Air France and KLM before their merger were two company players whose corporate identity and culture were strong. This gave them an edge in comparison with the other airlines. In addition, their merger enhanced their industry image, attracting more clients because of the initial successful services offered by individual firms. In addition, rivalry is very low in the airline industry.
This is because of the tight entry requirements postulated in the statute. Bargaining by customers is very low. The people who use these airlines are people of a high status (Wnittington 2001).
This uniqueness decreases firm rivalry. With competitors like Star airline being successful after their merger, it was clear that cooperating firms could have the muscle to compete in this industry. However, increase of fuel costs is a huge external problem as it is eating on the revenue generated.
Critical success factors
Transparency
Management decisions and policies are industry driven. The management always deliberates on the market issues before coming up with a decision.
Reliability
The decisions made by the airline are client driving. The public trust the airline to provide quality customer service while it is in the course of business.
Rational
The rationality of decisions is based on the application of cost/benefit analysis. Policy makers weigh a designated decision on costs and benefits before their adoption. When the costs outweigh benefits, the decision is abandoned.
Accountability and good ethical behavior
The airline stands by the decision made and takes responsibility to that effect. The responsibility in this line entails the ability to own, report and explain happenings upon occurrence.
Company analysis
Air France-KLM came into existence after the merger of air France and KLM Royal Dutch airlines in September 2003. Increase in competition of Europe airlines and the harsh financial position of the KLM airline led to this merger.
The merger led to the dilution of government stake; this ultimately led to transfer of the airline to a public-owned from a state-owned company. The autonomy has solely avoided the government intrusion in daily operations of the airline. The company has a well-designed decision mechanism that addresses day-to-day running operations.
Air France-KLM consolidated their revenue through the merger. The company is able to optimize on management as it has a large network. Due to the acquired position of dominance in the industry and bargaining power during the merger, the purchase of new airlines is imminent.
The Company also has a variety of services. Passenger, freight and maintenance services are the three major areas of service. This has enhanced customer satisfaction and fostered confidence (Hough 2006). Air France- KLM has huge operating revenue that is attributable to this wide range of products.
SWOT analysis
Strengths
The transfer of ownership from a state- to a public-owned airline has improved the firms operations and effectiveness
Huge consolidated operation revenue is one of the strengths of this airline. This has helped the firm cover its expenses with ease.
The diversification of its services gives the airline a competitive advantage over the other airlines. The services provided by Air France-KLM are, passenger, freight and maintenance services.
Weaknesses
Different cultures are a corporate weakness of this merger. This has led to inconsistency in the decision making process.
The firm’s autonomy discourages state intervention in terms of funding to cover its operation costs that may be acute i.e. the ever-rising fuel costs
Opportunities
With the opening up of the world market and increase of tourism, the firm has an opportunity to grow its revenue base.
Threats
Rising operation costs. The acute prices of oil drives firms cost high, this decrease the airline profits in the end.
The increased airline mergers in the European zone have hiked competition in both the European and global markets.
List of References
Hough, J. R. 2006, ‘Business segment performance redux: a multilevel approach’, Strategic Management Journal, Vol. 27 No. 1, pp. 45-61.
Wnittington, R. 2001, What is strategy – and does it matter? 2nd edn, Cengage Learning, London
The main goal of every business organization is to make profits, increase in its customer base, while still securing sustainability in the market. However, in the case of companies that come together for a merger, it is difficult to establish the likely ultimate impact of the merger on their operations and business goals.
Despite the risk that a merger could as well disadvantage a company, if well planned, mergers open up possibilities for companies. A balanced scorecard is an important tool used in harmonizing processes during a merger. In order to design a well-balanced scorecard, it is very essential to bring together all the critical factors within those organizations (Silverthorne, 2008).
The balanced scorecard provides four perspectives from which to view organization so that one can consequently design metrics, obtain data, and synthesize them to attain organizational objectives (Balanced Scorecard Institute, 1998). This paper looks into the merger between Utah Opera and Utah symphony to highlight critical areas that must be addressed in the merger.
Action plan for Anne Ewers
Before developing an action plan, it is critical to first evaluate the strategic objectives of both Utah Opera and Utah Symphony in order to see whether, if they decided to go on with a merger, the companies can meet their individual objectives or not. Moreover, it is critical to determine, the kind of challenges that the two organizations are likely to face due to merging.
Understanding the challenges is critical for management to identify a suitable approach to those challenges. Definitely, management is keen on ensuring that the integration of the two companies is successful.
Secondly, as desired, the merger has to be designed in a way that ensures reduction in expenses and maximization of profits. To guiding principle of the action plan is to ensure that despite the merger, the current customer base is maintained or increased.
Analysis of the financial and leadership strengths of Utah Symphony
Financial Strengths
Based on the information provided in the case, the following are the strengths of Utah Symphony. First, Utah Symphony’s revenues total up to $3,836,513; a figure that is $2808336 more than that of Utah Opera. It also receives government grants totaling to $3,124,999, an amount that is $2,147,677 more than the one obtained from Utah Opera. Utah Symphony also receives contributions that total up to $4,460,268. This figure is actually $ 2,270,281 more than the one collected by Utah Opera.
Secondly, regarding investments, Utah Symphony has so far gained an investment income of $817,505. Moreover, the company still projects this figure to reach $919,013.
From the given figures, it is clear that, based on revenue and contributions from the previous periods, Utah Symphony are advantaged compared to Utah Opera. This makes it more advantaged than Utah Opera. For instance, its total revenue and contribution is $12,398,548.
Leadership strengths
Utah Opera has a very experienced management team. For instance, Keith Lockhart, who had joined the Utah Symphony in 1998, had served as a Boston Pops Orchestra conductor (Delong & Ager, 2005). In addition, Keith had been a conductor at both the Cincinnati Symphony and Cincinnati Pops Orchestras. Lockhart’s experience is quite extensive, for he had been a conductor to more than 600 concerts.
Moreover, he has also successfully built some 50 television shows. The mentioned strengths notwithstanding, Keith remains a sort after guest artist in major states in the US. This experience puts Keith at an upper hand in terms of management.
Leadership Weakness
The major weakness of Utah Symphony in terms of leadership relates to the nature of experience that its leaders have in order to manage the group. It is the analyst’s view that even though Keith’s experience is vast, it has more to do with orchestra than with opera.
Therefore, the kind of responsibilities allocated to Keith are way beyond the experience acquired implying that Keith could not be in a position to make efficient strategic decisions pertaining to Symphony’s progress towards organizational objectives because the manager is better suited to work with Utah.
Symphony than Utah Opera
Analysis of the financial and leadership strengths and weaknesses
Leadership Strengths and weaknesses
Anne Ewers, who was brought to office in 1999, was previously the general director at the Boston Lyric Opera, lead Utah Symphony. At Boston, she had helped clear a debt of $450,000, debt previously held (Delong & Ager, 2005). She also helped in the establishment of endowment fund, in addition to increase in productions to three from an initial unit production. Ewers, therefore, has a very rich experience in managing Opera entertainment.
She especially had a successful career as a stage director across the US as well as abroad. Her skills are without doubt very profound especially in fundraising both within and outside the US, and in managing both the Orchestra and Opera business. However, despite the rich experience, sales and support for arts have been waning thus need for more concerted effort by management to keep the arts industry vibrant and dynamic.
Recommended steps prior to the Merger
Before going into the merger, the two leaders should have a talk on their experiences and undergo some workshop experience in which one reveals to the other the secret behind the success either of the organizations.
