Strategic Management D5

Strategic Management D5

In 2005, a merger between Sprint and Nextel, which were communication service providers in the United States took place. Before the merger, each operated in different market segments. Sprint operated in the home services and personal cell phone market segment while Nextel operated in the transportation/business/infrastructure market.

The merger was, however, a failure that became evident immediately after the merger. The failure  was caused by the leaving of former Nextel employees on the claim that the two companies had different cultures that could not be aligned to function as one (Gancel, Rodgers and Raynaud, 2002). The results of the failure took a great toll to both the company’s leadership and staff. The leadership was faced with a task of steering the merged company without their counterparts from Nextel while the performance of the company deteriorated. As a consequence, it started laying off workers. These workers were hit hard by the loss of their jobs because the economic conditions at the time were bad.

One failed acquisition of the last decade involved News Corp and Myspace. In 2005, News Corp purchased Myspace, one of the successful social media sites at the time for $ 580 million. At the time, the traffic at Myspace was enormous and promised great performance in the future. The acquisition, however, did not succeed. The acquisition failed because the new corporation formed after the merger stopped innovating (McCarthy and Dolfsma, 2013). Moreover, the emergence of Facebook consolidated the failure of the acquisition as it took almost the entire market share from the News Corp.

Another failed acquisition took place in 2005 when eBay acquired Skype. The acquisition was a potential for eBay to improve its communication through Skype. Skype provided the VoIP services that would help customers transacting on eBay to communicate verbally. However,  most of the customers did not prefer verbal communication during transactions (Schlie and Rheinboldt, 2011). They preferred using their emails for transactions. The acquisition of Skype by eBay was, therefore, a failure.

One of the successful acquisitions that has taken place in the last ten years involved Cisco acquiring Airespace, a wireless network provider. The acquisition took place in 2005 at a cost of $ 450 million in stock. The acquired company became a success because it made products that assisted businesses to set up wireless networks that were secure. The success of this venture was based on the ability of the acquired company’s ability to fit into Cisco’s core business (McCarthy and Dolfsma, 2013). The two businesses, therefore, did not have ant culture differences that would have hindered their business process integration.

Google’s  acquisition of  Nest Labs  is another successful venture for the company. Nest Labs make digital thermostats and smoke alarms. The success of the acquisition results from Google’s entry into the home devices market. Google has diversified its business from the technology related businesses. Such diversification is crucial because the technology industry is almost flooded with products and players. Google can dominate the home devices market because of  its extensive network that can help it market its products to customers throughout the world (Beschorner, 2008). Moreover, Google has innovation capabilities in the technology field, which can place it in a leadership position in innovative home devices. Therefore, this acquisition is one of the most successful venture for Google strategically.

References

Beschorner, P. F. (2008). Do consumers benefit from concentration in the new economy? A review of Google’s mergers, acquisitions and arrangements. New York, NY: John Wiley & Sons.

Gancel, C., Rodgers, I., & Raynaud, M. (2002). Successful mergers, acquisitions and strategic alliances: How to bridge corporate cultures. London: McGraw-Hill Education.

McCarthy, K. J., & Dolfsma, W. (2013). Understanding mergers and acquisitions in the 21st century a multidisciplinary approach. Houndmills, Basingstoke: Palgrave Macmillan.

Schlie, E., & Rheinboldt, J. (2011). Simply seven Seven ways to create a sustainable internet business. Basingstoke: Palgrave Macmillan.

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