1. STATEMENT OF THE PROBLEM(S)
The problem that was indicated in the case study was the obstacles that the company faced during creation of new entity. This entity was created with the merger of ATK and EDS but with this merger, there were a lot of critiques and questions that were raised as both the organizations had totally different background and were operating in different market as well. It is important for the organizations to carefully analyze and evaluate the different factors and elements before taking a decision of merger or acquisition. If the organization is able to manage all related factors and elements in effective and efficient manner then the merger or acquisition can be success (Birkinshaw, Bresman, & Håkanson, 2002).
2. SUMMARY OF THE FACTS
In 1994, the management consulting services was at its peak. It was observed that in this particular year, consulting services earned $40 billion from corporations around the globe. In this $40 billion earning, the major ratio was of top 15 management service companies i.e. $18 billion. With such extra-ordinary revenue earned in 1994, it was forecasted that this segment would grow faster than any other segment with an annual rate of 15 percent.
The key for such growth was the globalization of companies and to maximize the performance of companies, consultancy firms were hired to provide the organizations with strategies that could enable the organizations to remove the uncertainties that the business could face in the forthcoming years.
With organizations trying to manage their strategies due to the change, the management consulting industry was also witnessing great changes. The major change that the consulting industry was facing was due to the development of technology in operations due to which it became essential for this industry to provide the clients with new and customized products globally. With such changes, technology became a crucial factor to achieve growth in the industry. With technology at the side of consulting firms, these firms were able to ensure the global clients regarding their desired success in the future.
With the passage of time, technology became the core of the business of consulting firms and with the growth of the consulting firms; the IT companies were enjoying their growth rate above 15 percent. With IT gaining momentum, it became strategic in nature for companies and companies started to use it as an instrument for reengineering. With the help of IT, companies were trying to broaden their services offered to organizations. It was observed that apart from strategic expertise, organizations were moving into operations consulting.
ATK was one of the companies that evolved with the passage of time and was one of the leading management consultancies firm. ATK’s aimed to provide its clients with realistic solutions and to help the clients in gaining competitive advantage in the industry. The uniqueness of this particular company was its mix of strategies and operations, combined with an aim to implement the strategies provided to clients. It was also noticeable that 75 percent of the company’s revenue was from clients that had already done business with ATK in previous year. Along with helping the clients to gain competitive advantage in the industry, ATK pursued its goal of expansion in the global market. Within every 3 years, ATK doubled its size and was listed as one of the fasting growing consulting firm in the world.
On the other hand, EDS was established in the year 1962 with only $1000 investment. The company started its operations by offering routine data processing to clients. But with the passage of time, the fledging company achieved the desired growth. In 1985, the company reported earnings of $3.4 billion. The major earning of this company was from providing the clients with computer networking. With such help, the clients were able to identify new opportunities that they could capitalize upon. The specialty of EDS was its ability to use information technology and to provide the clients with such technology. This enabled EDS to become the world leader in information technology services. With EDS’s command over IT services, the company was able to process over 2.2 million automated banking machines (ABM) transactions, 1.2 billion credit card authorization and 500,000 airline reservation.
3.1. Opportunities for EDS/ATK
The opportunity that both the organizations were provided with after the completion of first year was growth in the business. By this merger, the company was able to start its operation in more than 30 countries. Along with the geographic expansion, the company was also able to enhance its consulting practices with 3.500 employees out of which 2,400 employees were consultants.
Another major opportunity that the companies were provided with was; the maximum utilization of capabilities in order to effectively meet the demands of the customers and to provide the customers with their requirement even under pressure. By merging the operations of both the companies, an opportunity would be created to provide the clients with products and services as done in the past. With EDS having expertise in healthcare, insurance, communication, electronics and aerospace and defense industries and ATK having expertise in manufacturing, consumer products, transportation and chemical. Both the companies had proven track record in their areas of expertise and by providing each other’s clients with such products and services, the merger could be provided with high revenue.
