Executive Summary
The objective of the report is to analyze the current scenario that Vader Corporation is facing along with a Detailed analysis of all the decisions taken by senior management of Vader Corporation that are responsible for the current situation are presented in the report. The report further discusses several options that the Vader Corp. may exercise in coming days. The report also looks at the reasons that drove the vader into such complex situations.
Table of Contents
Introduction
3
the Vader Corporation
3
rapid Acquisition
5
change management
7
internal stakeholder management
/>
7
cost control . ..8
Conclusion
8
List of References:
10
Introduction:
The Vader Corp is a consulting firm which was founded in the year 1995 by G. Hill and J. Bent. The Company performed very well and successfully managed an aggressive expansion during the initial five years of its operation. During initial years of its operation Vader Corporation acquires multiple firms to increase the geographical presence and customer base. The Company increased its presence from one country to 9 countries with total 15 locations in a very short span of time due to acquisitions. In the year 1998, the company acquired five smaller companies followed with acquisition of Swedish company Spray network, Cambridge and Integrator i-cube in the year 1999. The aggressive approach adopted by Vader Corporation’s senior management towards acquisitions did not go well and company faced various challenges in long run due to those acquisitions. The vision of the Vader senior management team was not good and they laid down the foundation for dark future due to poor decision makings ability. Acquisitions made by the company to grow its presence bounced back and the strategy adopted by Vader management team was not strong enough to sustain the company in an economic slowdown. In the year 2006, Company was facing a really tough scenario as the income was declining quarter by quarter. Company share price also touched value as low as $2 per share due to declining stock market. Vader CEO G. Hill along with his team of senior management and general managers has to take a final call. He wants to explore options available with Vader to deal with the current crisis situation. The options available with the Vader are:
1. Slightly cutting on expenditure and try to generate business from new sources of income along with retention of existing talent.
2. Shutting down unprofitable locations along with drastically reduction in employees.
3. Selling of Vader Corp.
4. Shut down the business completely.
CEO of Vader Corporation is considering only the first option as a best possible solution to existing situation. He also mentions that, the current situation is not that bad to consider other three options. In the report we will step by step analyze all the decisions made by G. Hill and also how those wrong decisions lead a growing company to current crisis situation.
The Vader Corporation:
The growth and success of the organization depend upon the effective management and decision making ability of senior management. Decision making plays a very crucial role in the organizational growth because a wrong or right decision can cost a huge amount or can generate a huge amount respectively for the organization. A good leader always takes any major decision after analyzing its short term as well as long term effects, especially in those cases where a huge sum is involved. The case is a very good example of poor decision making abilities and how decision taken today can hamper the growth of the organization in the long run. CEO of Vader Corp should have analyzed all the pros and cons of the decision he has taken for the organization. Now we will analyze four major problems faced by the company.
Rapid Acquisitions:
It is a common belief that acquisitions provide the fastest way to expand the business. People do not think that you will grow just by doing hard work and satisfied customers. Acquisition is considered as a less risky and quick option to grow. It also gives benefits to stakeholders in the long run. The Vader Corporation made several small and large acquisitions to increase its geographical presence along with customer and employee base. Vader group faced various challenges due to acquisitions:
Large acquired organization presents cultural conflicts which destroy the healthy environment of the organization. All organizations follow a different set of rules and culture. If you create a single identity by merging all of them it will certainly raise conflicts. Vader Corporation did the same thing. They diluted the identity of all acquired companies which resulted in cultural conflict. In Vader Corporation it was the main cause for talent attrition. If the planning for acquisition is not properly done, it sometime leads to poor communication, unorganized policies and conflict in overall strategy. It further de-motivates employees and increase attrition.
It is not necessary that the acquired company will perform well. They may have some hidden problems in terms of management, manpower, processes, technology and the like. Acquisition also does not promise you that the existing customer base will be completely shifted to your organization. Customers do not feel the same trust and comfort level if the management and culture of the organization is changing hence acquisition attract customer attrition. Acquisitions also dilute the ownership as you have to give some part of your ownership. Vader has also given a big portion of its ownership to i-Cube, which created a huge problem for Vader in the long run.
Many experts believe that the natural growth is a slow process which can be speed up without acquiring any or multiple organizations. The natural growth has its own benefits.
It safeguards company to maintain its identity and culture.
Company can divert its attention from acquiring new business to new innovations, product diversification, identifying ideas to increase customer base and the like.
Customers and market also consider organic growth as a most reliable and rewarded way to grow. Customers do not lose their faith and trust if the growth is natural. In case of acquisition they do not feel the same trust.