They should bear in mind the fact that a merger will only flourish if they can work in improving one another’s skills. The workshop experience will be beneficial to the two leaders as they are likely to discover ways of ways of working together.
Financial Strengths and Weaknesses of Utah Opera
Utah Opera has continually grown in its annual productions, that is, from three productions to four. In addition, it has boasts of an audience of 130,000 patrons, and already performed to over 70,000 students in view of increasing its scope.
Recommended Steps Prior to the Merger
Compared to Utah Symphony, the Opera group needs to improve in its financial base. They should engage in a campaign to raise more funds through fundraising or through issuing of shares to the public.
In fact, since Anne is recognized as an excellent fundraiser, they should engage her in coming up with a plan towards more funds to kick them off. Issuance of shares could also work in their favor. However, success in such a step largely depends on how well the merger is planned and executed.
The Four Aspects of the Scorecard
Different cultures and visions for each company
Although the two companies have different visions, there is a lot of similarity. Utah Symphony’s vision is to attain excellent symphony.
They intend to attain this through increased quality standard in its concerts in order to maintain the 83 full-time musicians that it is currently in contract with. Utah Opera’s vision is to become a nationally renowned opera entertainment house. This vision is to be attained through optimal quality in its performances as well as in the endowment funds.
Financial Strategy
Utah Opera’s financial strategic goal is to be financially stable by increasing is reserve fund, and to generate annual profitability, but the critical success factor is through increased annual endowments. In addition, the financial measure of this success is to increase total revenue and contributions from $4,741,206 to $5,116,049 (Delong & Ager, 2005).
Utah Symphony’s financial strategic goal is to be financially stable, through orchestra performances. The critical success factor in achieving this aim is through increased number of performances and increased audiences. Finally, the financial measures will be through increased performance revenues from $1,028,177 to $4,516,308 (Delong & Ager, 2005).
Customer Factor
Utah Opera’s strategic goal is to be regionally renowned for opera performances. The critical success factor is to attain excellent performances. Performance measure is to sell out all their performances. Utah Symphony’s strategic goal is to attain excellent performance in the Orchestra performances.
The critical success factor is to hire the best talent. The performance measure is to delight in customer feedback especially from its patron customers.
Internal processes
Utah Opera’s strategic goal is to attract and retain the best talent in the industry. The critical success factor is to have a successful negotiation process with the selected performers (Delong & Ager, 2005).
The performance measure is to increase its profitability and to carry out reviews that identify the quality of performances. Utah Symphony’s strategic goal is to have a flexibly reduced expenditure plan on periods of no fundraising campaign. To continually negotiate their contracts with musicians in order to motivate them. The performance measure on this factor is increased profitability.
Learning and Growth
Utah Opera’s strategic goal in relation to this factor is to ensure high quality performance in the forthcoming period. The critical success factor in this case is to establish increased endowment fund, as well as ticket sales. The performance measure is to have its capital being taken care of by the sale of tickets.
Utah Symphony’s strategic goal is offer, increased number of symphonies in order to attract increased audience base. The performance measure is to improve the sale of tickets, as well as bringing back audiences
From the above overview of the balanced scorecard, it is evident that the two companies reflect varied organizational culture and visions. As a result, this poses a challenge especially related to the aforementioned factors of financial and leadership strengths and weaknesses.
The scorecard does address the so mentioned weaknesses and strengths. For instance, the problem of financial stability has been addressed in both the scorecards of Utah Symphony and Utah Opera.
Both the strategic goals, critical success factors and the performance measures are very different. One point though is that the scorecard addresses the financial factor more than the leadership issues. For instance, the two personalities have experiences that are quite different from the roles they perform.
The fact that the balanced scorecard does not address the leadership issue arouses concern because it is through efficient leadership that the two companies are to be able to attain the objectives mentioned.
A balanced Scorecard for the merged company based on the specified strategy
Figure 1b: Balanced scorecard.
In the figure above, a balanced scorecard has been presented that should take into consideration the merger between the two companies. According to the established balanced scorecard, the first factor to be handled should be learning and growth in order to improve performance in both companies, leading to the retention of the best talents due to employee satisfaction and enjoyment.
Similarly, quality performance shall lead to customer satisfaction, which will consequently create increased frequency of attendance as well as increased customer return. Ultimately, the result of the merge is to be financial stability and optimal performance.
The Strengths and weaknesses of proposed merged company
Strengths
The following strengths are to be realized in the event of a merger. To start with, the proposed merger is expected to consolidate the management of the two companies. Given both leaders have diverse knowledge; they are likely to come up with very different ideas in order to boost the management of both organizations.
Additionally, the merger will facilitate resource sharing and maximum utilization. The proposed plan could help enhance resource use thus help to avoid underutilization of resources. Moreover, the proposed plan could greatly increase the customer base due to diversity in the products and services provided by the two companies.
Merging could help improve the strategic positioning of the two companies in the market through management process. Finally, improved internal processes through learning might also reduce the costs incurred in using underperforming staff.
Possible Weaknesses in the Merger
The proposed merger might experience problems when it comes to cultural transformation. The two companies have different cultures, which might become very difficult to manage. Moreover, the proposed plan might lead to customer dissatisfaction in the sense that each group has its own customers who have their own preferences. The merged entity might assume brand characteristics that do not appeal to certain hitherto customers.
There is likelihood of problems arising in the internal processes because of the varied corporate objectives from both groups. This is likely to pose a challenge.
It is also possible that the financial objectives fail to be achieved as both groups have different ways of managing and attaining their finances. Finally, the process of learning and transforming the cultures of the two corporations might become very unattainable due to resistance to change within the two companies
Probable Issue that might arise during the merger
The likely issues that might arise during the merger have to do with finance, human resource and customer satisfaction. When it comes to finance, issues may arise with regard to methods of allocating funds and sharing returns. As for the human resource management, it will be challenging to determine which employees to use and which tasks to assign to employees from either organizations in the merger.
Finally, the managers have to plan on how to deal with customer satisfaction related issues. Unless, the merger works right, the mode of estimating each group’s contribution towards customer satisfaction may become a cause of disagreement. Moreover, if the merged entity comes up with very different ways of operation, this could alienate the customers.
Mitigating Actions that the new merged company executive could take
The issues likely to arise relate to finances, human resource and customer management. With regard to human resources management, the two companies have to find ways of ensuring synergy. Immediately the merger gets underway, each of the companies needs to address the issue of quality in performance. In this regard, the top executives should organize for a workshop that brings together all the staff members.
Such sessions will helps towards better understanding of the operations of both organizations. By so doing, both parties could feel part of one group. Additionally, staff should familiarize with the cross cutting operations. Such familiarization is important towards increasing efficiency.
Customer management will only become tricky if the two organizations operate as two conflicting brands under one merged entity. Consequently, it is important that the top manager impresses on the executives to work on harmonizing their customer approach methods. An analysis of each company’s customer relations should help the managers synchronize operations.
The customers should find even more value for their money from the merged entity. If merger company services are enhanced than what the different companies were offering, customers will appreciate. However, the two managers have to ensure that merging does not make operations too different from what customers were used to.
Financial gain is at the heart of doing business. Often, partnerships break up due to finance sharing related problems. It is recommendable that the top manager works with the directors to on a formula of generating finances, assigning finances to operations and finally sharing whatsoever gains from her operations.
There is need to come up with a financial plan before starting operations. This ensures that money realized is assigned properly with the priorities of the merged entity serving all stakeholders.
