Introduction Australian multi-nationals have divergent histories. Often they share different global ambitions and strong product recognition in Australia and abroad. New Australia multi-nationals are formed through merger of different firms. The new conglomerates so often run into snags due to structural problems with the mergers and off-shooting management issues which crop up after the mergers. This situation leads to the failures at various levels. It is noted that domestic markets for the consumption of the products and international demand for the products of the new acquisitions obtained as a result of these mergers is not very well surveyed and accounted for.
Sometimes the local challenging environment forces the new mergers into the increased export focus and a new mix of quality and price both at home and abroad. The export focus of such companies as concentrated on penetrations into the markets of New Zealand, United Kingdom and the United States. On the cost side the firms usually improve profitability through better operational processes and improved management of distribution channels. Although, Australian climate and soil is very well suited to the agricultural products like fine quality of wines like Shiraz and Cabernet, Sauvignon.
But this whole story is not so smooth. The structural mergers and operational management strategies are so often not so compatible therefore they result into serious issues and ultimate failures. This case is more evident in Australian mergers. There are different opinions on precise causes responsible for the failure of mergers and acquisitions. At the same time there are many recommendations that can be counted upon for avoiding such situations. Although It is widely accepted that the 'human factor' is a prime cause of difficulty in making the integration between two or more companies work successfully.
If such transitions are carried out without care towards the employees who may suffer as a result, and without full awareness of the vast differences that may exist between corporate cultures, the ultimate result is a stressed, unhappy and uncooperative human resource and substantial drop in productivity. Appelbaum et al 2000 (p9-10) has said that, in fact a merger or acquisition is an extremely stressful process for stake holders in terms of job losses, restructuring process, and the introduction of a new corporate culture and identity that may create uncertainty, stressful anxiety and resentment among a company's employees.
Research has shown that a firm's productivity may drop up to 50 percent while undergoing such a large-scale reform substantial demoralization of the workforce is a major reason for this situation while Tetenbaum 1999 ( p45) explains that companies so often pay undue attention to the short-term legal and financial considerations that are involved in a merger or acquisition. Balmer and Dinnie 1999 (p5) say that companies usually neglect the implications for corporate legal identity and communication and the factors that may prove equally important in the long run because of their impact on workers and productivity.
In order to bring out the reason and argument behind the failure of Southcorp wines and Rosemount it is proper to go into the brief history of both the companies in Australia before their merger. As a matter of fact Southcorp wines had a long history of a diversified conglomerate until late 1990s, producing a variety of products such as packaging materials, Air conditioners, Water heaters and above all the finest quality of wine in South Australia.
Before disinvestment program the name of the firm was a proud brand name for all of its products. Southcorp Wines in 1990s changed its organizational strategy to become an international wine company and disposed off all of its operations and assets, by the end of 2002 except for wine production. At that juncture of time Australian wine industry was already dominated by BRL Hardy and others.
These companies had created already a sort of oligopoly in Australian wine market. BRL Hardy and its competitors Orlando Whndham company producing the Jacob’s creek label were already the mergers with French companies. In this backdrop it was not reckoned that Australian domestic wine consumption was already static for a number of years. In view of this fact these companies with the new inclusion of Southcorp wine ventured into the exports abroad. So the Australian wines exports in December 2003 grew 24% higher than the corresponding period for 2002. But despite this effort the Australian wine production amounted to only 6% of world’s total export which were already dominated by USA and Europe.
Since, Australian climate and soil was suitable for fruitier and smoother than the European wines, people in USA and Europe liked it more and more.