A family run business refers to that which members of the family control more than half of the business shares. Also, it may include businesses that have been passed through generations. Located off the coast of Wales and England, Ireland, is a beautiful country with her capital Dublin as the home of Guinness beer. It is indeed a small country with a big reputation. Just like many other countries of Europe, Ireland has both the advantages and shortcomings when it comes to running a family business. This essay takes a deeper analysis of the challenges and rewards of running a family business in Ireland and provides a summary conclusion on the findings of the paper.
In order to understand the rewards and challenges of running a family business in Ireland, there is a need to assess the background of the country in relation to its economy. The service sector majorly dominates Ireland's economy. According to Kirby (2016), the service sector was responsible for approximately 72% of it GDP in 2014. Noteworthy is the fact that the country experienced an economic recession in 2009 but using very strong fundamentals, it was able to recover from such a crisis and rebuild its economy. The major contributors to her GDP are quarrying and mining. As a country, she presents very substantial investment opportunities, especially in the IT sector. As a matter of fact, the country is amongst the leading exporters of computer hardware and IT business solution across the world. In Ireland, the leading industry is information technology.
Delegate your assignment to our experts and they will do the rest.
Rewards of Running a Family Business in Ireland
Based on the background data, to understand the rewards of doing business in Ireland a PESTLE analysis will offer insight. According to Inglehart, (2015) Politically, Ireland has witnessed a decline in political stability from 2010 to 2013. However, the political stability has witnessed improvement lately since 2014. Political environment affects how people carry out business. The political government of Ireland has created a pro-business environment through the enactment of laws of taxation that is friendly to business. As such a 12.5% corporate tax rate which is affordable and encouraging for business owners, it encourages families to start up business. Consequently, Ireland has become a family business start-up friendly environment encouraging household to invest in business. The World Bank for instance rates Ireland as the easiest country in EU to start up a business. This follows a significant tax incentive and flexible approach to new business as per influenced by the government policies. The government has also ensured that there is low bureaucracy in starting a family business to encourage its citizens and even non-citizens to startup businesses.
As per Andreosso-O’Callaghan, Lenihan and McDonough (2016) regarding on economic policy, the tax regime of Ireland has also been rated by the World Bank as very business friendly compared to other countries of Europe and America. The country boasts an extensive double taxation agreement as well as tax credits targeting research and development (Doran, Jordan, & O'Leary, 2013). It is no wonder the country has become a leading exporter of computer hardware and IT business solution across the world. The Irish government economic policy is a pro-business one who has made rents, salaries, and wages very affordable for those starting up or doing businesses in Ireland. In 2012, Forbes magazine listed Ireland as the best country to do business in just two years after a severe economic recession. Forbes further listed Ireland as the fourth in the entire world in doing business. All these positives make running a family business easier and fruitful and rewarding for entrepreneurs in this land.
Socially, Ireland is composed of the very highly educated population especially the younger generation (Walsh, Flannery, & Cullinan, 2015). Given that family, businesses rely on succession in many cases. The young people in Ireland are more skilled and have at some point worked in other businesses even before coming to work in their own family businesses. They bring such experience in organizations with them when starting up or in cases of succession when taking over the business management. For startups, this wealth of experience and skills in a boon to the family business operation or start-up in Ireland making it easier to start as well as operate. Usually, family businesses face a challenge of skilled personnel due to their dependence on family labor. However, based on education system Ireland ranks first in the world for the availability of labor to support businesses growth. It, therefore, follows that, for those running family business, they can access quality labor from within their household since their children get the best of education and training. Such good education and training results into the availability of cheap labor for family business since they can have the best skills from their children at more reasonable cost.
Technologically, in 2013, Ireland ranked among the top 10 in the global innovation index (Mazzei, Flynn, & Haynie, 2016). The implication of this for business is good in the sense that innovations enable a business to have a competitive edge over the rest. With such innovation, the country offers a good opportunity for startups to take advantage of the technology available to progress their business even beyond the borders of Ireland. For instance, such technology can be useful in concentration clusters to enable a family business outsource materials cheaply and enhance its performance. Secondly, the innovation in Ireland is further supported by a 25% tax credit by the government as a policy in the land (Doran, Jordan, & O'Leary, 2013). The implication of this is more and more innovation registered. Moreover, the country ranks amongst top 10 in the world whose education system benefits the economy. With a proper and competitive education system and an innovation hub, Ireland provides the best technology that fuels the growth of family business propelling their advancement and giving them a competitive advantage in the global sphere. For a family business that may not be able to outsource materials cheaply, they are able to tap into the existing technology to form clusters that can be useful in ensuring they conveniently source materials from all over the world. Technology shapes how businesses are run. Today, firms compete based on their advancement in technology to benefit from their external environment information. A family business, although could be small in scale has the advantage of fast passed technology in Ireland which offers an excellent opportunity for both growth and expansion.
Legally, Ireland has one of the freest economies in the Eurozone (Kahanec, Pytlikova, & Zimmermann, 2016). More than just being a free economy, the country’s economic policies offer a good environment for running family businesses. For instance, in order to start a family company the law requires that after an individual has compiled the Irish Companies Act provision, they should have their companies registered within one week. That is a very short and less bureaucratic procedure that encourages individuals with interest in opening or operating family businesses. The process is very first and encouraging. Additionally, in her economic policy, the country gives an innovation credit of 25% is yet another legal provision that the country has provided an incentive to businesses. Ireland is mostly a service sector economy, and much of their export are in Information Technology. With the availability of innovation credit, family business stands a chance to benefit in their innovation in IT sector; the credit can boost the investment of a business expanding its scale. Moreover, with the availability of innovation credit to support research and development, Ireland ends up having a wealth of information for the business community. Because family business hardly has enough resources for market research and other trends in the industry to enhance their business performance, the Research and Development support provided by the government ensure a pool of information that family businesses could benefit from.