Conclusion
The balanced scorecard widely applied in corporations. It is an important tool because it addresses the various indicators of progress in attaining organizational objectives (Kaplan & Norton, 1996, p.53). As the executives of the two companies prepare for a merger, they should use harmonized balanced scorecard to translate the visions of the two companies into operational activities.
It is important that they meet before the merger to agree on a number of things. As identified, they have to look into human resource, customer and finance management issues. Unless, the mentioned are addressed properly, enormous problems are likely to emerge after the merger.
Reference List
Ager, and Delong (2005). “Utah Symphony and Utah Opera: A merger proposal”. Harvard Business School, 9-404-611.
Performance of an organisation may be enhanced in a variety of alternatives. Formation of mergers is one of these alternatives that can help to increase the trading price of organisational shares, efficiency ratios, and increased value of a company in share markets. Bancolumbia utilised this strategy to enhance its organisational transformation. Mergers bring different organisations together with different organisational cultures and ways of accomplishing tasks.
Consequently, various management issues arise during mergers. This paper utilises Bancolumbia as the case study to analyse such issues, discuss key decision criteria, prescribe alternatives, provide recommendations, and prescribe an action and implementation plan to handle management issues associated with the formation of mergers.
Problem Statement
Bancolumbia conducted two of the largest mergers that had been experienced in Columbia with a period of less than 10 years under the leadership of Jorge Londono as the CEO. The success of these mergers as an organisational transformation strategy was dependent on the roles played by the persons charged with the entire process, factors such as organisational communication, and the leadership strategies deployed to enhance the overall collective transformation process. The main problem was to utilise organisational communication through leadership strategies to enhance the success of the new merger, which brought together persons who were inspired by different organisational cultures.
Supporting Evidence
Bancolumbia merged with Corfinsara and Conavi in 2004. The rationale for this merger was based on the argument that a merger can exercise competitiveness based on the advantages associated with economies of scale (Richard Ivey School of Business 3). In Columbia, this case was perhaps crucial since the era of 1990s saw the country experience an economic downturn resulting to decreasing financial entities to about 37 percent in 1995 through 1999 and to 62 percent in 2006 (Richard Ivey School of Business 2).
The reduction evidences that the only organisations that would survive the impacts of economic downturns were the prominent ones. Consolidation was a strategy that would see the organisations acquire more clientele levels. Consequently, a new trend emerged in the banking industry focusing on having fewer but bigger banking institutions. The success of this strategy for the case of the merger between Conavi, Bancolumbia, and Corfinsara was realised through communication to shareholders about its value in enhancing the success of the company.
Key Decision Criteria
Conavi, Bancolumbia, and Corfinsara’s merger decision criteria was based on the slogan “being one, we are more” (Richard Ivey School of Business 5). Realisation of this slogan led to the convening of a meeting by top executives of the three companies at Sata Marta. The main issue at hand was to determine the values, mission, and vision of the merged entity. Training and performance team did the facilitation of merger.
According to Richard Ivey School of Business this entangled offering technical advice to all parties involved in the merger on how to “ generate dynamics that would make people think on how to build a new organisation” (6). Arguably, the decision-making criteria on the approaches adopted in making the merger effective were based on communication strategies that would help to resolve a stalemate that would arise in case the parties, which perceived their organisational culture, would be eroded.
Alternatives Analysis
Although the analysis of a merger is based on the impacts that it would have on the overall performance of the merged organisation in terms of market divide and efficiency ratio, management needs to consider other issues that would to make the merger successful. Such issues include how to respond to questions that would emanate from workers who would be subjected to the changing working environment, new working processes and procedures, and addressing issues of layoffs and degrees of contributions of every company on the daily business of the merger.
Richard Ivey School of Business Reports, “Bancolumbia accounted for 75.5%, Corfinsara 12.7%, and 11.8% for Conavi” (7). Resolution of the challenges associated with change of work environment requires effective organisational communication. Analysis of the legal implication of a merger is also a critical alternative analytic aspect in the evaluation of decisions to form a merger.
For instance, in the case of the merger between, Conavi, Bancolumbia, and Corfinsara, employees were concerned that the merger would result in their layoffs. Such unsatisfied employees would file legal petitions against the merger decision made by their respective organisations. Consideration of how this effort would influence the performance of the merger both in the short and in the end is essential.
Recommendations
In the resolution of dominant challenges associated with organisational changes encountered in mergers such as those experienced in the merger between Conavi, Bancolumbia, and Corfinsara, it is recommended that, amid consideration of any other effort to enhance the success of the strategy, the merger should treat employees as the most crucial resource available for enhancing the success of the merger.
This provision would put more emphasis on the organisational communication through adopting a communication strategy having the following elements:
Incorporating the needs of different organisations’ stakeholders such as employees, managers, customers, and investors among others
Providing information on who would be making decisions that would influence customers and employees either directly and indirectly
Help in monitoring issues and needs handled during the integration process
Prepare employees for new roles that would arise following the mergers
Action and Implementation Plan
In the implementation of organisational transformation strategy through a merger, an effective action plan is required (Galpin and Herndon 23). As argued before, since a merger involves many organisational changes, communication of such changes is an immense challenge. As evidenced by the merger between Conavi, Bancolumbia, and Corfinsara, to resolve this challenge, the following action and implementation plan for effective organisation communication strategy is proposed.
Building Awareness
The implementation of the plan entails linking various integration alternatives with various strategic plans. The alternatives should reaffirm to the different organisations forming the merger about equal adaptation of organisational values in the merger and communication as advised by Harrison (Para. 3). They should touch issues such as equal participation of the each organisation’s management coupled with the support of the merger so that stakeholders of one organisation do not feel disadvantaged.
Merger Status
This action plan is organisation-specific. It seeks to demonstrate the participation of senior organisational management in the merger process in the effort to bargain for better rewards for each organisation’s stakeholders forming the merger (Watson 16). It also ensures that the rationale for the merger is reaffirmed to all organisation stakeholders besides creating a bigger picture of the merger in the minds of all the stakeholders.
Rollout
The scope of this plan is integration-specific. Its implementation entails the provision of specific information of the likely changes in the work environment showing how such changes would influence workers in the merger organisations. This strategy helps in avoiding situations in which employees would be caught unaware by the changes.
Works Cited
Galpin, Tim, and Mark Herndon. The Complete Guide to Mergers and Acquisitions: Process Tools to Support M & A Integration at Every Level. San Francisco: Jossey-Bass Publishers, 2009. Print.
Richard Ivey School of Business. Bancolombia: Talent, Culture and Value Creation Management in Mergers. Ontario: the University of Western Ontario, 2011. Print.
Watson, Wyatt. Human Capital Index: Human Capital as a Lead Indicator of Shareholder Value. Washington: Rowman & Littlefield, 2002. Print.
Change in normally brought about by globalization and advancing technology, as the organizations try to fit in the competing market by attaining a market share and a competitive advantage. However, change may not be appreciated by employees, as some view it as a threat to their jobs due to the expectations that accompany change.
Employees find it hard to adapt to change especially when change is forced on them other than discussed with them. In addition, employees may resist change if it has unrealistic expectations and is threatening to their jobs.
However, for change to be acceptable, it has to be healthy and has employees interest at heart, otherwise change may contribute to decrease in employee’s morale and performance (Houdmont and Leka, 2010 pp 125). Job demand should be realistic; otherwise, it may be a source of stress to the employees, which may also contribute to absenteeism.
