Applied Mergers and Acquisitions, Why Do Employees Resist Change - Assignment Example

Business Function Adm. No Course Institutional Affiliations Word Count: 1576 1.      In business there may be conflict that arises regarding the strategic direction of the business, and on its overall business objectives. Using the examples below, discuss how such conflict can arise and provide possible solutions to the issues. 1a. Marks and Spencer Conflict between shareholders wanting higher profits and customers wanting high quality In a period of four years, Marks and Spencer had very slow growth rate due to high competition in its clothing business and difficulties due to economic and political difficulties in overseas business such as Russia, Turkey and Ukraine, high tax. This caused conflicts between the company and shareholders. In such a situation, a company ought to focus on strategizing and focus on long term solutions of profit making (Hulland, 2015). They also have to renegotiate the first deal with the shareholders so that they stay informed about strategic plans. To increase profits, a company can increase prices of products. This strategy is hard to implement due to the fear of losing customers but statistics show that over 80% customers purchase items based on their value and not price. In the absence of value, customers make decisions based on price but perceived differences between value in a certain products and services, customers make decisions based on value (Hawes, 2015). Listen to customers so as to understand their wants, desires and frustrations 1b. NHS Government wishing to modernize the services provided, some staff resisting changes Employees may resist change and especially modernization due to fear of layoffs if the technology needs employees with higher qualifications. They may also resist change if they were not consulted about the possibility of the change. To solve the conflict, the government is supposed consult with the employees so that they feel part of the decisions that are made and offer free training to all employees who are capable of using the modern machines so that they don’t have to worry about layoffs (Tejvan, 2012). 1c. Tesco Management wanting to expand globally, customers locally not liking the product choices available, or the prices Sometimes the local customers may not like certain products or services offered while the management concerned about the preferences of international community. In such a case, a company may decide to merge with another company that has already made it. This would help the company to avoid competition from other major companies. By so doing, they may get monopoly raise prices (Tejvan, 2012).A merger between Sainsbury’sand Tesco would significantly reduce competition amongst UK supermarkets, leading to higher prices for basic needs. Expanding the company will also help the company to access a large number of customers who may have different preferences. It also helps to get new employees with greater talents and mew mindsets. This will also help the company have a good reputation. 2.      ‘An entrepreneur is a person of unique qualities, is a risk-taker and passionate about business.’ Using the examples listed below of successful entrepreneurs, discuss the key qualities that each of the entrepreneurs displays, the factors that they have/currently consider within their sector of business and why you think they are successful:- A. Sir Richard Branson – Virgin Group Richard Branson was a high school dropout when he first started business. He managed to turn his life around becausetoday he is the founder of a multibillion dollar empire. Virgin group today comprises of more than 400 companies (Tejvan, 2012).He is business oriented; at the age of 17, Sir Branson ventured in a magazine called “Student”, in 1970, Sir Branson started a mail-order record business and right afterwards opened record stores known as Megastores. He has launched many other business ventures since then. He is able to make use of any opportunity that presents itself including the use of TV shows. Branson values his staff. After being compensated in a lawsuit against the British Airways for poaching passages, leaking negative information and hacking Virgin Atlantic’s computer, Branson distributed the huge amount of money to his staff members. This keeps them motivated. Branson makes time to meet with employees and customers. From them, he is able to acquire new ideas, listen to complains. He makes a point of responding to his customers and employees within a day. He is able to follow up all the companies’ progress by attending meeting B. Lord Alan Sugar – Amstrad Group Alan Michael Sugar joined the billionaires club in 2015 (Sunday Times Rich List, 2016). Sugar started at a humble beginning as he left schooling at the age of 16 and started selling car aerials from a van meaning thatis business oriented. His starting capital was $100. At the age of 21, he founded the famous Amstrad and within a period of two years he started manufacturing low-priced hi-fi turntable covers. Sugar, since 2005 has been using a series of apprentices to hire business managers in his companies (Robert, 2004). This series, ‘The Apprentice’ made him a television star and a tycoon as candidates competed for $100,000 to get a job in Sugar’s company. He is creative as he wrote his book, “What You See is what you get” and negotiated a good deal with Pan Macmillan publishers. The book has been earning a lot (Sugar, 2010) C. Deborah Meaden – ‘Dragon’ investor and various business holdings Deborah Meaden is a British businesswoman. She runs a multimillion-pound family holiday business and appears in a British TV series called Dragon’s Den, hosted by Evan Davis.She is business minded as at the age of 16, she had started working as a sales-room model and at the age of 19 she moved to Italy to start a glass and ceramics export agency. Deborah believes that for a person to be successful one has to play his or her part and consider the positive and negative attributes of his/her business decisions (Robert, 2004) Successful people are quicker to make reasonable decisions at all times. Successful people are also able to put themselves in the customer’s shoe which helps them assess marketing strategies (Deborah 2016). She is a leader who is able to provide a sense of direction to other employees. She makes sure that her employees understand what they are working towards. Deborah takes risks through various business ventures. In 2009, she acquired Fox Brothers textile mill D. Levi Roots – Reggae Reggae Sauce The popular barbecue sauce; Reggae Reggae Sauce, was started by Levi Roots. Levi Roots is a convincing entrepreneur as he convinced Richard Farleigh and Peter Jones to invest $50,000 in return for 40 % of his company. This shows that Levi Roots is ready and willing to make risks.Levi Roots was able to take advantage of the “Dragons Den” TV show to expand his business and make it famous (Robert, 2004)He is also very creative as during the TV show in he accompanied his launch with the famous “Reggae Reggae Sauce Song” making the occasion memorable. “Put some music in your food” catch line for the sauce shows creativity. 