Challenges of Running a Family Business
However, despite all the rewards as mentioned above of running a family business in Ireland, there are also associated challenges that may often hamper the success of running family businesses in the country. A free business environment as that in Ireland means that most people find it easy to get into the market. When there are many players in a single industry due to incentives or good returns, competition sets in and becomes stiff. With the availability of technology firms with good turnovers could form concentration clusters that they can use as a standard for price controls and kick out smaller companies which in many cases often tend to be family businesses. In a highly technological country like Ireland, may of the businesses started or operated rely on technology to give them a competitive edge. Consequently, a family business that is young and only dependent on family labor for its operation, despite having an advantage of being near, say raw materials, cannot have the competitive advantage of location in business. Technological advancement enables firms to form concentration cluster to enable businesses to source goods, capital as well as information and technology from around the word in a much easier way. Therefore, all that could happen just by a click of a button. As such the role of location in a business competition in offering a competitive advantage is diminished by the open global markets due to concentration clustered enabled by technology which also enhances faster communication and transportation.
Secondly, trading across borders in Ireland is still slower based on the policy that guides international trade. For instance, to export a product would take one approximately seven days while when importing a product, it would take a business an average of 12 days (Yu, S., Beugelsdijk, & de Haan, 2015). In addition, the business involved in importing or exporting has about four documents to process. Such a process is very bureaucratic and eats so much into business time. The government needs to review its policies on international trade especially considering that Ireland, despite these challenges, has managed to be a leading exporter in Information Technology. The international trade policy should allow for shorter time in the clearing of goods for imports and the earliest possible time for clearing goods for export. Moreover, it makes slow the process of making an international trade for companies impacting on their ability to make quick profits.
Thirdly, for nonresidents, in order to open and run a family business in Ireland, one needs to be in partnership with a resident. As such one of the directors of the companies must either be a resident or a member of EEA. The implication is reduced shares and consequent reduced control of the business for the family. Such a move is good albeit with some reservations. Other families from outside the country might also be willing to invest in their business exclusively run by their families. However, with such a policy, it makes it difficult for a foreigner to enter the Ireland market especially if they do not have a trusted resident to start up a business with. All these notwithstanding, Ireland still offers the best opportunity for running a family business despite the few challenges.
Conclusion
As is always the expectation, family businesses often are the easiest to start up and operate. It is due to the ability to us cheap labor from home, the ease of raising capital or making use of locally available family resources. Moreover, a number of them are acquired through successions. This essay in identifying some of the rewards of running a family business in Ireland arrived at the following findings: The political government of Ireland has created a pro-business environment through the enactment of laws of taxation that are friendly to business. As such, a 12.5% corporate tax rate which is affordable and encouraging for business owners, it encourages families to start up business. Ireland has the best tax regime making it very business friendly compared to other countries of Europe and America. The country boasts an extensive double taxation agreement as well as tax credits targeting research and development. Technologically, in 2013, Ireland ranked among the top 10 in the global innovation index. The implication of this for a family business is good in the sense that innovations enable a business to have a competitive edge over the rest. The young people in Ireland are more skilled and have at some point worked in other businesses even before coming to work in their own family businesses making family businesses in Ireland benefits from skilled labor. The challenges, however, include a competitive business environment that could easily drive a family business out of the industry; slow cross-border trade due to poor policies; and difficulty of non-residents to open a business purely owned by the family.
References
Inglehart, R. (2015). The silent revolution: Changing values and political styles among Western publics . Princeton, NJ: Princeton University Press.
Kirby, P. (2016). The Celtic tiger in distress: Growth with inequality in Ireland . New Mexico: Springer.
Andreosso-O’Callaghan, B., Lenihan, H., & McDonough, T. (2016). The evolving model of capitalism in Ireland: An insight into enterprise development and policy. Economic and Industrial Democracy , 37 (2), 319-344.
Walsh, S., Flannery, D., & Cullinan, J. (2015). Geographic accessibility to higher education on the island of Ireland. Irish Educational Studies , 34 (1), 5-23.
Mazzei, M. J., Flynn, C. B., & Haynie, J. J. (2016). Moving beyond initial success: Promoting innovation in small businesses through high-performance work practices. Business Horizons , 59 (1), 51-60.
Doran, J., Jordan, D., & O'Leary, E. (2013). Effects of R&D spending on Innovation by Irish and Foreign-owned Businesses. Retrieved from http://www.tara.tcd.ie/xmlui/bitstream/handle/2262/68203/doran%202012-3%20ssisi.pdf?sequence=1&isAllowed=y.
Kahanec, M., Pytlikova, M., & Zimmermann, K. F. (2016). The free movement of workers in an enlarged european union: institutional underpinnings of economic adjustment. In Labor Migration, EU Enlargement, and the Great Recession (pp. 1-34). Berlin Heidelberg: Springer.
Yu, S., Beugelsdijk, S., & de Haan, J. (2015). Trade, trust and the rule of law. European Journal of Political Economy , 37 , 102-115.
