar 24, 2016
At Fern Fort University, we recommend that the Thanakorn family pursue a strategic shift away from their current gun-based business model. This shift involves diversifying into a new market segment, potentially within the broader security industry, while simultaneously implementing a robust succession plan that ensures the family's long-term financial security and the business's sustainable growth.
2. Background
The case study revolves around the Thanakorn family, owners of a successful gun shop in Bangkok, Thailand. The patriarch, Mr. Thanakorn, is nearing retirement and faces the challenge of handing over the business to his three sons. However, the family is deeply divided on the future direction of the business. One son, Adisak, wants to maintain the current gun-based operation, while his brothers, Anucha and Apisak, advocate for diversification into new markets. The family's decision is further complicated by the volatile political and social landscape in Thailand, which presents both opportunities and risks for the gun industry.
3. Analysis of the Case Study
This case study presents a complex scenario that requires a multi-faceted approach. We can analyze it through the lens of strategic management, financial analysis, and risk assessment.
Strategic Analysis:
- SWOT Analysis: The Thanakorn family business possesses strengths like a strong brand reputation, established customer base, and experienced workforce. However, it also faces weaknesses like limited market growth potential, regulatory challenges, and ethical concerns associated with the gun industry. Opportunities lie in diversifying into related markets, leveraging technology, and expanding into new geographic areas. Threats include political instability, economic downturns, and increasing competition.
- Porter's Five Forces: The gun industry in Thailand is characterized by high competitive rivalry, low bargaining power of buyers, and moderate bargaining power of suppliers. The threat of new entrants is moderate, while the threat of substitutes is high due to the availability of alternative security solutions.
- Competitive Advantage: The Thanakorn family's existing business model offers limited competitive advantage in the long run. Diversification into new markets, such as security systems, training, or consulting, could provide a more sustainable competitive advantage.
Financial Analysis:
- Financial Statement Analysis: Analyzing the Thanakorn family's financial statements (income statement, balance sheet, and cash flow statement) can reveal key insights into their profitability, liquidity, and financial health. This analysis can inform the decision-making process regarding diversification and succession planning.
- Capital Budgeting: The family needs to evaluate the financial feasibility of potential diversification projects using capital budgeting techniques like net present value (NPV), internal rate of return (IRR), and payback period.
- Risk Assessment: The Thanakorn family needs to assess the financial and operational risks associated with their current business and any potential diversification options. This includes evaluating regulatory risks, market risks, and economic risks.
Risk Assessment:
- Political Risk: Thailand's political landscape is volatile, with potential for policy changes that could affect the gun industry. The family needs to consider the potential impact of these changes on their business.
- Social Risk: Public opinion towards gun ownership is evolving, and the Thanakorn family needs to consider the potential impact of this shift on their business.
- Economic Risk: The Thai economy is subject to global economic fluctuations, and the family needs to consider the potential impact of these fluctuations on their business.
- Operational Risk: The Thanakorn family needs to assess the operational risks associated with their current business and any potential diversification options. This includes evaluating supply chain risks, technology risks, and human resource risks.
4. Recommendations
The Thanakorn family should consider the following recommendations:
- Diversify into a New Market: The family should explore diversification into a new market segment within the broader security industry. This could include:
- Security Systems: Installing and maintaining security systems for homes, businesses, and government facilities.
- Security Training: Providing security training courses for individuals and organizations.
- Security Consulting: Offering security consulting services to businesses and government agencies.
- Develop a Succession Plan: The family should develop a comprehensive succession plan that outlines the roles and responsibilities of each son, the transfer of ownership, and the future direction of the business.
- Implement a Robust Financial Strategy: The family should develop a financial strategy that includes:
- Investment Management: Diversifying their investment portfolio beyond the gun business.
- Asset Management: Managing their assets efficiently to ensure long-term financial security.
- Debt Management: Managing their debt responsibly to minimize financial risk.
- Embrace Technology and Analytics: The family should explore the use of technology and analytics to improve their business operations, enhance customer service, and gain a competitive advantage.
- Engage in Corporate Governance: The family should implement strong corporate governance practices to ensure transparency, accountability, and ethical conduct.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Diversifying into a new market segment within the security industry aligns with the family's existing expertise and resources. It also allows them to maintain a focus on security while mitigating the risks associated with the gun industry.
- External Customers and Internal Clients: The recommendations address the needs of both external customers (seeking security solutions) and internal clients (the family members seeking a sustainable business model).
- Competitors: Diversifying into a new market segment allows the family to compete with a wider range of businesses, potentially leading to greater market share and profitability.
- Attractiveness - Quantitative Measures: The attractiveness of diversification can be assessed using quantitative measures like NPV, ROI, and payback period. These measures will help the family make informed decisions about the financial viability of their options.
6. Conclusion
The Thanakorn family faces a critical juncture in their business journey. By embracing diversification, developing a robust succession plan, and implementing a sound financial strategy, they can navigate the challenges of the present and secure a prosperous future for their business and their family.
7. Discussion
Alternatives Not Selected:
- Maintaining the Current Business Model: This option carries significant risks due to the volatile political and social landscape in Thailand, as well as the limited market growth potential of the gun industry.
- Selling the Business: This option would provide immediate financial gain but would also result in the loss of a family legacy and potentially lead to job losses.
Risks and Key Assumptions:
- Political Risk: The political landscape in Thailand could change, impacting the gun industry.
- Social Risk: Public opinion towards gun ownership could shift, affecting demand.
- Economic Risk: Economic downturns could impact consumer spending and the security industry.
- Competition: Diversification into new markets could lead to increased competition.
Options Grid:
| Option | Advantages | Disadvantages | Risks |
|---|---|---|---|
| Maintain Current Business Model | Established customer base, experienced workforce | Limited market growth potential, regulatory challenges, ethical concerns | Political risk, social risk, economic risk |
| Diversification | Greater market potential, reduced risk | Requires investment, new skills and knowledge | Competition, economic risk |
| Selling the Business | Immediate financial gain | Loss of family legacy, job losses | Market conditions, finding a buyer |
8. Next Steps
- Market Research: Conduct thorough market research to identify promising new market segments within the security industry.
- Financial Analysis: Analyze the financial feasibility of potential diversification projects using capital budgeting techniques.
- Succession Planning: Develop a comprehensive succession plan that outlines the roles and responsibilities of each son, the transfer of ownership, and the future direction of the business.
- Implementation: Implement the chosen diversification strategy and succession plan, monitoring progress and making adjustments as needed.
The Thanakorn family needs to act decisively and strategically to navigate the challenges they face. By embracing change, they can secure a brighter future for their business and their family.
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Case Description
The case highlights the infighting within a Thai family who own and operate a fresh-food market stall business in Bangkok. The case explores the depths to which the Thammawattana dynasty sank in order to keep control of a profitable cash-in-hand business that had made the matriarch, Suwapee Thammawattana, a billionaire by the time of her death at age 65.
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