If your organization were planning a major change, such as a merger, what steps would be necessary to manage the transition?
Change in an organization should be aimed at improving the organization’s performance and it should not be aimed at meeting a manager’s personal interests. According to Piederit (2000, pp 795), sometimes, opposition to change may be aimed at protecting the organization’s interests.
When implementing change, for instance a merger, the managers should be able to communicate with the employees about this change before it is implemented. This way, employees will not acquire negative ideas about the change; instead, they will get to understand the importance of a merger to the organization.
The management should engage the staff in the implementation; hence, they would be in a position to manage change. In addition, effective communication is important between the management and the staff regarding the change in mergers.
A well-elaborated plan should be created, which should involve the employees, as they will be affected by this change. Even if the management may not consider the employees’ opinions in the final decision-making, it is important that the employees feel that their views are considered, hence avoiding resistance.
The management should also support employees with full support in regard to their opinions by ensuring that effective communication exists in both teams. In most cases, employees fear change due to its uncertainties, however, the managers may give room for employees’ views and establish forums in which employees can learn more on the proposed change.
In this case, the management should be able to provide the employees with relevant information on the importance of mergers and how they will impact on the organization and the staff.
According to Kerfoot (2005 pp 271), “effective change must be built on the foundation that is already in the organization; diffusion of changes are only effective when the seeds of change are planted in people throughout the organization.” Employees have to own the change first, hence adapting to it and being able to operate under a new change.
In case an organization decides to merge with another organization for a profit making purpose, it should inform employees about the plan and the benefits to it. It is obvious that employees may fear the uncertainties of being part of another company or even leadership; however, if this idea is communicated well to the employees and they are allowed to air their views, it will be an easy task.
Piederit (2000, pp 786) proposes multi-dimensional attitudes as responses to organizational changes in employees, which portray both emotions and feelings that could either be negative or positive regarding the proposed change.
Conclusion
Change in an organization proves to be necessary due to the technology advances and it may be of use to the organization; however, change is not always welcomed with open arms especially by employees, as they fear the uncertainties associated with it.
It is however the duty of management to implement change effectively by also engaging employees in the implementation process, ensuring effective communication of the proposed change, and informing employees on the impacts of the change, for instance, rewards may be inclusive in the new change. Therefore, employees may learn to appreciate and embrace change, as it is also beneficial to them.
References
Houdmont, J. and Leka, S. (2010). Contemporary Occupational Health Psychology: Global Perspectives on Research and Practice. NJ: John Wiley and Sons Publisher.
Kerfoot, K. (2005). Leadership; the jonny apple seeds of organizational change. Web.
Piderit, S. (2007). Rethinking resistance and recognizing ambivalence: a multidimensional view of attitudes toward an organizational change. NY: Academy of management publisher.
In the current business world, entities are looking into ways to expand, acquire an operational or a competitive advantage edge. One way of accomplishing this entails mergers and acquisitions.
A merger entails two firms combining on equal terms to form a different firm while in an acquisition; one firm becomes the holding entity of the other.
This is normally an exceedingly risky move since most entities are different in diverse ways. Companies differ in terms of philosophy, culture, operations and organizational structure. Integrating all these aspects is challenging.
Subsequently, many acquisitions and merge may fail to realize the ambitions of undertaking them (Goldberg & Practising Law Institute, 2005).
One of the factors that contribute to failure of mergers and acquisitions is cultural disparity among organizations. Organizational culture denotes the values that an organization seeks to entrench among the staff members. Most of the American firms have a relaxed approach to management.
However, European entities form countries such as Germany will probably have a very formal approach to management. Merging firms form such backgrounds may be tough. This will result in lower job satisfaction among the employees who have to alter the way they undertake their work.
The culmination of a merge in the above scenario would be high employee turnover and lower productivity. The merger between Chrysler, an American entity and Daimler-Benz, a German company did not take off appropriately since the entity had many cultural and philosophical disparities.
Chrysler had a relaxed managerial attitude, which was suitable for its employees. Hence, this managerial approach was responsible for the success the entity had realized. Contrary, Daimler-Benz, another successful organization had a different managerial culture.
The company owed its accomplishments to a formal managerial approach. The merger between the two organizations should have resulted in a bigger entity with massive potential.
The resultant company would have had at its disposal a greater market proportion, excellent employees and a good product portfolio. However, the merger failed to meet the expectation of the managers and owners (Gole & Hilger, 2008).
The organizations had different philosophies with reference to remuneration and management. Attempts to merge these disparities had massive implications on the work force. The Daimler- Benz’s employees became more motivated as the entire entity tried to replicate their organization’s culture.
Conversely, Chrysler’s employees were disoriented and most left the organization. Subsequently, Chrysler’s performance dwindled significantly triggering take-over attempts by Daimler- Benz. The above example provides insight into the failures of mergers and acquisitions.
The two firms failed to consider the human aspects of the merger. Chrysler and Daimler-Benz overlooked the impact of the merger on the most important resource, the human resource. As such, one firm was operating better than the other was, but the merged firm (resultant entity) was not realizing the expected results.
This reveals that managers should make lengthy considerations prior to merging. The entity should consider the cultural disparity and various philosophies employed in determining vital issues such as remuneration.
Overall, entities should seek merges among entities with similarities in numerous aspects. Disparities make it hard for entities to integrate various aspects of the merger (Sherman & Hart, 2006).
Conclusion
In conclusion, mergers require massive preparations. Hence, merging entities should create a period within which to integrate and jell various aspects of the entities such as operations, philosophy and culture.
This period should come prior to the signing of a comprehensive merger and acquisition deal.
Period to this period the entities should sign a memorandum, which will detail what the entities should undertake to set the stage for the signing of a comprehensive deal. The integration process should provide insight to possible outcomes of the merger or acquisition (Sherman & Sherman, 2011).
References
Goldberg, R. A., & Practising Law Institute. (2005). A guide to mergers & acquisitions, 2005. New York, NY: Practising Law Institute.
Gole, W. J., & Hilger, P. J. (2008). Corporate divestitures: A mergers and acquisitions best practices guide. Hoboken, N.J: Wiley.
Sherman, A. J., & Hart, M. A. (2006). Mergers & acquisitions from A to Z. New York: AMACOM.
Sherman, A. J., & Sherman, A. J. (2011). Mergers & acquisitions from A to Z: Mergers and acquisitions from A to Z. New York: American Management Association.
The airline industry is a capital-intensive industry that has stiff competition. Some of the avenues that airlines use to compete include convenience of flights, inflight comfort, capacity, and ticket prices (Inderwildi & King, 2012). Stiff competition necessitates airlines to form collaborations to improve their profitability. National flag carriers are the major airlines that dominate the market.
The national carriers may use their vast resources to acquire small airlines. This reduces competition in the industry. KLM is a Dutch national carrier. On the other hand, Air France is a French national carrier. Problems that the two airlines faced necessitated the merger of the airlines. The merger would lead to the formation of Air France-KLM holding company.
This would make Air France-KLM the largest airline in the world in terms of revenue. The European Union (EU) is a powerful body that can negotiate on behalf of its members. The EU has the right to enter into open-skies agreements with non-member states. In so doing, the EU ensures that it safeguards the interests of member states. Therefore, the EU plays a critical role in shaping the future of the airline industry.
