Vienna Days Two thru Four: Take it to the BauMax!

These last few days have gone by in a whirlwind for our group. We have toured and experienced (8) different companies. This has led to a lot of lessons learned on both the family and business side of things. I will attempt to provide a solid overview of a couple of our visits and the lessons learned. I will also attempt to not be boring.

1. BauMax

We toured the U.S. equivalent of the Home Depot/Lowe’s chains in Austria. BauMax is a family owned construction/home improvement supply and garden center. The founder of BauMax, Mr. Essl, opened 10 store chains in Austria by himself in 1976.

This company has thrived through two main ideas: economies of scale and historical macroeconomic events. BauMax achieved economies of scale by being a first-mover in the home supply market. They rapidly expanded to 67 stores in Austria, and have also expanded internationally. They use a strong mix of local suppliers and international suppliers to gain a cost advantage over their competitors. BauMax has also benefited greatly from the fall of the Iron Curtain. In the 1990s, they expanded into the Czech Republic, Hungary, Slovakia, and Slovenia.  The fall of communism in these areas allowed foreign entities to move in: essentially the new “Wild West” market.

Our BauMax host, Alexander, reiterated how a being a family business was a big advantage for BauMax. First of all, they were able to move quickly into new markets because Mr. Essl made the major decisions. They didn’t waste time with shareholder votes and a complicated due diligence process. Another advantage was that Mr. Essl made decisions that were right for the long-term survival of BauMax. He placed emphasis on timing the right expansion, rather than growing yearly earnings. The final advantage of being a family business seemed to be in “walking the talk”. While the company expanded into new countries, the local foreign newspapers were trying to dig up dirt on Mr. Essl. However, because he carried his family values to his business and lived modestly, Mr. Essl was able to gain the respect of the local people and avoid bad press in the new countries.

Okay, maybe that was a bit analytical (boring). Hey, here’s a cool thing: the BauMax mascot is a construction worker without a chin.

BauMax mascot. I think he may be related to Beaker from the Muppets.

2. Gebrüder Weiss

This was a really cool firm. Gebrüder Weiss is a logistics, transport, and freighting company that has been around for 538 years. Yes, that is a long time. They were around before America was a known thing. The other crazy part about this company: they have been a family business for all of that time.

With a tradition this old, I can only imagine the enormous pressure that the children in the company must have felt over the years. I can picture in my head one of the fathers passively aggressively talking to his son/daughter about the future, “You know, our 1 billion Euro company has been around for 17 generations…but sure, you go ahead and audition for American Idol. I’m sure that will be the most rewarding move you will make in your life.” Of course this would have been relayed in German.

Paul Senger-Weiss talking to CBS students about how his family business operates.

The Weiss family has accomplished an amazing feat by lasting this long. They had this advice to offer in maintaining a family business for 500+ years:

1. Organize and plan succession early and openly.

2. Be balanced in the paradoxes that exist in the family business (i.e. do what is best for the family vs. best for the company)

3. Live humility

4. Always seek challenges and innovation

5. Balance risk and security

6. Stay sensitive to and always focus on employees and customers

Perhaps another bit of very useful advice that came out of our meeting: Never form 51% to 49% partnerships. Either structure a partnership to be 50/50 or a proportion that is much larger. A proportion that is so close breeds resentment, and often ends in loss for both sides.

I wonder if the show American Idol will last for 500+ years. Probably not, thank goodness.

By: Michael Murnane ’12

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