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Merger Challenge: Unite Toothbrush, Toothpaste May 8, 2007

Posted by Brian Mulligan in Merger, Organizational Culture, Organizational Environment.
4 comments

The article that I found in the Wall Street Journal titled, “Merger Challenge: Unite Toothbrush, Toothpaste – P&G and Gillette Find Creating Synergy Can Be Harder Than It Looks directly relates to company culture conflict. Many thought that the merger of the world’s No.1 toothbrush and the world’s No. 2 toothpaste would provde to be a match made in heaven.

The rosy picture painted by most anaylsts turned completely grey once the companies actually tried to merge together. Oral-B employees were forced to move from Boston to Crest’s Cincinnati hom office, while there was a clash of management style. Oral-B favored meeting while Crest liked memos. In contrast, Crest liked deliberated moves while Oral-B liked quick decisions.

“Gillete staffers had to learn to cope with P&G’s famously rigid culture”

In th end, both companies have to deal with all of the problems that they are having with each other. How do you propose a compromise? What is the best solution?

Empire Building at Google? April 14, 2007

Posted by K.C. in advertising, allances, Marketing, media, Merger.
5 comments

Recently, Google purchased DoubleClick, an online advertising company, for $3.1 billion. This is yet another large purchase from Google who paid half of that for YouTube last year. DoubleClick is one of the top online advertising companies who specialize in software for display advertising and has close relationships with various web publishers. For some time now, Google has had its eyes on DoubleClick because of their success in display advertising. Display advertising is essentially the picture ads on the banners and sides of websites. While Google is also an expert in online advertising, they have not been able to capture every aspect of online advertising. Google’s advertising strengths lie primarily upon small text ads that pop up when a user completes a search.

 DoubleClick’s strengths on the other hand, “…lie in flashy banner ads and, more recently, video ads that are more like high-end magazine or television ads.”  

 Purchasing DoubleClick means that Google will be able to track user patterns much more closely in an attempt to produce smart ads that are based upon a user’s interests and search habits. As usual, analysts argue that $3.1 billion may be excessive but DoubleClick had similar offers from Microsoft, AOL, and Yahoo, its closest rival.

 

In the eyes of internet users, online advertising may seem ineffective but with this large purchase of DoubleClick, Google may know yet another thing we don’t.

Sirius and XM merger? April 3, 2007

Posted by Stacey Swift in blogs, Merger.
4 comments

Through CNN.com I came across a blog addressing the possible merger of Serius and XM radio. Recently, The Carmel Group, an outside research and consulting firm, published a paper stating that he possible merger would be anti-competitive and harmful to consumers. If the merger did take place consumers would be able to access both MLB and NFL programming from a single subscription, however they would be subject to a monopoly of satellite radio. This situation is very similar to that of the attempted merging of satellite TV companies DirecTV and EchoStar in 2002. The merger was prevented by the Federal Communications Commission because it would create a monopoly. Sirius CEO Mel Karmazin claims that the merged company would still face competition against free radio, MP3 players, and internet radio. Are these forms of listening to music, news, and sports really on the same level? I think satellite radio is its own product and is not in competition with these other products and services.

Many consumers who posted to the blog are in favor of the merger because currently many people pay $12.95 a month to each company in order to receive the benefits of both services (mainly sports fanatics). If Serius and XM merged they would be able to get MLB and NFL games for around $15 a month. However, I do not think Serius and XM should merge. The competition between the two is essential to get the best product possible. It forces them to seek out the best music that thier consumers want. If the companies merged they would not have any close competition and would lose incentive to continue improving thier product. This is still a fairly new product and concept and I think competition is necessary to bring it to its best possible form. Do you think XM and Serius should merge? Is satellite radio in direct competition with ipods and free radio?

Gung-Ho on Mergers April 3, 2007

Posted by Kira in Growth, Merger.
1 comment so far

A popular new television show in Japan, called “Vulture”, is about a fictional New York investment fund that buys struggling Japanese companies and imposes harsh American-style management changes. The national broadcaster was surprised to learn that half of the millions of viewers supported the American fund and faulted the Japanese acquisition targets for getting into trouble in the first place.