Managing business in few locations is different from managing business in multiple locations. Effective strategy and proper planning is required when Vader was growing its business at very fast pace. The large business is also exposed to higher risk.
Change Management:
It is imperative for any organization to plan all the changes in a very systematic manner. The acquisitions made by Vader Corporation were so fast and frequent that company did not plan them in a proper manner. All the changes should be done without disturbing the existing employees and organizational environment whereas in case of Vader, the decisions made by CEO impacted the environment as well as employees. It is important to involve team members while making any decisions. This will not only increase the knowledge pool but also increase their commitment and participation. Before bringing any change it’s required to develop objective of that change and allocate resources that will develop strategy and proper implementation of the change.
Internal Stakeholders Management:
Internal conflicts pose major challenges in front of management. Conflicts not only reduce the productivity but also destroy the healthy culture and environment of the organization. In case of Vader Corporation, management made wrong decision by diluting the identity of acquired companies and rebranded them. Change in management also brought some changes in existing culture which brought cultural conflict. The poor decision making ability of senior management impacted employees in a great manner for instance Vader Corporation laid off 200 employees in the year 2006. The number is equal to the number of employees hired during the same year. The management has shown a very poor ability to see the business in near future. Acquisitions made by Vader to increase the revenue were resulted in creating a crisis situation for the company. Many of employees including some senior people from i-Cube left the organization and sold their stock in the market which further made the scenario worst. The Vader Corporation did not perform well on strategy front. In just five years company made various acquisitions just to expand the business without giving a thought to successful operation of acquired business. Company was holding huge technical knowledge to provide technical solutions to customers. It also invested huge money in creating brand image and marketing communication activities. Human resource and finance department was completely neglected by the CEO hence the whole strategy planning and employee management suffered. He also refuses the idea of cost cutting made earlier.
Cost Control:
Effective cost management is required not only during the time of recession but also during the thriving time. Vader Corporation invested huge sum in establishing state-of-art office complex. The office land was situated at the prime location in city. Company invested huge sum in decorating the office and in provide all luxury facilities to the employees. The expenditure of Vader Corporation was much higher than other company in same business with almost same size of client base. In just five years company increased its employee base from 2 to 1300 which was also a factor of the cost. The company should only own the staff that is required. It should also disinvest the costly property which it holds.
CEO of Vader Corporation did not show good decision making qualities. Step by step all decisions taken by him pushed the organization in scarcity. Great leader reflect good decision making and management qualities. They have huge knowledge which helps them in decision making.
Conclusion:
From the above discussion we can say that the current situation which Vader Corporation is facing is nothing less than a crisis. Company is going to be out of fund if CEO will take the decision to slightly cut down the expenditure and try to generate business from new sources of income along with retention of existing talent. CEO’s inability to understand present situation and get the idea about future condition is main source for making wrong decisions. The main factors that were responsible for existing situation are: multiple acquisitions in very short time, poor change management, poor internal stakeholder management and inability to control expenditure.
The situation can only be improved if company cut down its expenditure drastically by laying off employees and closing down all unprofitable offices across the worlds. Company should sell all recent acquisitions. Shifting its office base to a cheaper location can also be a good idea. A change in management team is also requirement of time.
References
C. Jay Lambe and Robert E. Spekman, 1997. Alliances, External Technology Acquisition, and Discontinuous Technological Change. Journal of Product Innovation Management, 14(2), pp.102-16.
Carr, C., 2003. Globalisation, strategic alliances, acquisitions and technology transfer. Lessons from ICL/Fujitsu and Rover/Honda and BMW. R&D Management, 29(4), pp.405-22.
Dunphy, D., Griffiths, A. and Benn, S, 2007. Organizational change for corporate sustainability : A guide for leaders and change agents of the future. :. New York: Routledge.
Hubbard, N., 2001. Acquisition Strategy and Implementation. West Lafayette, Indiana: Purdue University Press.
John P. Kotter and Dan S. Cohen, 2002. The heart of change: real-life stories of how people change their organizations. Boston: Harvard Business Press.
Phanish Puranam and Kannan Srikanth, 2007. What they know vs. what they do: how acquirers leverage technology acquisitions. Strategic Management Journal, 28(8), pp.805-25.
Tim Loughran and Anand M. Vijh, 1997. Do Long-Term Shareholders Benefit From Corporate Acquisitions? The Journal of Finance, 52(5), pp.1765-90.
Wim Vanhaverbeke, Geert Duysters and Niels Noorderhaven, 2002. xternal Technology Sourcing through Alliances or Acquisitions: An Analysis of the Application-Specific Integrated Circuits Industry. Organization Science, 13(6), pp.714-33.