The EU kicked off negotiations with the US on behalf of the member states (Tagliabue, 2003). It was vital for the merger of Air France and KLM to get the approval of the EU. The merger would lead to the formation of Air France-KLM holding company. However, the individual airlines would continue operating as independent companies to preserve their distinct identities (Tagliabue, 2003).
The holding company would have three major operations. These included passengers, freight, and aircraft maintenance. The merger would be greatly beneficial to both airlines. The merger would lead to financial stability of the Air France, which was on the verge of bankruptcy in the mid-1990s. On the other hand, the merger would inject capital into KLM.
The merger of Air France and KLM would lead to significant changes in the market. In the long-term, the merger would help in reducing the number of the carriers that compete in the European airline market. The merger would help in the formation of a small number of large carriers. This would make the European airline market resemble the American airline market, which has a small number of large airlines.
American Airlines and United Airlines are the dominant players in the American airline industry (Ireland, Hoskisson & Hitt, 2008) Focus of the large airlines on the long-haul routes would help in the growth of small airlines, which focus on short-haul flights. Growth of the short-haul flights would increase competition in the short-haul routes. This would put pressure on the traditionally high fares of European carriers.
However, certain analysts believe that the merger would limit competition in the airline industry. According the analysts mergers of large airlines would lead to reduced capacity and higher ticket prices. In addition, large carriers may use their resources to push small airlines out of the market.
Mergers should take into the consideration the interests of shareholders of the respective companies. Most mergers offer shareholders a premium price on their shares (Peng, 2011). Shareholders of KLM received 11 shares of the holding company for every 10 KLM shares. In addition, the shareholders had warrants of additional shares until 2008.
On the other hand, shareholders of Air France received one share of the holding company for every Air France share. Therefore, the merger was more beneficial to the shareholders of KLM. This led to an increase of the price of KLM’s shares and a fall in the share price of Air France in the stock markets.
The merger of Air France and KLM would lead to significant changes in the European airline industry. The merger threatened the position of the British Airways and Lufthansa, which were the two largest airlines in Europe. However, it was vital for both companies to formulate strategies that would enable them combine their strengths to improve their competitiveness (Ireland, Hoskisson & Hitt, 2012). Otherwise, the merger would be ineffective.
References
Inderwildi, O. & King, D. (2012). Energy, transport, & the environment: Addressing the sustainable mobility paradigm. London: Springer.
Ireland, R.D., Hoskisson, R.E. & Hitt, M.A. (2008). Understanding business strategy: Concepts and cases. Mason, OH: Cengage Learning.
Ireland, R.D., Hoskisson, R.E. & Hitt, M.A. (2012). Strategic management cases: Competitiveness and globalization. Mason, OH: Cengage Learning.
Peng, M.W. (2011). Global business. Mason, OH: South Western Cengage.
The failed merger between Daimler-Benz and Chrysler suggests that the integration of large corporations requires in-depth assessment of external risks and possible conflicts within an organization. Provided that these precautions are not taken, even very efficient companies can become stagnant. On the whole, it is possible to make several recommendations on the basis of this case.
First of all, the management of merged companies should not be too optimistic about the performance and profitability of their organizations. The thing is that the integration of large corporations is a very time-consuming process because it is necessary to align different cultures, production methods, performance appraisal techniques and so forth.
This issue is particular important in those cases when business administrators set timelines or develop schedules. The management of DaimlerChrysler expected significant revenues within several years, but these expectations were unrealistic.
The problem is that unrealistic expectations often lead to panic and hasty decisions. For example, many Chrysler executives were fired only because DaimlerChrysler did not attain the expected financial goals. Such a strategy only increased the tensions within the organization.
Prior to the merger, the management of companies should pay close attention to the competitive positions of each other and the trends that emerged in a certain market. For example, Daimler-Benz was an indisputable leader of the German car-manufacturing industry.
Moreover, they believed that the partnership with Chrysler would give them access to the U.S. market. Yet, Chrysler faced significant competition from Ford as well Toyota. Again, this recommendation is related to the problem of unrealistic expectations set by corporate executives who expected that the merger would become successful almost immediately.
The executives of such companies should find ways of reconciling various organizational cultures. It should be noted that Daimler-Benz and Chrysler had different polices regarding executive compensation, work styles and decision-making within the company. These differences resulted in many conflicts between the employees of these corporations.
Their corporate executives should create a culture that appeal to the workers of a newly-created company. Under these circumstances, the HR managers of both companies should join their efforts and develop a set of policies related to compensation, evaluation of performance, and the structure of the new company. In this way, companies can avoid many potential conflicts.
The managers of merged companies must ensure that different departments or divisions of the organization can share resources, technologies or information. For instance, Chrysler did not receive any support from Daimler-Benz. Thus, corporate executives should eliminate the barriers that prevent different departments from cooperating with one another. These organizational policies were not developed in DaimlerChrysler.
Business administrators should inform the employees about the future strategies and goals of an organization. The workers should now what is expected from them and how they are supposed to achieve these goals. The Chrysler employees never had an opportunity to interact with the management and discuss future activities of the organization.
Many workers were not confident of their job security and this lack of certainty could adversely affect their performance. It should be noted that many former executives were fired because of satisfactory results and this influenced the overall morale with within the company. This is one of the reasons why this merger was unsuccessful.
The executives, who plan the merger of two organizations, should determine whether this partnership will be really a merger of equals. They have to decide which partner will play the leading role.
The union of Daimler-Benz and Chrysler was described as the merger of equals, but this approach resulted in a great number of conflicts between the executives of the American and German divisions of DaimlerChrysler. At the very beginning, this issue was not properly addressed by the leaders of two corporations.
Finally, business administrators should find ways of making large corporations less bureaucratic and hierarchical. In particular, they must ensure that workers can communicate with top executives of any organization.
This task is particular important for merged corporations like Chrysler and Daimler-Benz. This goal can be achieved by joining several departments and empowering workers. The managers of DaimlerChrysler did not do it.
Conclusion
On the whole, the merger of Daimler-Benz and Chrysler can be viewed as a valuable lesson for other companies that intend to merge with one another. Moreover, the recommendations put forward in this paper can be applicable to other industries, for instance, financial services sector, IT industry, manufacturing and so forth.
Furthermore, the challenges described in this report are particularly relevant to large corporations that can be based in countries with legislation, work culture, language, and labor relations. In particular, this case illustrates the importance of reconciling different organizations, exchange of information between departments, and employee involvement.
Furthermore, such a problem as unrealistic expectations can occur in various organizational settings. This is why the lessons of DaimlerChrysler should be considered by the management of various organizations that are supposed to merge with one another; otherwise these companies will not attain their objectives.
Conflicts are a constant reality in our society and the effective resolution of the same may spell the difference between a successful and failed society. It is therefore imperative that the people involved in a conflict resolve the contentious issues constructively. Key to the process of conflict resolution is the use of negotiation tactics and strategies. This is because a deeper understanding of negotiation results in people getting the necessary skills required in diffusing conflicts. Knowledge of the negotiation process is therefore vital for effective conflict resolution. In this paper, I shall give a detailed description of how a merger problem can be solved through negotiation. The steps that should be followed during the negotiation shall also be discussed.
Shamir (2003), claims that negotiation can be defined as a form of communication whose purpose is persuasion. The negotiation process is therefore a process by which parties to a dispute discuss possible outcomes to their conflict. The parties involved might choose to adopt one of the two fundamental negotiating approaches: Competition or collaboration. Despite the fact that the proposed merger is beneficial to both companies, we all need to protect our interest to ensure that each company remains relevant after the merger. As such, the fundamentals of negotiation that should be employed in this case are finding resolves through the interests and positions of the parties.
