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In the modern world, most of the companies try to merge their company with another company. There are some advantages and disadvantages in merging. The main advantages are reputation, brand image can be increase through the merging. The industry will become simple through merging and this is the competitive advantage, Alcatel Lucent Company can gain from the merging. The main disadvantage in merging is cross culture conflicts and this case study is about Alcatel Lucent merger. Alcatel Lucent is one of the leading companies in mobile, fixed, Optics technologies and a pioneer in applications and services (Alcatel Lucent, 2011). According to the merging procedure, Alcatel Lucent merger faced cross culture conflicts from France and U.S. Still, the company tries to control the culture conflicts in the organization. This report mainly describes the conditions and negotiation factors, industry changes after merger and the international challenges of Alcatel Lucent.
1. The conditions and negotiation factors pushed forth the merger in 2006 that were not present in 2001
According to the case, in 2006 both companies come up with new conditions and negotiation factors. Mainly, France shareholders, they gave their approval to merge Alcatel company and Lucent company. Alcatel’s chief executive Mr. Techuruk encouraged 1500 shareholders in Paris by mentioning Alcatel Lucent is truly global and has no equivalent today and won’t in future. He also agreed to pay 10.6 billion euro for Lucent company to merge Alcatel and Lucent companies as Alcatel Lucent. The stock swap was valued at one Alcatel American depository share for every five Lucent shares. Both companies agreed to publish English as the official language of the Alcatel Lucent. After considering above conditions and factors, both company shareholders gave their approval to merge Alcatel Lucent as one company. They also decided to deal with both pre-merger and post-merger integration issues such as salaries, benefits, designations and other structural maters by holding a series of meetings between the top HR executives at the two companies.
2. merged company
A merged company which means the combination of two companies where one corporation is completely absorbed by another corporation. After the merging procedure, both companies have to do business as one company. As a result of that, they should invent new identities for the company. They couldn’t use their separate identities for the business. Any company, they couldn’t merge with another company without the approval of shareholders. Negotiation also very important for merged companies. Negotiation is the process of discussion by which two or more parties aim to reach a mutually acceptable agreement (Strategic International Management, 2011). There are five stages included in the negotiation process. Those stages are preparation, relationship building, exchanging task related information, persuasion and concessions and agreement. Mainly, any organization, they wants to follow this negotiation process when they planning to merge their company with another company.
Alcatel is a company which produce the communication equipments for their customers and Lucent company, they provides telecommunication services to their customers. After merging these two companies, their industries become simple. As Alcatel Lucent, they did their sales of $25 billion. They also produced many telecommunication products such as wireless equipments, wire line equipments, wireless infrastructures, internet routers, equipment for carrying calls over the internet, etc. The negative side of the industry is company loss $7 billion since the merger. In addition to that, Alcatel Lucent around 16500 jobs since merger. As the advantages of the industry, for the fourth quarter 2006, the company posts adjusted pro-forma revenues of Euro 4,421 million and operating profits of Euro 21 million. The company reported Euro 18,254 million adjusted pro-forma and operation profit of Euro 1,025 million for the full year 2006. On 31st December 2006, their total cash and marketable securities was Euro 6.7 billion leaving a net cash position of Euro 508 million.
3. Evaluation of the comment that the merger is â€œa giant transatlantic experiment in multicultural diversity.â€
When Lucent’s merger with France’s Alcatel, Russo became CEO of the combined Company and Tchuruk became chairman. According to the American culture terms, that means Russo runs the company. But, in the French culture terms, the chairman is the boss. In addition to that, Americans and French have very different ideas about what to do when a company is in crisis. The American preference is to right-size the business, a euphemism for cutting jobs and lowering costs. In French, their preference is to protect the jobs by looking for assistance from a friendly government. According to the above situation, Alcatel Lucent have to face difficulties because the two nationalities are trying to protect the jobs of their compatriots. Mainly, the French and the Americans have different business cultures. Their business patterns are completely different. In Alcatel Lucent, both American and French cultures affect for the decision making process in the company. Alcatel Lucent have to find a solution to solve the culture conflicts in the organization.
