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THE LAROCHE CANDY COMPANY
In 1864 Henricus Laroche started making high- quality chocolate in his kitchen in Ooigem,
Belgium. Henricus learned his trade at a famous chocolate shop in Paris, and he and his wife
began to make chocolate in bars, wafers, and other shapes soon after Henricus had returned
to Belgium to start his own business. The Belgian people loved Laroche’s chocolate and the
immediate success soon caused him to increase his production facilities. Henricus decided to
build a chocolate factory in Kortrijk, a nearby city in the Flemish province West Flanders. With
mass-production, the company was able to lower the per-unit costs and to make chocolate,
once a luxury item, affordable to everybody. The Laroche Candy Company flourished,
expanded its product lines, and acquired related companies during the following decades.
Within a century the company had become Belgium’s leading candy- manufacturer, employing
over 2500 people.
Today, The Laroche Candy Company is one of the biggest manufacturers of chocolate and
non-chocolate confectionery products in Europe. Under the present leadership of Luc Laroche
the company has become truly innovative. What’s more, the company has adopted a very
proactive approach to marketing planning and is therefore a fierce competitor in an
increasingly global marketplace. The number of products the company produces and markets
has increased dramatically; at this moment there are more than 250 Laroche Candy items
distributed internationally in bulk, bags, and boxes.
Luc Laroche, born in 1946, is the fifth generation of his family to lead The Laroche Candy
Company. He is the great-great-grandson of company founder Henricus Laroche and the
current Chairman and CEO of the company. But Luc is nearing retirement. He has planned to
stop working in two to three years. Whereas stepping back from power is a very difficult thing
to do for a lot of people, it is an easy thing to do for Luc: He is looking forward to spending
time with his grandchildren and to driving his Harley-Davidson across Europe. What’s more,
he has never found the time to play golf, and he is planning to spend “three whole summers
learning it” if necessary. And yet, even though “letting go” is not a problem for Luc, he still has
his worries about his imminent retirement.
As in most family businesses, Luc’s two children spent their share of summers working for the
company. Luc’s oldest son Davy has repeatedly worked for the accounting department
whereas Davy’s younger brother Robert has infrequently worked in the field. However, they
have never shown a serious interest in the business. Davy, who is 35, currently works as an
associate professor of management accounting at a reputable university in Belgium. Robert,
aged 32, lives in Paris and has been working as a photographer for the past ten years. About
12 years ago, Robert told his dad, “I know you’d like me to come into the business, but I’ve
got my own path to travel.” Luc recalls responding that he respects that and that he does not
want Robert to feel constrained; “I just want you to be happy,” is what he told Robert on that
particular occasion.
Ever since this conversation with Robert, Luc has put his hopes on Davy. A few days ago, Luc
invited Davy to have dinner at the famous In de Wulf restaurant in Dranouter, Belgium, to
discuss the future of The Laroche Candy Company. He wants to talk about his retirement and
a succession plan for the company with Davy, who has serious doubts about taking over the
company. Davy knows that for his dad the company is his life and, like his dad, he wants the
company to be successful in the future; but he just does not know whether it is a good idea to
take over from his father. In an effort to maintain a balanced perspective on the issue, Davy
has done some research on it. Hence, he has become very familiar with statistics about the
failure rate of family transitions. These statistics have triggered numerous concerns and fears
about taking over the company from his father.
Luc and Davy discuss the future of the company during a memorable dinner in Dranouter. Luc
tells Davy that he wants his son to take over the company, but Davy explains that he has
qualms. He brings up his doubts and fears and alternatives such as going public, selling to a
strategic acquirer or investor, or selling to employees through an employee stock ownership
plan. Luc hardly listens to Davy’s concerns and strikes a blow for family business.
“History is full of examples of spectacular ascents of family business,” he said after the waiter
has refilled his glass for the fourth time in just over an hour, “the Rothschilds, the Murdochs,
the Waltons, and the Vanderbilts, to name only a few. The Rothschilds, for instance, not only
accumulated the largest amount of private wealth the Western world has ever seen, they also
changed the course of history by financing kings and monarchs. Did you know that they
supported Wellington’s armies, which ultimately led to the defeat of Napoleon at Waterloo? I
bet you didn’t.”
Davy raised an eyebrow. “I didn’t. But what I do know,” he replied, “is that only 50 years after
the death of Cornelius Vanderbilt, who created a fortune in railroads and shipping, several of
his direct descendants were flat broke. Apparently the Vanderbilts had both a talent for
acquiring and spending money in unmatched numbers. Seriously, dad, I do believe that strong
family values are very important but I also feel that they may place restraints on the
development of the company. It is commonly known that familism in Southern Italy is one of
the main reasons for the slower economic development of the south relative to the north.”
Luc sighed and looked at his son. “So, what does this all mean?”
“Well, I think that the key question is whether family firms evolve as an efficient response to
the institutional and market environment, or whether they are an outcome of cultural norms
that might be harmful for corporate decisions and economic outcomes,” Davy replied with a
gentle smile. “Don’t you think so?”
“I . . . um . . . I guess I do.” Luc smiled back at his son. “I am not sure that I understand what
you mean, but it sounds great. Let’s throw some money at it and hire a consultant who knows
something about this. I’ll call McKinsey first thing tomorrow morning. Cheers.”
“Cheers dad,” Davy echoed lifting his glass.
Two weeks later, Paul Thomas Anderson, a senior McKinsey consultant, put forward the
following problem statement in a meeting with Luc Laroche: What are the implications of family
control for the governance, financing, and overall performance of The Laroche Candy
Company?

1. What is business research?
2. Why is the project that Paul Thomas Anderson is doing for The Laroche Candy
Company a research project?
3. Which steps will Paul take now that he has clearly defined the problem that
needs attention?
4. Luc Laroche has decided to hire an external consultant to investigate the
problem. Do you think that this is a wise decision or would it have been better
to ask his son Davy or an internal consultant to do the research project?
5. What can (or should) Luc do to assist Paul to yield valuable research results?
6. How can basic or fundamental research help Paul to solve the specific problem
of The Laroche Candy Company?

 
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