With strength being the same of both the companies, the merger is provided with an opportunity to provide the clients with a unique and entirely new product. This opportunity would allow the merger to gain competitive edge over others in the marketplace and would also allow the company to move forward in order to gain the full potential. By doing so, the profit margin would gradually increase which neither ATK nor EDS could have achieved without such merger. One such example of a service provided by the partnership was CoSourcing.
3.2. Why these opportunities?
While considering that both the organizations i.e. EDS and ATK, these organizations has quite different management style along with different areas of expertise but due to the merger both the organizations could work together to achieve a far better result; one that cannot be achieved alone.
It was also observed that several critiques were provided regarding the attraction and retention of good employees within the organization. These critiques were proven to be wrong as this merger was clearly a success. The organization was able to retain their employees along with the clients and the turnover rate was almost equal to zero. Furthermore, it was observed that with these opportunities ahead of the company, ATK was able to establish itself strongly in the market along with unique skills and management that none of the competitor had in the market.
3.3. Deciding on opportunities
For an organization to achieve success, it is crucial to take steps that could enhance the organization’s ability to differ in the marketplace. By this merger, ATK was able to expand globally with the help of its partner i.e. EDS. This allowed the organization to enhance its client’s base along with the expansion of consulting employees.
With both the organization working together to achieve a same goal, the chances for success greatly increase. This merger was of same kind. Both the organizations had certain abilities and by merging the abilities for the transformation of business, ATK was able to enhance its revenue to a great extent.
CoSourcing is an example of using the talent from both the partners in order to create a new offering to the clients. Along with new offerings, the organization was able to pursue its goals and objectives efficiently with the help of this partnership.
3.4. Factors encouraging adapting opportunities
There were certain factors that encouraged the companies to adapt opportunities. One such opportunity was well established and readymade consulting practice that could have taken a decade for EDS to establish.
On the other hand, both the companies had expertise in totally different sectors and by merging their strength into one would provide the merger with competitive edge over others in the industry. With such merger, the ATK was provided with additional consultants that were required by the company to reach the clients in the market effectively and efficiently. Along with reaching the market, the ATK Company was also provided with geographic advantage and through the combination of locations, it became quite easy for the company to meet the client’s requirement comparably easier than others.
With each company having its own respective clients, it was difficult for both the companies to attract further clients in the market but with this merger, the companies were provided with an opportunity to expand the client’s base by helping each other to enhance the core competencies so that the client’s requirements could be met globally. In addition, the company was provided with an additional opportunity; to manage the inconsistent consultancy methodologies due to which the positioning of the company was weaker in the market as compared to other companies. With this merger, the company was able to improve its position in the market by managing the human resource, billing rates, quality measures and processes.
3.5. Capitalizing upon opportunities
It was observed that the both the organizations had totally different organizational culture and for capitalizing upon opportunities, it was essential for the organization to develop a new culture for the organization so that the inconsistency between the organization could be eliminated. This would help the organization to provide the customers with consistent product and the processes could be further improved with such new culture.
With EDS already having support from seven of its purchased management consulting firms and with ATK’s merger, the company would be provided with an opportunity to create a management consultancy firm that have experience and the required technology by its side to help the clients globally along with an ability to take initiatives accordingly to establish its ground firmly as others in the market.
Before the merger, both the organization had limited resources along with limited global expansion but with this merger the company would be able to operate globally with unlimited clients along with an opportunity to gain much experience regarding the needs of other clients in the market.
Since, both the organizations had expertise and knowledge regarding their market, it would be best for the organization to merge their operations in order to provide the clients with new services that could not be provided with competitors in the market.
3.6. Obstacles in sales job
With merger between two organizations of great magnitude, there were some obstacles that the company had to face to get the sales job done. Some of the obstacles faced are as follows;
The internal obstacles that the organization faced in getting the sales job done were the culture and lack of coordination between both the organization’s human resources. As indicated by the James Kennedy, both the organizations had quite different cultures due to which the organizations were not able to operate together. It indicates that both the organizations had different operations as ATK was known for its consultancy service whereas, EDS was particularly known for its technology.
