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Today's fast growing globalize economies and competition have forced industries to fine ways to survive in today's perplexed business environment and generate profit for their shareholders. There are many methods to develop the organizations one of them is Mergers and Acquisitions. This is where strategies for success are developed by acquiring new companies or by the merger of two (P.Gaughan, 2000).
Mergers and Acquisitions are amongst the most important phenomena of modern economies (Kwoka, J.E. Jr 2002).
Globally number of completed acquisitions tripled between 1991 and 2001. But the world wide announced deals declined rapidly after 2000 falling by nearly 30% in 2002, North America particularly showed its lowest level of activity since 1994(Johnson et al 2005).
Mergers and acquisitions occur frequently in organizations, but rarely achieve their desired financial and strategic objectives. There is a need to review the human, organizational and cultural dynamics affecting mergers and acquisitions, and reports recent trends influencing interventions to enhance merger and acquisition success. Managers need to describe consulting approaches and methods required to minimize employee stress, management crisis and culture clash and to enhance the desired financial and strategic results of mergers and acquisitions (Mitchell lee marks 1997).
AOL and Time Warner:
America Online (AOL), founded by Steve Case, began life as a proprietary online service and became the biggest provider of home internet connections; in 2000 it bought a media conglomerate, Time Warner. The move, which needed almost a year to be approved by the FCC, sparked a flurry of (not necessarily wise) online-offline mergers. Just under three years later, the Time Warner investors, holdings in the merged company were worth only $36bn, a loss of over $50bn.
The new AOL Time Warner hoped to use its many divisions to promote group products, but ran into trouble when advertising revenues fell in 2001. Amid lawsuits from shareholders alleging that AOL's value had been overstated before the sale, Mr. Case stepped down as chairman in May 2003.The renamed Time Warner, under its chief executive, Richard Parsons, had to face off a challenge from Carl Icahn, a notorious "corporate raider" unhappy with company strategy, in early 2006. Jeff Bewkes, who will succeed Mr. Parsons as chief executive on January 1st 2008 is expected to make Time Warner much smaller.
The management of these two companies has still been unable to attain the benefits of synergy which actually is the main driving force behind the mergers and acquisition activities. Under achievement of the company is resulted from problems with cultural fit, learning and integration of the new company.
[Source: http://www.economist.com/background/displayBackground.cfm?story_id =10097842]
Purpose of the research:
The main reason for doing this research thesis is to identify the cultural issues at Time Warner and AOL. Which has been a hurdle in the path of company's progress? The aim is to identify the role and need of training for the management of the company to manage the desired impact of mergers and acquisition on the new conglomerate. There is also an immediate need to identify the importance of communication, leadership, synergy management, stress, motivation, training, performance feedback and culture.
Following research statements can be made in the context of above discussed issues:
How merger affects the performance outcome of the company?
Which approach company uses to communicate the merger and acquisition?
How staff can be motivated during the change process to work according to expectations?
What level of training at all levels of hierarchy is needed to support the M&A?
What is the role of leaders during M&A?
Why M&A are a source of stress for employees and managers and how this can be reduced?
How can synergy benefits of mergers and acquisitions be achieved throughout the conglomerate?
How all the above discussed issues can be meld together to form a healthy culture of the merged or acquired company?
How employees and management's resistance to change can be overcome by change agents during M&A?
All the above questions address the prevalent problems in ALO and Time Warner at the management and staff does not mutually agree on the decisions. This has resulted in constant declining performance of the new company. The main objective will be to address these problems in the context of available literature on organization's cultural issues, motivation, role of leadership in change management, communication and performance management.
General definition of strategic change management:
Strategic change management is generally defined as the science, art and craft of formulating, implementing and evaluating cross-functional decisions at the highest possible level of an organization that will enable an organization to achieve its long-term objectives. It is the process of specifying an organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are in turn designed to achieve these objectives and then allocating resources to implement the policies and plans, projects and programs. The function of strategic management is to seek to coordinate and integrate the activities of the various functional areas of a business in order to achieve long-term organizational objectives. Strategic management mainly focuses on building a solid underlying infrastructure to a business set-up that will subsequently be reflected through the combined efforts of every individual the organization employs. (Lamb, 1984: ix).
