Sprint Nextel struggling since merger February 6, 2007Posted by Kira in allances, Merger, Organizational Culture, Organizational Design.
In December of 2004, Sprint announced that it would acquire Nextel to create the third-largest wireless phone provider in the country. The merger was thought to be a good idea since Nextel had loyalty from construction crews, taxi companies and other businesses that liked their press-to-talk feature and Sprint was building itself as a world leader in developing content for the consumer market. It seemed as though what both companies were bringing to the table would complement each other in a positive way and that merging was a good strategy for managing the two company’s interdependencies. However, years later the merger is still struggling to be completed. When one company takes over another, there are great expenses and problems faced in managing the new business. Technology problems, strong competitors, and cost-conscious consumers are adding to the difficulty of the Sprint Nextel merger. Many customers are leaving Nextel because they are frustrated with service problems that the company is blaming partly on technology. As discussed in our text book, a main problem that is faced by a merger is the coordination and blending of corporate cultures.
“Since the deal’s consummation, however, the company has fallen behind its competitors as it struggled to blend the two corporate cultures and assimilate a host of acquired affiliates. It’s also been criticized for a marketing plan that experts said has ignored the different desires of Sprint and Nextel customers.” http://www.businessweek.com/ap/financialnews/D8MINRCG0.htm?chan=search
Sprint Nextel executives are aware of the customer service problems and plan to spend $8.5 billion in the coming year, mostly adding signal sites and improving signal quality. The company also plans to revisit their marketing plans to better sell their strengths.
By not aligning two companies’ corporate organizational designs and cultures in a merger, it is easy to understand how the company could decline. The process of value creation slows down and because the companies are unable to adjust to changing conditions they face competition and a loss of customers. The main goal of most companies is to be able to adapt to customer tastes and preferences and provide excellent customer service because without customers there would be no company. The insights on Amazon and McDonald’s in chapter 4, discuss the importance of the link between the customer and the organization. Both companies discuss their challenge to change to decentralized control as a way to empower employees to find ways to better meet customer needs and provide better customer service.
Although the article does not give any information about the current organizational structure of Sprint Nextel, it sounds as though they are more centralized and mechanistic based on the reasons given above for the difficulty of the merger. Based on Amazon and McDonald’s experience, a more organic approach would allow Sprint Nextel to respond to customers’ needs and competitors’ moves. Although the company does plan on investing a lot of money on their customer service problems, they do not address the organizational issues that may need to be handled in order to fix their customer relations and competition problems. It is good to see that Sprint Nextel recognizes there is a problem and is willing to spend $8.5 billion to fix it, but if the problem is rooted in their organizational structure then spending all that money may ultimately be wasted. I am curious to see if the company also works to reorganize their structure and if they can finally complete the merger after all these years.