Negotiation fundamentals employed in resolving the merger issue
The competition approach of negotiation is based on opposing positions (demands), and ends up in a win-lose scenario. Hunt (2009) states that the negotiation process may be futile if a party’s wants are not fully addressed. For example General Dynamics may want a particular price, work schedule or changes in the mode of operation of Lockheed-Martin. In this case, using the demands (positions) of General Dynamics as the baseline for this negotiation would be very important.
This is attributed to the fact that if General Dynamics feels like their demands (stand on the issue) have been addressed through the negotiation, they will have no choice but to sign off the merger. However, Lussier (2008) states that while using this strategy, it is always important to ensure that the negotiators demands are also addressed with little to no compromises. Being the negotiator in this case, I have to ensure that the demands of General Dynamics are addressed so that they can agree to the merger.
On the other hand, I have to employ the collaborative approach which is based on common interests therefore yielding to a win-win outcome. In addition to the competition approach, I have to find the common interests between our companies and use them as leverage in pursuit of an agreement. Information is important towards a successful negotiation. All companies want to make profits, expand their market base and lower costs. As such, I would ensure that I gather as much information as possible regarding to General Dynamics’ position on these aspects. I would then use this information to present my arguments for this merger. This would ultimately lead to a unanimous consensus and ensure that the merger is a success because the common interests of both firms have been addressed.
Negotiation sub processes that will help ensure a successful negotiation
The first step in the negotiation process is to describe what it is that you want to negotiate (interests). This is based on the concept that negotiation involves conflicts about particular resources. General Dynamics will therefore identify if there is a situation that needs to be negotiated. Lack of an identifiable area of conflict invariably renders negotiations unnecessary. Having acknowledged the conflict, the negotiations between General Dynamics and my company can be deemed as being ready to begin.
The process ideally begins by both parties presenting their issues which are mostly in the form of demands and goals to be met. A goal is defined as a known or presumed commercial or personal interest of all or some of the parties to the negotiation and it is these goals that set the grounds for the negotiation process (Barry, Lewicki & Saunders, 2010). From this an outline of expectations from the parties involved can be made and the agenda for the negotiation process outlined.
Having established the basis for the negotiation, we can now delve deeper into the task. While the preliminary stage acted as ground for negotiation, the information on the issues at hand was only sparingly addressed. The second step involves a deeper probing to enable both parties understand each other better. As such, this step is characterized by the informational exchange between the parties involved in a bid to establish the real needs and goals.
Each side aims at understanding the opponent, their limits and how far they are willing to compromise so as to reach a consensus. Use of open-ended questions and allowing the other party to correct your understanding of the issue are some of the best means of ensuring that a good understanding of the issues at hand is attained. Restatement of information leads to clarity and confirmation thus assuring that communication is effective.
A key element in this step is to get as much information as is possible to enable the parties to come up with as many options as are possible. It is in this stage that a person can also gain a better appreciation of the other party’s point of view. This will be hugely beneficial since once you are able to look at the conflict from the other person’s point of view, you can propose solutions that they would find appealing and therefore resolve the issue.
Concession trading which is the aim of good negotiation is the next stage in negotiating. Shamir (2003) defines consensus building as a decision and agreement reached by all the identified parties. In this process, each party is required to reduce their demands or aspirations so as to accommodate the other party. Through this process, unanimous agreement over the disputed issue(s) is reached. As such, each side makes some gains and possibly some loses.
Conclusion
Negotiation is one of the most productive means through which disputes can be successfully resolved. An understanding of the negotiating process greatly empowers a person in his/her negotiating undertakings. In addressing the merger issue between these two companies, the key steps in the negotiation process have been outlined. While the process described herein is basic and might have to be modified to be applicable to the specific disputes at hand, it provides a good framework for negotiation tasks. An understanding and proper implementation of these process will lead to greater success during negotiations.
References
Barry, B., Lewicki, R., Saunders, D. (2010). Negotiation Readings, Exercises and Cases. New York, NY: McGraw-Hill Companies, Inc.
Hunt, P. (2009). Structuring mergers & acquisitions: a guide to creating shareholder value. New York, NY: Aspen Publishers.
Lussier, R. (2008). Management Fundamentals: Concepts, Applications, Skill Development. San Fransisco, CA: Cengage Learning.
Shamir, Y. (2003). Alternative Dispute Resolution Approaches and their Application. Buenos Aires, Argentina: PCCP Publications.
This report discusses the use of project teams in achieving objectives of a given project in an organization. In this case, the report discusses the use of project team in a merger between Hewlett-Packard (HP) and Compaq companies in the computer industry.
The merger was important in trying to solve the crisis facing both companies. Although the management of these two companies enabled the companies to grow significantly, they failed in achieving set targets of their respective companies. These crises with both companies were accelerated by high competition in the computer industry. This led to an agreement between the CEOs of both companies to merger them.
The process of a merger between these two companies meant changes in human resource, communication and management. The report thus discusses how teams are used in the merger project to ensure its success. The merger starts with approval by stakeholders of both companies after a hard convincing by management.
The teams called clean teams are formed from employees of both companies. The clean teams adopted different strategies to create a unified culture out of the different cultures of the two companies. The team members carry out different responsibilities but reporting to two team leaders selected from both companies.
These clean teams are faced with conflicts regarding which aspects to adopt and which to drop from both companies. The aspects and products which are more advantageous are chosen while others are dropped. Those employees whose products are dropped lose their jobs but are compensated or taken in other jobs.
The management communicates either good or bad news to employees to gain their trust and reduce their resistance. The merger thus succeeds through use of clean teams to implement the project.
Introduction
Organizations in the same industry normally compete against each other in the same market as they sell the same products. When the individual organization’s internal strategies fail to enable them meet targets, they face a great risk of failure. In the many options of trying to avoid failure organization in the same industry can merger to form one company which will succeed and compete efficiently in that industry.
This report discusses the merger between Hewlett-Packard (HP) and Compaq companies in the computer industry. This report analyses different aspects of the merger with emphasis on human resource, communication and integration of management (Piven 2001).
Merger Background
In 1999, HP chose Fiorina as its CEO, who worked hard to transform the company old culture and structure as a way of improving it. Her work of pushing for more focus in services led to an increase of the company’s stock from $54.43 to $74.48 (Carleton, and Lineberry, 2004).
Though this was a great success to her, the company failed to meet its targets. The company started to cut down on jobs but with no success with its stock value declining significantly. The company’s internal strategies were not working anymore. Fiorina came up with the idea of merger between HP and Compaq through buying of stock (Williams 2001, 3).
Merger context
The merger was to happen in 2001 with Carly Fiorina planning to acquire Compaq through buying of its stock. Fiorina wanted to acquire stock worth $25 billion from Compaq (Clegg et.al. 2009). Through this stock HP was to own 64 percent while Compaq would be left with a share of 36 percent.
This merger was expected to be completed by the first half of 2002 with the two companies becoming one. The merger was faced with opposition not only from investors but also the workers of both companies (Clegg, Kornberger and Pitsis 2009, 51). They criticized that the merger would not solve the individual company’s problems but would create a bigger unified problem for both.
Exhibit 1: Merger Summary
Structure:
Stock-for-stock merger
Exchange Ratio:
0.6325 of an HP share per Compaq share
Current Value:
Approximately $25 billion
Ownership:
HP shareholders 64%; Compaq shareholders 36%
Accounting:
Purchase
Expected Closing:
First half of 2002
Source: Press Release issued on September 3, 2001.