The clear layout of mission and objectives:
A clear layout of mission and objectives is necessary for ALO and Time Warner as the gist of strategic management hinges upon answering the three basic questions concerning corporate managerial function in general. The three questions are what the business venture's objectives are, what the best ways are to achieve those pre-determined objectives, and what resources are required to make that happen. Henceforth, it is important to unambiguously map out corporate mission and objectives so that everyone involved with the organization knows clearly what responsibilities and duties are expected from him/her. The process of formulating an organization's core objectives can have several phases.
Firstly, it is essential to assess the landscape within which ALO and Time Warner will be operating in, and determine the set of roles of which the company will be playing within the landscape identified. This step is commonly known as the mission statement identification phase.
Secondly, ALO and Time Warner should move on to the phase of establishing practical and feasible objectives which are explicitly defined to address some of the unmet challenges, projecting both a long- and short-term perspective of what the organization is capable to offer to its clients and what are the limitations of the organization's operations. This phase is commonly known as the vision statement identification phase.
Last but not least, it is vital to stipulate the goals ALO and Time Warner has set for itself, both in terms of financial and strategic objectives. Once these three steps have been taken, a strategic plan should begin to emerge.
Strategic management planning process:
Strategic management is a combination of three main processes; they are namely strategy formulation, strategy implementation, and strategy evaluation respectively. This three-step corporate strategic management formation process is sometimes referred to as the determinant to assess what the organization's current market position is at, where the organization is heading towards, and by what strategies and measures the organization is ready to deploy to get there. These three questions basically constitute the essence of strategic planning.
The strategy formulation phase encompasses performing a primary situation analysis, an objective self-evaluation analysis, and a thorough competitor analysis which covers both internal and external; both micro-environmental and macro-environmental analysis. Concurrent with this assessment, organizational objectives are laid out and finalized. These objectives should be parallel to a timeline; some are in the short-term category whereas others fall into the long-term category.
Strategic management evaluation parameters:
The aspect of suitability mainly deals with the overall rationale of a management strategy. One of the most important points to consider here is whether the strategy would effectively address the key strategic issues underlined by the organisation's strategic position. The suitability aspect attempts to answer the question of whether the finalized set of strategies makes economic sense after all and if there would be profitable outcomes to be generated through the implementation of such strategies for the organization as a whole. Another important question is to always keep in mind when conducting a litmus test for a set of strategies is to ask the question of "whether the organization would obtain economies of scale, economies of scope or experience economy." The suitability aspect also examines in terms of environments and capabilities. Various tools that can be used to evaluate the aspect of suitability include ranking strategic options, decision trees, and the what-if analysis.
The aspect of feasibility is concerned with the resources required to implement the strategy; whether they are available in sufficient quantities and whether they can be developed or obtained from other ready sources. Such resources include funding, personnel, time and information, e.g. data and records. Feasibility testing tools that can be used to evaluate the aspect of feasibility include cash flow analysis and forecasting, the break-even analysis, and the resource deployment analysis.
The aspect of acceptability is generally concerned with the expectations of all identified stakeholders, e.g. mainly shareholders, employees and customers, with the expected performance outcomes which can be return, risk and stakeholder reactions. Return reactions deal with the benefits expected by the stakeholders, i.e. financial and non-financial. For example, shareholders would normally expect a net increase of their invested wealth in the organization they have chosen, employees would expect improvement or advancement opportunities in their careers, and customers would expect better value for their money. Risk reactions deal with the probability and consequences of the occurrence of a failure associated with a particular set of strategy, i.e. financial and non-financial. Stakeholder reactions generally deal with the anticipation of a probable reaction from stakeholders.
The general approaches in strategic management:
Generally speaking, there are two main approaches involved with strategic management practices, each of them is somehow opposite or contradictory to one another but complements each other in some other ways. The first approach is known as the industrial organizational approach which is based on the economic theory that deals with issues like competitive rivalry, resource allocation, economies of scale. This particular approach makes certain assumptions about rationality, self-discipline behaviour, and profit maximization. The second approach concerned with corporate strategic management is known as the sociological approach which deals primarily with human interactions. This particular approach makes certain assumptions regarding bounded rationality, satisfying behaviour, profit sub-optimality. An excellent example of a company that currently operates in this way is Google. Conventional strategic management techniques can be viewed as bottom-up, top-down or collaborative processes.