In Japan, corporate takeovers used to be rare because of the deep cultural aversion to selling one’s company. This was considered a humiliating failure by the founders and owners. There is also a cultural aversion to confrontation. However, with years of slow growth, Japanese companies need to find new ways to increase revenue and profit.

“Japan’s in an M. & A. boom…The thinking has changed here,” says Nobuo Sayama, a professor of management at HitotsubashiUniversity in Tokyo and president of GCA, a merger advisory firm.

There is a new openness in the country’s business culture where takeovers and buyouts are becoming a common business practice. The number of mergers involving Japanese companies as buyers or sellers has more than quadrupled in a decade.

I thought the Japanese would have no interest in the new television show and would hate the American fund for imposing its management style on them. I was surprised to see that the Japanese actually liked the American fund although their style was different culturally. Although M. & A. go against their culture, from a business perspective, I think the Japanese recognized that they have to adapt to the competition or they will be left behind in the global economy.

The U.S. economy is over 2.5 times the size of Japan’s and just last year there were nearly four times the number of mergers in the U.S. compared to Japan. I think that Japan recognizes that in order to grow their economy they need to incorporate M. & A. into a strategic advantage. As we have studied, we know that mergers and acquisitions are extremely challenging and that most of them fail- especially the international M. & A. due to all of the cultural differences.

What do you think would make a merger of this type successful? Are mergers and acquisitions inevitable and simply just an example of Darwin’s survival of the fittest? Do you think that Japan should change their culture for the sake of business? Is it fair to impose American-style management in Japan?

Mergers: Do you cut and run? March 8, 2007

Posted by Stacey Swift in Merger.
2 comments

After our discussion in class today about organizational change and layoffs I found a very interesting article in the Wall Street Journal titled Managing Your Career: Do You Cut and Run Or Stay in Your Job After an Acquisition?  In 2005 MetLife bought a Travelers Life & Annuity, a Citigroup unit.  Employees of Travelers Life & Annuity, like Paul J. Higgins a successful vice president, were flown to Florida by MetLife for a weekend of luxury, food, and booze.  During this vacation they were told they would benefit from the merger.  However, after the merger took place Mr. Higgins ended up making $172,000 less than he previously did under Travelers Life & Annuity.  He then took MetLife to court claiming he would have quit had he known he would be receiving a pay cut.  Is MetLife responsible for this misunderstanding?

There has been a recent trend of mergers and acquisitions that bring about organization change.  The article explains it is very important to assess the expected change in order to make your best career move, “Many people ignore warning signs that a merged workplace is no longer the right fit because they overestimate their own value to the company.”   They say exclusion from meetings and e-mails is a warning sign you may get laid off in the process of merging and it is time to start a job search before you get laid off.  As we discussed in class, no one likes to fire someone, so employers find ways to get their employees to quit in order to avoid the dirty work. 

“Certain purchasers deliberately assign acquired staffers the most difficult or unpleasant tasks so they’ll quit and forfeit severance.  Getting invited to a “change-management” session may augur a switch to a position ‘you’re not going to like,” Ms. Zabriskie

Even if you do not get fired in the merging process, the “culture clashes”  may be to difficult to deal with and drive long time employees to quit.  How can one be sure they will be fired in the process of a merger?  How can organizations make the transition a smooth one to minimize culture clashes?

If I had the Money I would Buy Chrysler March 6, 2007

Posted by K.C. in Auto's, brand, Manufacturing, Merger.
3 comments

Recently at the Geneva Motor Show, DaimlerChrysler chief executive, Dieter Zetsche discussed speculations about dumping Chrysler. While he did not give too many details, he did discus how if Daimler were to sell Chrysler, they would sell the company as whole and not break up its brands. Chrysler has a highly integrated production system that allows it to manufacture different brands of automobiles using similar platforms and parts. Therefore, if Daimler were to sell Chrysler, they would not sell its brands individually as many Chrysler badge cars use the same chassis as Jeep and Dodge vehicles.