Stakeholders
The merger stakeholders were HP and Compaq with the management representing them in the process. The shareholders of HP were represented by their CEO Fiorina who initiated the idea of a merger between the two companies. On the other hand the Compaq company shareholders were represented by their chairman and CEO, Capellas.
Hp Company was begun in 1938 by two electrical engineering graduates named William Hewlett and David Packard (Hoopes, 2001).
The company was named after their names gaining the short form of HP. HP shareholding is thus centered on the family of these two founders as even Fiorina was the first CEO outside the family ties. On the other hand Compaq started by two senior mangers as a computer company in 1982 (Levine, 2005).
The two CEO from both companies started the idea to merge the two companies with a phone call conversation. During this time both companies were suffering from competitive prices in the industry.
These two managers eventually meet but first with the idea of coming up with competitive strategies which would enable both companies to meet their targets. Fiorina during this meeting came up with the idea to merger both companies through buying of stock. The two CEO came into an agreement of merger as it would prevent the two companies from failure.
The two parties having come into an agreement went to represent the idea to their board of directors respectively. Fiorina was faced with opposition from the stakeholders who saw the idea as a creation of a bigger problem (Williams, 2001). The stakeholders believed the merger would lead to loss of consumer loyalty with the new formed company.
But on the other had the CEOs of both companies saw it as the only way to cut the rivalry in conditions of expenses. Fiorina though faced with this opposition from stakeholders managed to convince them on how the merger would not only reduce competition but also cut down on production expenses.
Fiorina been a CEO was thus able to influence the stakeholders to accept the idea of a merger even though it was thought to create a big problem. She argued on the basis of reasons for merger stating that the merger was meant for consolidation and not diversification.
Both the CEOs confirmed to the stakeholders the advantages they were to derive from the merger. The merger would create a stronger company which would mean increase in profitability through development. The merger would also enhance the ability to execute with integration of both management and strengths of both companies.
The stakeholders having agreed to the idea left their representation to carry out the management of the merger process. The integration of both management and cultures was used as the strategy to enhance the merger.
Organizational structure
The organizational structure of both companies was to change to pave way for the merger and formation of an entirely new company. The roles of the managers and supervisors were to change in many ways with more and complex responsibilities emerging. The new structure was based on the four major operating groups to be formed.
Exhibit 2: Organizational structure. Adapted from 425 filed by Compaq with the SEC.
The four major operating groups included; services, imaging and printing, access devices, and information technology infrastructure (LaPlante, 2007). This new integration meant a reduction in the workforce which meant retrenchment of employees. Fiorina was elected as the chairman and CEO and with her experience in restructuring, she advocated for discipline and inspection in the integration process.
The organizational structure formed had included the integration office which was occupied by two integration managers selected from each company (Resnick, 2010). These managers created teams from other managers and employees from both companies known as clean teams.
These teams were to research on the culture and management styles of both companies and come up with ideas on her to merge them as one. The first thing carried out by these teams was assessing the cultural differences between the two companies.
HP culture was viewed as a culture where consideration, thoughtfulness and planning were applied (Fiorina, 2002). On the other hand Compaq culture was viewed to be ready to act. The employees of Compaq were seen to act fast after little debate and consideration.
Those employees which were experts in different departments of both companies were selected to form the integration team (Koontz, and Weihrich, 2006). Fiorina selected McKinney, who had served for long in HP in running worldwide sales and marketing, to be an integration manager.
His experience would were be applied in managing the integration process. On the other side of Compaq, Capellas selected Clarke who was the chief financial officer during this time, as Compaq’s integration manager. These two integration mangers came up with different ideas from their application of experiences with their companies.
These managers contributed greatly to the integration process by been part of the integration teams. McKinney identified that the companies’ strategies were similar and thus required no significant changes. Both companies applied same strategy from product point of view and to move to industry standards.
Through these similar strategies the team advocated for the need of one CEO and one country manager (Lee, 2004). On the other hand Clarke also made significant contribution through the clean team. Clarke advocated for the “adoption” strategy among senior managers which applied a buddy systems staffing plan.
Team responsibilities and roles in integration management
This clean team applied the many strategies in the process of integrating both companies. The teams were referred to as the clean teams as members could meet in clean rooms away from their workmates they were used to. The teams could adopt different strategies in their responsibility of integrating both teams.
The strategy which was highly applied by the clean team was the adopt-and-go method (DePamphilis, 2009). The clean team could go into the field and carry out necessary research to make recommendations. These recommendations were based on a two way decagons, that is, the clean team could decide on which products to keep and which to eliminate.
The recommendations were made after the clean team evaluates the product, asset or internal system. The evaluation was meant to show which of company used a better version than the other. The better product, asset or internal system was kept while the other was done away with. This strategy allowed for faster integration process as it was faced with no resistance.
The employees whose product line was eliminated lost their jobs but were given chance for other jobs within the new company (Piven, 2001). The decisions made in the clean rooms by integration team were final and did not allow for further discussion.
In the integration role of the team members, adoption of the launch-and-learn strategy was adopted. With the clean teams having less time to carry out the integration process, the launch and learn approach saved time to wait and see the outcomes of decisions made.
The clean team also applied the use of launch-and-moose strategy in their responsibility to merger HP and Compaq (Gaughan, 2010). This approach was initiated to prevent as well as help solve the conflicts that emerged among the clean team.
Conflicts and differences were common in the clean team as it was formed by employees from different companies with different cultures. This approach enabled the tabling of differences and then the team could decide how to deal with them. This helped the clean team to reduce and avoid conflicts.
The clean team also applied the approach of watch-out-for-icebergs. Icebergs though seen above the surface of water, their bigger part is hidden underwater and not easily seen. This was the case for the integration process with many problems hidden from the visibility of the clean team.
Some issues in the merger were not well visible and could lead to its failure if not attended to like; leadership, governance, retention, and communications. With these invisible problems posing threat to the integration process, a Cultural Integration Team (CIT) was formed. This team was formed within the clean team itself (Federico, 2003).
The CIT introduced the “Fast Start” program which was to enable workshops for individual employee teams. These workshops were meant to help employees known each other, familiarize themselves with both companies and solve conflicts among themselves. This use of the CIT enabled employees from both HP and Compaq to adapt with working horizontally across the post-merger HP (Hill, and Jones, 2009).
The clean team selected from both companies used the horizontal reporting relationship among members. This was because the clean team did not consider nor apply the former roles and position of the team members.
The team members though having authority and responsibility differences before merger, were now equal and at same level. The leadership of the clean team was only exercised by the two integration managers selected by both CEOs from the two companies.
Merger development and conflict
The clean team by now had developed and included many members from both companies. The integration process had now advanced that it was time to name the team which would form the new company’s leadership. This was a difficult task for the clean team to select which executives from HP or Compaq would occupy the top management.
In a four business group, HP now the new company announced the names of 150 senior managers to lead the organization across the world. This meant the company had done away with some managers and employees. To this effect the company human resource management offered retention bonuses to these managers and employees although most of them preferred to stay (Cumming, and Worley, 2009).
The clean team had to consider many aspects in selecting the merger team members and establishing their roles. First the clean team used the strategy of adopt-and-go approach to eliminate some managers and employees.
Those managers and employees whose product line or internal systems were eliminated were less considered than those whose were chosen. This was on the basis of who?, among both companies’ managers and employees were better experienced and qualified to run different aspects of the new HP.
