Research On The Process And Results Of Strategic Change In The Context Of Family Business Succession

Family business have long been regarded as the most universal form of organization in the world and have made indelible contributions to the development of the world economy.After 40 years of reform and opening-up,family businesses in China have not only improved their social status but also have been recognized by the party and Chinese people.However,as the founders are getting older,most family enterprises are at the turning point of intergenerational inheritance or have already entered the stage of intergenerational inheritance.The intergenerational inheritance of the family business is a very strategic event.If it goes successfully and smoothly,businesses are expected to maintain ever-lasting success.Otherwise,businesses will face the dilemma of life and death.In fact,the number of family enterprises that have successfully passed on their wealth is very small,and even if they have done so,they may face the problem of shrinking wealth,declining share prices,and loss of social resources.This shows that it is not an empty saying that family businesses"cannot stay rich longer than three generations".Since intergenerational succession is a life-and-death issue for family businesses,it has attracted many scholars to study this complex and volatile stage.By integrating the existing family business literature,scholars have focused on the following issues,including the path of family business succession,the relationship between family business succession and innovation,the factors that affect family business intergenerational succession,and how family founders can pave the way for successors.However,most of the studies on strategic change and the performance of family firms at home and abroad have been based on quantitative analysis.In this paper,we hope to use theoretical research combined with case studies to analyze how Yuwell Medical seized the special time of intergenerational succession to carry out strategic change and evaluate the effect of strategic change,in the hope of gaining further insights into family companies in the stage of intergenerational succession and carrying out strategic change.This paper consists of six chapters:Chapter 1 introduces the background,content,significance,and methodology of this paper;Chapter 2 is a literature review section,which compares the literature related to family firms,literature related to intergenerational inheritance,and literature related to strategic change,and introduces the advanced theory and authoritative theory used in this paper.Chapters 3,4,and 5 analyze specific cases based on the above literature and theories,including the research background of Yuwell Medical,the division of intergenerational inheritance stages,the motivation and reasons for strategic change,the process of strategic change,and the evaluation of the economic performance of strategic change;Chapter 6 concludes this paper through the above analysis and summarizes the shortcomings and deficiencies of this paper.Based on the domestic and foreign literature,this paper draws on the existing research and uses the case study method and the event study method to study the case.By sorting out the succession events of Yuwell Medical,the succession process is divided into three stages:participation in management,joint management,and management receipt.Next,we analyzed in detail the motivations that drove Yuwell Medical to make strategic changes,including the company’s own issues and the realistic background of the industry.Next,the strategic change process of Yuwell Medical is studied in detail.Through the analysis,it is found that Yuwell Medical has made significant strategic changes in products,channels,management personnel,and investment.Regarding the above division of inheritance stages.it can be explicitly seen that as the second-generation successor continues to take over the family business,the intensity of strategic change will be significantly enhanced.Finally,this paper analyzes the strategic change performance,market performance,and long-term financial performance of Yuwell Medical and evaluates the overall inheritance effect,and draws the following conclusions.First,the successful inheritance of a family business is dependent on the joint efforts of the inheritor,the successor,and the company.The family needs to plan the intergenerational inheritance,create a good training environment for the successor,and support the successor’s changes and attempts;the successor also needs to learn and improve in the inheritance process,continuously improve his or her management level,and establish a management style different from his or her father’s based on his or her unique experience and new perspective,and establish his or her authority in the family business;the market environment in which the company emerges into is also crucial to the intergenerational inheritance.A good enterprise development environment can also provide a boost for the second-generation successor to take over the enterprise smoothly.Secondly,there is heterogeneity between the first generation and the second generation of family businesses,which often promotes the strategic reform of the second generation of family businesses.When family businesses are faced with the two major problems of intergenerational succession and strategic transformation,the second generation adopting strategic transformation can promote their own cognition to match the future development of the enterprise,which can not only improve enterprise performance,but also help smooth inheritance.Third,strategic change is an important factor to facilitate the smooth succession of Yuwell Medical.In this case,strategic change has a positive impact on the long-term development of the company.In the process of the second-generation successor continuously promoting strategic change,the company’s indicators performed well,and these results further enhanced the prestige of the heirs and increased the control of the heirs over the company.At the same time,by comparing the performance of enterprises in different inheritance periods,it can be found that there are great differences in the corporate governance styles of the two generations.Strategic change can make this difference more prominent,allowing investors to clearly distinguish the performance of the two generations and gradually build up recognition of the second-generation successor’s ability,so that family wealth does not dissipate due to the succession event.Fourth,the market’s recognition of the second-generation successor’s capabilities is a gradual process.After the strategic change of the company,various indicators are improved,but not immediately reflected in the market return.As the inheritance continues,the degree of strategic change deepens,and the market feedback will gradually improve.This is reflected in this paper:when the second-generation successor takes over as general manager,there is a clear downward trend in excess cumulative returns,but when the second-generation successor takes over the company after the succession is completed,the market feedback is the exact opposite,with a significant upward trend.Thus,family businesses making strategic changes in intergenerational succession are likely to incur short-term performance losses,but if the second-generation successor makes strategic changes in the right direction,he can create value for the firm,and can still gain market recognition from a long-term perspective.