With the merger, there was lack of coordination between the human resources of both the organization. As further indicated by James Kennedy, the human resource of both the organizations was unable to work together due to ego problem. The combination of consultant from both the organization was not a success as it was predicted by the top management.
Another major internal problem that was feared by the ATK’s human resource was lost of independence and retention of key employees on their rank. This internal obstacle was considered crucial as most of the consultants were questioning regarding their independence as well as retention of ranks at ATK.
The external obstacle faced by the new entity was the negative perception of clients. As both the organizations were merged, most of the clients started to question the ATK’s reliability to provide the clients with right suppliers. It was observed that with this merger, some of the clients lost their faith in ATK’s ability to provide them with service before the merger.
Another external problem was the attraction of clients. It was getting difficult for the ATK as it was directly engaged to compete against EDS and particularly General Motors.
- For the organization to define a new entity, it is crucial to develop a new culture that could be based on the cultures of ATK and EDS. The new culture should be a mixture of the culture already established in the organization. By doing so, the organization would be able to enhance their performance and would be able to provide solutions to any problems within the organization (Palmatier, Miao, & Fang, 2007).
- Lack of coordination and ego is another crucial problem that needs to be eliminated. To eliminate this particular issue, the management should provide the human resources with training and developmental programs and should elaborate the importance of diversified and talented consultants in organizations to achieve its desired goals and objectives along with strengthening the organization. Both the organization’s human resource should be provided with opportunities to work together. This could bring the human resource together and would help them to trust each other and to work with each other by keeping their ego aside (Nguyen & Kleiner, 2003).
- Retention of good people for the organization is quite crucial as without good people achieving goals and objectives become difficult. To attract and retain good people, the organization should provide them with training and developmental programs that could help them to enhance their skills and knowledge. This would eventually help the employees to establish trust with the organization and would help the organization to retain them (Spiro, Rich, and Stanton, 2008).
It could be said that the merger between the ATK and EDS was a successful merger even after difference in culture and management. But within a year, the new entity was able to attract clients by providing them with innovative and new products and services that others in the market were not capable of providing. Regardless of the internal and external obstacles, the new entity was able to attract and retain its employees and was able to gin competitive edge over other competitors in the market. With mutual understanding and consideration, the organization was able to combine the strengths of ATK and EDS to maximize the capabilities of the new entity in the management consultancy services.
The case study is a vital example of well managed and planned merger. Both companies were able to fulfill growth objectives and opportunities with the help of the mutual understanding the corporation. Apart from this the organizations were able to capitalize on the basis of the combined capabilities and skills and expanded into different markets. This clearly shows the importance of the careful and effective planning and management during and after the merger. Along with this it is important to define the aims and objectives of the merger beforehand in order to make sure that the strategies and methods formulated and undertaken will lead to the correct path. One of the most important factors which should be kept in mind while going for merger is the resistance on the part of the employees and sales staff and the management of the human resource. The case study discussed above is a good example for the effective and efficient merger activity, for the organizations that are looking forward to indulge in any such activity in future. Both organizations were able to make the merger a success despite of the huge criticism on part of different companies and parties.
Birkinshaw, J., Bresman, H., & Håkanson, L. (2002). Managing the post‐acquisition integration process: How the human iintegration and task integration processes interact to foster value creation. Journal of Management Studies, 37(3), 395-425.
Nguyen, H., & Kleiner, B. H. (2003). The effective management of mergers. Leadership & Organization Development Journal, 24(8), 447-454.
Palmatier, R. W., Miao, C. F., & Fang, E. (2007). Sales channel integration after mergers and acquisitions: A methodological approach for avoiding common pitfalls. Industrial Marketing Management, 36(5), 589-603.
Spiro, R., Rich, G., and Stanton, W. (2008). Management of a Sales Force. Boston, MA: McGraw-Hill Irwin