The developed team to manage the new HP Company was likely to encounter conflicts due to culture differences of the employees from HP and Compaq. Thus their main challenge was to develop a human resource strategy that would maintain the standards both companies had before while allowing for cultural change.
The new HP had to create new unified culture among the employees to avoid conflict issue. The HP’s human resource manager saw the need to use good communication as a way to incorporate both companies’ cultures among employees. In the issue of eliminating about 10 percent of the combined workforce, this HR manager saw it essential to communicate these to the team members (Baque, 2003).
On the other hand the Compaq HR manager saw it inappropriate to communicate to the employees about the expected retrenchment due to restructuring of both companies. This conflicting issue made it hard to integrate both cultures in the shortest time.
The use of good communication was adopted after discussion by the clean team as the best strategy to avoid cultural differences. The employees of the new HP were thus given all the information regarding expected changes whether good or bad. This aided the employees to gain trust of the newly formed HP.
Conclusion
The merger between HP and Compaq was a big challenge for both companies. Though a difficult strategy to adopt, the merger would enable both companies to solve the problem of not meeting their internal targets. The merger would also enable the companies to compete effective in the industry irrespective of the price challenges experienced at the time.
Though the merger had these advantages, it was faced with great opposition from both stakeholders and traders of both companies (Aqrawal, 2010).
The merge to them was expected to create bigger problems for both companies rather than solving current problems. This was a challenge for the management of both companies who saw the merger as the only way to solve their problems. The management argued the benefits of the merger and convinced stakeholders to allow it.
The merger was a big step for both companies and required discipline and massive inspection to integrate both companies. The use of a team combining employees from both companies allowed for a faster integration. The merger was faced with the threat of integrating both cultures of both companies into one.
In the integration process, culture differences led to conflicts between team members regarding different decisions to be made. Though the existence of conflicts the integration became a success.
Recommendations
In a merger between two companies, the advantages and disadvantages of the merger should be clearly known by both companies. The effects of the merger to the two companies should be well explained to their respective shareholders to avoid their resistance and gain their support. The two companies should create a team from employees of each to carry out the process of integration.
The team members selected to drop their authority and responsibility from their respective companies to allow for a horizontal relationship between the team. The team should apply the approach of adopt-and-go in the integration process to make it quick and without conflicts.
Companies undergoing a merger face the great challenge of incorporating their respective cultures to one. These companies should use good communication among employees as the best tool to integrate both their cultures into one. The companies’ integration team should inform employees of both companies regarding expected changes whether bad and good.
References
Aqrawal, R., 2010. Mergers and Acquisition – A Case Study and Analysis of HP-Compaq Merger. Ezine articles. Web.
Carleton, J. R. and Lineberry, C. S., 2004. Achieving Post-Merger Success. A Stakeholder’s Guide to Culture Due Diligence, Assessment, and Integration. New York: Pfeiffer.
Clegg, S., Kornberger, M. and Pitsis, T., 2009. Managing & Organisations: An Introduction to Theory & Practice. New York: SAGE Publications.
Cumming, T. and Worley, C., 2009. Organization development and change. New York: Cengage Learning.
DePamphilis, D., 2009. Mergers, Acquisitions, and Other Restructuring Activities: An Integrated Approach to Process, Tools, Cases, and Solutions. Burlington: Academic Press.
Federico, G., 2003. Carly Fiorina: Is she Helping or Hurting HP. Keeeez.com. Web.
Gaughan, P., 2010. Mergers, Acquisitions, and Corporate Restructurings. New York: John Wiley & Sons.
Hill, C. and Jones, G., 2009. Strategic Management Theory: An Integrated Approach. New York: Cengage Learning
Hoopes, L., 2001. A case study on business communication. Awpage Society. Web.
Koontz, H. and Weihrich, H., 2006. Essentials of Management. New Delhi: Tata McGraw-Hill Education.
LaPlante, A., 2007. Compaq and HP: Urge to Merge Was Right? Stanford BusinessMagazine. Web.
Lee, X., 2004. The Secrets of our happy union. Human resource online. Web.
Levine, H., 2005. Project portfolio management: a practical guide to selecting projects, managing, and maximizing benefits. New York: John Wiley & Sons.
Piven, J., 2001. HP-Compaq: A technology giant born of industry weakness. All Business. Web.
Resnick, S., 2010. Organisational Change Management Process. Work systems. Web.
Williams, M., 2001. HP’s Deal for Compaq Has Doubters as Value of Plan Falls to$20.52Billion. The Wall Street Journal, p. A3.
The concept of merger and acquisition is very important in the corporate world today since the problems with the economy and expansion of businesses on the increase considering that the Marketplace has become economically unpredictable. There are efforts by business managers to try and find ways that can facilitate better outcome in tough economic times. This has included mergers and acquisition of businesses as opposed to starting new ventures
Purpose of Study
The purpose of the study will be to investigate the significance and impact of the merger between two firms that are diversified in terms of products they deal in. This is very important because many firms have come to join resources in the name of forming a merger with great hopes for success but then suffer a set back of incompatibility (Meyer & Altenborg, 2008, p. 508). Some are usually forced to liquidate the property acquired.
Problem Statement
Mergers and acquisition in some cases can be very problematic especially when the merging firms cannot attain harmony. This is the problem of incompatibility and it has to be resolved before businesses suffer the consequences of failing to investigate success achievability of the objective (Meyer & Altenborg, 2008, p. 509).
Hypothesis
Merging companies often face a very huge setback of asset incompatibility due to failed planning. Business managers are therefore working very hard to try and solve this problem by providing information on effective management that will assist in strategic alignment of resources (Meyer & Altenborg, 2008, p. 508).
Literature Review
This section is very important in providing an extensive understanding of the topic of understanding. Basically, it will start by defining the principles of mergers in relation to the different background of businesses. This section then will discuss a variety of facets that surrounds mergers from different perspectives.
Managers are the root cause of business successes in the corporate world of merger scenarios in the world today. Nonetheless implementing the correct strategy is indispensable when addressing risk management and attaining the synergies that are wanted (Huang & Kleiner, 2004, p. 53). The strategic reorganisation, merging and de-merging have been very common in many businesses. The success of a business merger is motivated in part by the model the merging businesses adopted and the strategic configuration of the available resources immediately after the crucial reorganization (Huang & Kleiner, 2004, p. 53).
Methodology
Research Design
The research will involve both qualitative and quantitative methods of study.
Target Population
The sample population will be managers and workers from the two large corporations that have merged before like Telia and Telenor companies. Structured and semi-structured questionnaires will be used to collect information which will subsequently be analysed. Scaled questions that utilize Yes/No response of the likert design questions were expansively used on the questioners as they are very easy to understand and analyze. Reliability of the methods was assessed and reported (Huang & Kleiner, 2004, p. 53).
Conclusion
These were drawn from the study findings analysed, to sum up, the findings. Business managers will continue finding solutions to the problem. Addressing problems that come with mergers and acquisition is of critical importance as many businesses are merging in order to increase their working capital, increased product diversity, increased work skills and experience and to increased market share. All these attributes go towards increasing survival chances of business. As a result managing incompatibility problems is very important.
Meyer, C.B & Altenborg, E. 2008, ‘Incompatible Strategies In International Mergers: The Failed Merger Between Telia And Telenor’, Journal Of International Business Studies. Vol. 39 Issue 1, Pp 508–525 New York, Palgrave. Web.