Chrysler Group is very integrated,” – Dieter Zetsche

In addition, many new Chrysler vehicles use Mercedes parts and pieces, which may create a problem for the brand if Daimler does decide to sell them. The Chrysler Crossfire uses almost 70% of its parts from Mercedes vehicles and if Daimler were to drop them, Chrysler would need to find another manufacturing source.

In the past few years, DaimlerChrysler has tried to differentiate the Chrysler brands and focus on establishing its three brands as unique brands. Ford on the other hand is facing issues with brand differentiation because many of its Ford badge models look almost identical to its Mercury and
Lincoln brand models. In my opinion, I think Chrysler remains an attractive automotive unit because they have been able to produce cars that have appealed more than many other American brands. Even with a loss of $1.5 billion last year, Chrysler has been able to increase its global sales 15 percent outside of North America this past year.

 

Industry analysts argue that private equity investors would be the most likely buyer of the brand and if this does occur, Chrysler may be forced to drastically reduce its operations.

New Conditions May Ease XM-Sirius Merger February 28, 2007

Posted by silviamocanu07 in Merger, Organizational Environment.
1 comment so far

I found this interesting article on Businessweek (http://www.businessweek.com/technology/content/feb2007/tc20070228_918698.htm), which talks about the proposed merger between satellite radio players XM Radio (XMSR) and Sirius Satellite Radio (SIRI). In the piece, it is argued that thsi merger would not be in accordance with current government regulations. However, the two companies appear to be very confident in obtaining approval for the merge to go through. Their main claim is that the market has undergone substantial changes with the past decade, with new products such as iPods coming into the market. Given the changing environment and new competition, XMSR and SIRI are confident that regulators will grant them approval.

I believe that this relates directly to our class discussion on how the external environment affects organizations and how these must respond and adjust to these changes in order to remain competitive. In addition, it is not only the companies themselves that must adjust, but also regulations that no longer apply to the current market environment, in order to prevent unfair competition from emerging.

In this particular case, despite the fact that the two companies appear to be over 60% sure that the merger will be approved by the regulators, I believe that the process could be quite lentghy and its results uncertain. What do you think? Do you believ that government regulations are changing quickly enough to match emerging issues in the today’s dynamic market environment?

GM to buy Chrysler February 20, 2007

Posted by Charley S in Business-Society Issues, Merger, transportation.
2 comments

http://www.businessweek.com/autos/content/feb2007/bw20070220_219247.htm?chan=top+news_top+news+index_top+story

http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070218_013874.htm

Well it appears that two of the top three American car manufactures may be headed for a merger. In recent days the German ownership of DaimlerChrysler has expressed interest in getting rid of the Chrysler division. Last year, Chrysler posted up billions of dollars in losses, much like the other American car companies. Daimler, which owns Mercedes-Benz, and Chrysler merged together over 9 years ago and for awhile it appeared that the marriage was working out. In the early 2000’s Chrysler was the only American car company that was still profitable, but it appears that even Chrysler cannot take the foreign pressure. GM has expressed interest in buying out its old rival and has already inquired to the board of directors as to whether this was possible. Some advantages for GM would be that they could cross manufacture Chrysler cars much more cheaply than Chrysler can now because GM has a bigger global network of suppliers. Also, Chrysler has been recognized recently to have very innovative designs and they would seek to utilize their engineers to improve current GM cars. Chrysler also does not have as big a pension problem as GM and they may seek to use Chrysler to help to offset some of the pension costs.

There are some major obstacles to overcome for GM if it were to purchase Chrysler. One would be the fact that there are too many Chrysler dealerships, many of which are literally located across the street from GM dealerships. It would be extremely expensive to close these dealerships because they are franchises and are protected against being arbitrarily closed by franchise laws. Another potential problem would be the integration of the employees of both companies. To start, there would be huge layoffs on both sides of the merger to eliminate redundancies. Also integrating the two giant companies cultures could prove extremely troublesome, especially considering the fact that the two have been rivals practically since the beginning of the automotive age. Frankly, I’m surprised that GM would be considering buying another company when all I have heard recently talks about how bad off GM is. I just checked their last annual income statement, and they lost 10 billion in 2005 and have lost in all the quarters available since then.