3.      Comparing the profit achieved by one business with that achieved by another similar business is important. There may be many reasons why profitability is a key issue within a business. (a)     Choose a company that you have knowledge of and advise on its current profitability. Zara Fashion Company whose headquarters are in Spain is one of the largest Metanational retailer companies in the world. Statistics show that Inditext’s gross margin in 2010 was 56.8 percent compared to its rivals who were at 37.5 percent (Robert, 2004) In the past few years, the company made a profit of 17 dollars making the founder the 7th richest man in the world. (b)     Analyze why this may have changed over time, what key factors have influenced the profitability and how the company could increase profits in the future. It creates profit through speed, quality and research. Zara uses 0.4 percent of its profit to advertise its products compared to other companies that use up to 14 percent. Zara is thus able to direct most of its profits towards producing quality clothing and researching on the market trends. Zara delivers orders in only 6 weeks compared to other textile companies that take 6-9 months to deliver orders thus attracting millions of customers (Robert, 2004). In African countries, Zara has only heavily invested in Brazil but since it has opened stores in nearly all other continents, Zara ought to invest in African countries especially now that they have higher development rates. This will help it expand future profits (Paul, 1996).. 4.      Read the case study below and provide answers to the following questions (b)     Discuss the advantages and disadvantages of the merger with Fast Track. 1. Network economies- companies that merge are able to provide better and efficient services 2. Research and development- Merging a business enables to make more profit as well as more funds for research (Brook Intelligence Center and Property, 2013). 3. Merging businesses helps to bring all the potential from the merging firms together thus improving efficiency.The merging companies are able to share skills and knowledge. This also increases the market penetration power due to access of more customers 4. Merging a business helps to avoid duplication while at the same time leading to diversification since the merged companies can offer different services and 5. Regulation of monopoly (Paul, 1996). The merged company benefits from the economies of scales although the merger doesn’t have to result to raised prices due to monopoly. Disadvantages 1. When two firms merge, the founders may find difficulty in the choices they make since they have to constantly consult. If the founders do not always agree on how to run the business, it may collapse. 2. A merger can lead to some employees losing their jobs. One of the merging companies may demand that the other firms cuts-off underperforming sectors in the other firm. 3. Due to increased size, the bigger firm may suffer from diseconomies of Scale since it takes a long time to take control of the firm at large and also to motivate workers (c)     Explain any potential benefits to Hey Presto of choosing to replace diesel vans with more expensive electric vehicles. We are in a century were speed counts. Clients need to be sure that all the deliveries will be done right on time. Should Hey Presto consider replacing the diesel vans with more expensive electric vehicles, customers will learn how to rely on their services (Richard, 2016).Other companies with their old vehicles may lower their prices to attract customers but statistics show that the highest percentage of customers purchases their goods or services by considering value. Electric vehicles will enable Hey Presto to provide quality services. (d)     Christine is considering two ways in which Hey Presto might expand: • continuing to buy new vans from the profits the business makes • merging with its competitor, Fast Track Ltd (Richard, 2016). Advise Hey Presto on which of these two methods of expanding the business would be more suitable for the business. Use Item B to support your answer. I would advise Christine not to merger with Fast Car. Since Hey Presto’s competitors use very old and unreliable vans, Hey Presto is still capable of maintaining its customers especially if they decide buying the electric vehicles. Before merging a company, as in B above, one ought to consider the level of competition and since Hey Presto’s competitors are not efficient enough, it is advisable for Christine to consider using other methods instead of a merger. The merger may lead to loss of Christine’s opportunity to make business decisions such as buying the electric vehicles. References Branson, R., (1998). Losing My Virginity: How I’ve survived, Had Fun, and Made a Fortune Doing Business My way, Virgin books, 14- 78-107 Robert F. B., (2004). Applied Mergers and Acquisitions, 11, 45-76 Tejvan, P., (2012). Advantages and disadvantages of mergers, Retrieved from http://www.economicshelp.org/blog/5009/economics/pros-and-cons-of-mergers/ Paul, S., (1996). Why do Employees Resist Change?; Journal of Harvard Business Review, 5, 18-21 Brook Intelligence Center and Property (2013). Marks and Spencer makes profit after four years, Journal of Brook Intelligence Center, pp. 6 Richard, L., (2016). Profitability Indicator Ratios: Profit Margin Analysis, Journal of Janus Capital Group, vol.4, 22-43. Read More