Phase 1- Revision 1

Hello everyone, this is my "first draft" of Phase 1 for the Case Study. Please feel free to leave any comment/feedback.

Family Business Case Study

Phase 1

Main Characters of the Case Study:

• ·         Engineer Gianfranco Rossi- CEO of the company “L’Abruzzese”. Owned 1/3 of the shares

• ·         Engineer Luigi Rossi
• ·     Engineer Nicola Rossi                  
• ·         Dott. Franco Rossi

 They (the 3 brothers) owned all together 1/3 of the corporation stock  

• ·         Dott. Antonio Rossi- owned 1/3 of the shares
• ·         Angela Rossi – Antonio’s sister

All of them were from third generation of the pasta business.

In 1912 Nicola Rossi, after having decided to dissolve the company “Factory of Ice and Pasta” created a few years earlier with another entrepreneur, founded in Vasto, and to be more specific in the heart of the city, the firm “L’Abruzzese” exclusively aimed at the production of pasta.

The plant was renovated and modernized in the 30’s but, unfortunately, towards the end of World War II, the factory was undermined and destroyed by retreating German troops. However, the plant was rapidly rebuilt thanks to the tenacity and determination of the two brothers: Nicola and Martino Rossi.In the 50’s the production was transferred in another of the main streets of Vasto, and that was the last time that the production was located in the city center.

The whole structure was then in the 60’s expanded by Nicola’s three sons, Michele, Saverio and Martino, as production was increasingly growing. They inserted in the firm’s statute the clause according to which the women of the family could not be members of the company and for this reason they were paid in advance.

In 1969, year which coincides with the shift of the activities of production from the plant in the center of the city to the structure that was being built in the more industrial area, the founder’s first grandchild, Gianfranco, officially joined the family business.

Between 1977 and 1979, after a ten-year long internship inside the company, the young engineer Gianfranco Rossi had to decide how to expand the new plant. In fact, since the production was increasing more and more, enlarging the factory and placing the production plant alongside with a mill for the transformation of the raw material became necessary steps to take.

Obviously, the main problem did not concern the design of new factory buildings/units, which could be built adjacent to the existing ones, but rather the finding of the financial resources necessary to realize this project.

The issue was solved through the acquisition of a non-repayable grant from the State for the realization of the mill and with an operation of leasing, delivered by a state holding company, in order to realize the project of expansion of the factory. This has been one of the first Italian examples of facilitated leasing for the expansion of an industrial plant.

During those years, the new mill and the larger pasta factory, realized between 1979 and 1981, were respectively producing 4,000 tons of wheat and 1,850 tons of pasta daily.

In this way, through the great foresight coming from the property which represented also the management of the company, an important project of short chain, in which the grain from the surrounding areas was, within the same company, turned into bran and then in the finished product, came to life.

1981 until the early 90’s was definitely a good period for the factory, but in 1991 the first signs of a crisis started to become clear. It was not only an economic and industrial crisis but also a deeper one, rooted in the family itself and based on a lack of trust among the family members, which culminated in 1994 with the final dismissal of Gianfranco, director of the company, from the corporate management.

In the early 90’s, having reached a considerable level of development, L’Abruzzese needed economic-management systems typical of the big companies that operate in the domestic and foreign markets. Gianfranco Rossi, the chief executive officer (CEO), seeing the evolution of the Italian entrepreneurship and the new challenges of the market, aware also of the inadequacy of a business management conducted within the family (regardless of professional training of its members), felt the need to move towards a new internal structure that would increase the efficiency of corporate governance and that would rest on an organogram which is based on it rested on specific and circumscribed skills.

The same people within the corporate organogram cover simultaneously different positions and have several roles (owner / partner / director / manager) and this overlap and confusion of roles, as it is well known, often represents a challenge for a proper management of the business dynamics and makes the relationships between controlled and controller extremely difficult.