Aluminum… February 14, 2007

Posted by Brian Mulligan in allances, Merger.
2 comments

Since we’ve mentioned Alcoa, the aluminum giant, in class so many times I decided to do a little research of my own and this is what I discovered and it raising some interesting questions:

In current news, Alcoa has been at the forefront of a large buyout my mining companies. Alcoa is may be bought by either BH Billiton or Rio Tinto. These two firms are large mining firms that are looking to integrate the production of aluminum into their business. Why would they want to do this?

According to the The Mineral, Metal and Materials Society the demand from China is going to drive the price and demand for aluminum in the coming years. The statistics show that China will, by 2020, be the largest consumer of aluminum over the US, Japan and Canada. Of course, it may be lucrative endeavor for these two mining companies to pursue this. Here is the article from the Mineral, Metal and Materials Society on the Chinese demand for aluminum and the potential business growths and faults. The articles is named “The China Factor: Aluminum Industry Impact”

The growth is there in the aluminum industry, so if the mining company can combine production and mining together then it will be beneficial for the company to cut down on transaction costs. This could also pose a major problem with competition among both the producers and the mining companies. If these companies keep up with the pace, they will form an industry dominated by specific providers of certain minerals and metals. This may destroy any form of competition and cause prices to rise.

Cnn.com actually has articles out analyzing what may potentially happen with this need to combine a large mining company with a production company. The name of one article is “Aluminum get hot. Who’ll get bought next.”

The article analyzes the situation from the standpoint of the mining company. Although, Alcoa is the largest aluminum producers in the world; it carries along with it assets downstream such as aluminum foil production facilities that the mining companies don’t want. Cnn.com says that it may be a better bet to buy out the second largest aluminum producers from Canada, Alcan. It has less assets downstream and is cheaper.

“Alcan makes more sense. It would cost less and it has no downstream business,” Charles Bradford, an analyst with Soleil-Bradford Research said.

This raises the question of analysis. A company would have understand the transaction costs associated with each and make a decision. What you do think these two mining companies should do?

MySpace hits a snag with Google February 7, 2007

Posted by Brian Mulligan in allances, Internet, Merger.
1 comment so far

I read this interesting article from the wall street journal titled, “MySpace’s Pact with Google Hits a Snag” early this morning about how MySpace is trying to team up with eBay to allow MySpace users to sell items on their homepages through EBay and their PayPal payment system. Google isn’t too cool with this third party decision since their 900 million dollar deal with MySpace from 2005 may become a potential roadblock.

Google has created it’s own new online selling database called Base with a payment system, similar to PayPal, named Checkout. Google has been stealing market share away from eBay in the past couple months and doesn’t feel that MySpace should work with a direct competitor if they are benefiting from the earlier Google – MySpace deal. Google and eBay have been viewed as partners in the past with eBay directly advertising on Google for product search, but Google is trying to gain market share by actually asking people selling products to advertise directly on Google. This will cut out eBay from the picture.

This article poses some interesting questions relations and structure between to companies that have come together for a joint-venture to benefit both parities. Google is paying 900 millions dollars to MySpace, owned by News Corp, to control ad space on their websites. Also, MySpace would have access to the Google’s search engine. The new deal has created many new synergies between the companies that have reduced costs and increased the traffic on both the websites. Also it have proved to be a great way for advertisers to use the web as a medium to reach potential customers.

Along with these great benefits, there comes some extra baggage and commitments that you have to adhere to. The more tight a relationship reduces uncertainty, but creates more connectivity and dependence between companies. This relates directly to our reading from last week concerning the ideas of transaction costs. Both companies reduced transaction costs. MySpace utilizes Google’s strong search engine and shares the revenue from the ads the Google controls on MySpace.

It posese just one question. Although this deal reduces transaction costs, a joint ventureship may shut you out of potentially more profitable ventures. Is it worth it?