Hierarchical levels in strategic management:
Conventionally, strategic management can be categorized into three hierarchical levels; they are namely corporate level, business unit level, and functional or departmental level respectively. These three levels of management can be observed in most large corporations of today. Combined together, they give directions to corporate values, corporate culture, corporate goals, and corporate missions.
Corporate level strategies refer to the overarching strategies of the various organizations in question. These corporate level strategies attempt to answer the questions of "in which businesses should an organization competes in?" and "how does being in these business create synergy and/or add to the competitive advantage of the corporation as a whole?" At this level of corporate strategic management, overall directives are decided by the top management team of an organization and a general operational model is formulated. Business unit level strategies refer to the aggregated strategies of single-business company or a strategic business unit (SBU) in a diversified corporation.
As we know that our research is a blend of experimental and quasi experimental (interventionist- use of multi measure of control group) descriptive and interpretive. Its purpose will be to explain the causes of something identify relationship and measure change in something (Chris hart 2005). In our research we will be mainly focusing on the qualitative method of research rather than quantitative. It identifies and isolates variables for discussion and interpretation, though of course for different purpose from those of experimental research (Milgram 1974).
This kind of research collects information which can be primary and secondary. According to Fisher (2007), an interpretive approach to research sees the link between understanding and action as an indirect one because the word is complex and potions for action are not always clear Saunders et al 2002 suggests the use of qualitative date follows an inductive data follows an inductive approach, Silverman (2000) suggests the use of qualitative data allows the research to build rich descriptions of the context within which the phenomenon develops.
We will adopt a research approach where qualitative date collection methods are used quantitative methods (e.g. experiments, questionnaires and psychometric tests) provide information which is easy to analyse statistically and fairly reliable will also be used in order to produce results from the collected primary or secondary data. The research will be a mixture of both qualitative methods.
Saunders et al (2002) suggests the research strategy is a general plan of how you will go about answering the research question. It will include case study of the company and of other organizations facing the same problems e.g. Kaplan financial, journals, articles, interviews of selected sample of the whole population, reading books addressing the cultural problems of merged organization.
Tony Watson (1994) argues that case studies do enable generalizations to be made about organizational processes and Yin (1994) confirms this by emphasizing there is a distinction between statistical generalizations which cannot be derived from case studies (Fisher 1007). There for the research strategy will be to use both secondary and primary data for the research purpose.
As the chosen topic is slightly broad so to get the readily available data for literature review and related information will be easier. Mainly the researchers have used qualitative data for this type of research topic as it becomes much easier to interpret the results in the context of literature.
Alvesson and Skoldberg (2000: 251, 247-86) that the problem associated with the research can, in part be overcome through the collection of rich data from multiple sources we will be looking at collecting data from both the available primary and secondary resources in order to formulate a comprehended conclusion and reasoned recommendation for the prevailing business problem.
Following the research strategy for the dissertation following primary data collection approaches will be used:
Taking the selected respondents on the specified topic to find answer to research question will be the basis of interviewing. There are many kinds of interviewing's, including structured, semi- structured, unstructured or focus group interviews. Interviews can follow from questionnaires, adding depth to breath, or be a part of an ethnographic study or oral history. The results of interviews are analyzed by looking to find similarities and difference between responses from respondents.
Questionnaires are a serious of structured questions which address a specific topic or issue and are used as the basis of the survey approach, Used to find out what, how much, how many, and how often the questionnaires survey can be administered personally, via post or e-mail (Foddy, 1993; Oppenheim, 1992).
Focused based on interviewing, a focus group is a carefully selected group of brought together in the same place to discuss a particular topic or issue relevant to them.
Case study/ reports:
As all the publically listed companies are legally bound to disclose information to their shareholders in their financial statements so we will be looking at the problems of post mergers in the company and will also look at the publically available information. This will also help us coincide the results of primary and secondary data and enable us to reduce the errors in our results.