According to the case, there is an evidence that the company has run into cross-cultural problems since the merger took place in 2006. The evidence is, in July 2008, the Alcatel Lucent CEO Patricia Russo resigned by mentioning she can’t work with her fellow board member Serge Tchuruk. As a result of that, Mr. Serge Tchuruk also resigned from his job. Mainly, these cross cultural problems occurred because the overall leadership of the company had been handed to the target company.
4. The international challenges that Alcatel-Lucent faces as it moves forward as a combined company
Low cost competition from new Chinese rivals
There are many Chinese competitors in the industry. Those competitors mainly affects the Alcatel Lucent’s business. In China, their labour cost is very low comparing to the France or USA. As a result of that, the product cost in china is very low and it affects with the Alcatel Lucent’s product price. Most of the customers, they always try to buy cheap products from the market. Alcatel Lucent company, still they couldn’t earn enough profit from their industry. They do their business as low profit, low growth company. For example, Alcatel Lucent’s main Chinese competitors are ZTE and Huawei. Their cost structures are more favorable than Alcatel Lucent Company.
Technology changes also very important for Alcatel Lucent Company. The technology is always getting improving. As a result of that, many companies tries to add new features to their equipments. As an international company, Alcatel Lucent also wants to consider these technological changes when they do their production process. Sometimes, Alcatel Lucent company have to spend more money to get latest technology for their products. Alcatel Lucent is the only Western Company to offer or develop products for all wireless technologies (GSM, UMTS/HSPA, LTE, CDMA2000, WiMAX).
Transformation to digital economies
On 7th of September in 2007, Alcatel Lucent and Nextgen Networks started their broadband business in Australia. Nextgen Networks owns and operates Australia’s third fibre network. This is the first Australian and Asia Pacific first with the delivery of traffic 100 gigabits speed. When Alcatel Lucent entering to the digital economies such as Australia, the company have to transfer of over 100,000 mp3 files in 60 seconds or the live streaming of over 15,000 HDTV channels parallel. Mainly, the company should improve their optical and IP technologies to do the above process successfully. Alcatel Lucent have to find some cost effective strategies when they do their fast broadband business in Australia. They also have to increase network capacity and manage quality of service to meet new customer demands in Australia.
According to the rural inclusion, Alcatel Lucent Company have to expand their business all over the world. When they planning to start their business in a rural area, the company have to arrange the background to start business over there. Mainly, the company have to built partnership with local companies to create high added value services. The company also have to consider the local population in those areas when they start business internationally.
Cross Culture Conflicts
According to the case, there were some changes in management team and board of directors in Alcatel Lucent company. CEO, Pat Russo resigned from her job in July 2008. Non executive chairman, Serge Tchuruk also resigned from his job. Pat Russo clearly mentioned that she cannot work with Serge Tchuruk. At that time, there were many disagreements between Russo and Serge in the company. Still, both U.S and France cultures affects on Alcatel Lucent’s business. Alcatel Lucent as a multinational company, they have to start their business in various countries. Mainly, they have to make cultural changes inside the company according to the country to country. For example, If Alcatel Lucent starts their business in Dubai, they have to get new employees from Dubai and they have to design their marketing according to the culture of the country.
After merging Alcatel and Lucent Companies, their industries become one industry. The Alcatel Lucent merger provides many equipment and telecommunication categories to the customers. The company invented many new equipments for the customers after merging. Before the merger, both Alcatel and Lucent companies, they did their business separately. As a France company, Alcatel had their own business culture and Lucent company had own business culture as U.S company. As a result of that, both U.S and France cultures affects on Alcatel Lucent merger. The merger has many problems under cross culture conflicts. The Company lose their previous CEO and Non executive chairman because of cross culture conflicts. These cultural conflicts mainly affects on Alcatel Lucent’s business.
In Alcatel Lucent, they have a huge competition from China. Their main competitors are ZTE and Huawei. The product price of Alcatel Lucent is very higher comparing to the Chinese competitors. Mainly, Alcatel Lucent should have to implement new strategies to reduce the product cost. Most of the customers try to buy low cost products from Chinese Companies. As a result of that, Alcatel Lucent company will lose profits from their industry. In addition to that, the company also should have to consider technological changes, transformation to digital economies and rural inclusion when they do business internationally.
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