Credibility of research:
The research is credible in a sense that the cultural issues in merged and acquired are becoming serious and research have done a lot of work to identify and solve such issues during change management. The worthiness of the result will be measured by using statistical tools for sampling tools for and computing software e.g. SPSS (Statistical Package for the social science). Hypothesis testing will be done to finally examine the overall result conclusion and suitable recommendation of the topics. It can also be done by comparing our research methodology and result with the work done by other research on the same business issue. The validity of the result of various will be understood by the above mentioned methods.
Access and research implications:
As far as the literature researches are concerned we are going to need books on the role of organization culture on the people on the performance in organizations. As we have already got some the material on this topics because we studied this in depth in our taught modules of MBA. If we need any addition literature to support our arguments that can easily be collection either from the college library or to gather a range of ideas of how they went about the topics. This will help us to formulate a healthy argument on the topics.
For the sake of primary information we will try to arrange some group interviews with the sampled staff of the local office of our selected organization. We will try to get the required information mainly thought questionnaire and interviews.
To combines all the information to generate results the research need to have good command on Microsoft word and Excel as well s on the statistical tools.
Presenting data or ideas of another person as your own without property citing them, and there by showing the attribution amounts in varying degrees to plagiarism. Failing to acknowledge all person and organizations involved a research project constitutes bad practice; publishing duplicate or nearly duplicate articles of the research in multiple journals distorts citations, indexes and is therefore bad practice. It also constitutes including the name of persons who had little or nothing to do with the research for an article constitutes deception.
All the above mentioned ethical issues related to the dissertation or research can avoid by properly referencing everything (Chris Hart 2005). The best approach is to use Harvard referencing technique for the literature or whatever the martial we are going to use (published by other people) for our research.
Task Start End
Research proposal 02-07-2010 27-08-2010
Topic selection 02-07-2010 03-07-2010
Findings 04-07-2010 06-07-2010
Drafting 15-07-2010 16-07-2010
Submission of research
proposal 26-08-2010 27-08-2010
ALO Time Warner is not in the typical category of a state-owned company in mainland UK. Founded in 1984 by academics at the official UK Academy of Sciences, it has been initially set up to distribute equipment made by IBM and other companies. By 1990 it was providing services under its own brand name. Although the state is the majority owner, the Academy of Sciences was designed to create start-ups and allow them to fail as they would in a capitalist society. Inevitably, most of them did. The Academy of Sciences spawned a lot of companies and ALO is the only significant survivor. The company has not been sheltered from competitions by the government as expected with regards to the norm taken by the UK government towards state-owned enterprises and in turn the company has been able to keep the government interferences at bay with its stellar performances over the decades.
In recent years, however, ALO has suffered some setbacks. It has attempted to branch out into new product lines only to retreat after it has failed to keep focusing on its core business and subsequently conceded market share in mainland UK. To reclaim lost shareable has started a painful price war by offering the equivalent of US$300 equipments at a great expense of profits. It has been noted ALO is still able to defend its domestic market share, but still this company urgently needs economies of scale that the acquisition will be able to provide to compete both in mainland UK and abroad. With appropriate strategic management practices put in place, the Group should be much better equipped to deal with issues such as investment appraisal directives so that it will not be tempted into another price war which could hurt the organization financially.
ALO Time Warner with these key characteristics is known as a living company because it is able to sustain and perpetuate itself. The management of this company emphasizes knowledge rather than finance, and considers itself as an ongoing community of human beings, it has the potential to attain the status of greatness and endure for decades. Such that organization is an organic entity capable of self-learning, i.e. Geus has called it a "learning organization", and capable of creating its own processes, goals, and persona.
ALO Time Warner has evolved into a service-oriented company over the years with focuses on products/services generating high returns to investments. But the internet providing business is still at a stage where efficiency spells success, and that is the fundamental causation why ALO's previous business model has not worked according to expectations. In order to attain high efficiency, there has to be grand-sized product scale. ALO has only chosen to focus on the corporate clients, with less coverage for the middle-sized clients.