Business Analysis - Norwest and Wells Fargo - Research Proposal Example

Introduction: The 20th and the 21st century have seen a lot of mergers and acquisitions taking place. However, most of these mergers and acquisitions have always failed to be successful. Examples of mergers that have failed include the merger that occurred between internet giants, Ebay and Skype. Other mergers that have considerably failed include the merger between automobile giants namely Daimler and Chrysler (Smith and Lajoux, 2012). Scholars denote that some of the reasons advanced for the failure of mergers is the notion that mergers help an organization to acquire a competitive advantage because of the benefits associated with economies of scale. That is an organization is able to reduce its costs of operations, without affecting the quality of its products. This reduction is further reflected in the prices of the organizations products, and hence it will manage to be competitive. This principle is referred to as cost reduction strategy (Trompenaars and Asser, 2010). Other advantages of a merger and acquisition are that a company will manage to use the resources of the acquired firm, for purposes of advancing its business operations. These resources include the distribution channels of the organization, and even the brand name of the organization under consideration. Take for example the merger of two financial institutions that is Norwest and Wells Fargo. In as much as Norwest had a better financial position, it decided to operate under the brand name of Wells Fargo, and this is because of a good historical background associated with the name (Smith, 2010). This paper is a research on why most mergers fail. It uses the case study of eBay and Skype, which is considered one of the worst acquisitions and mergers in the century. This is because the organizational and business cultures of these two dominant internet giants were contrasting. However, this paper will carry out a research on exactly what led to the collapse of the merger. Research Problem: Studies reveal that most mergers and acquisitions normally do not meet their objectives. As discussed earlier, most objectives of these acquisitions and mergers is to gain a competitive advantage over the rival firm of an organization. But this is not always the case. This research occurs on the background that most mergers and acquisitions is a managerial issue that if poorly handled, would result into the fall of the organization but if properly handled, the acquisition and merger will result into a good fortune for the company (Trompenaars and Asser, 2010). However, most organizations are accused of poorly handling the merger and acquisition process, resulting to the failure of the merger. This is the case of the merger that occurred between internet giants, eBay and Skype. Context: The main focus of this research will be the factors that led to the failure of the merger between the two internet giants, namely eBay, and Skype. In 2005, financial analysts explain that eBay was able to acquire Skype, by using a tune of 3.1 billion US dollars. eBay and Skype are both internet companies, providing different services. eBay is concerned with the provision of online auctioning services, while Skype provides communication services to anyone with an internet facility. Analysts denote that this acquisition was an attempt by Skype, to regain its lost glamour, through acquiring a company that was built by use of the web 2.0 instruments, as this was a new trend in the market. However in 2009, the merger and acquisition failed because of a variety of factors. Scholars identify a variety of factors that led to the collapse of the merger/acquisition, with some denoting that the incompatible company cultures was the major reason as to why the merger failed. Others denote that eBay lacked the technological knowhow that could be used to integrate the technologies of the two organizations together was a factor. Others point to the inefficiencies of the workforce of the two organizations, and lack of research and development on how to effectively use the advantage gained by eBay through this merger. Aims, Objectives and Research Question: Aim: The major purpose of this research is to investigate the reasons as to why the merger between internet giants, eBay, and Skype failed. Objectives: To gain information on how the merger affected the operations of eBay. To analyze the strategies used by eBay to acquire Skype. To acquire information on why these strategies were ineffective, hence leading to the failure of merger. Research Questions: How the merger that occurred between internet companies’ eBay and Skype did affected the operations of eBay? What were the strategies that eBay used in acquiring Skype? Why were these strategies ineffective, leading to the failure of the merger? What is the main reason that made the merger and acquisition between the two companies to fail? Literature Review: Falk and Jebejian (2010) denote that it is not a secret that most mergers and acquisitions normally fail. One of the major reasons advanced by scholars is that mergers fail because of an incompatible company culture. In regard to this reason, scholars give an example of the merger between automobile companies, Daimler and Chrysler. Daimler is a German company, and its organizational culture was mainly influenced by the German ways of life. On the other hand, Chrysler was an American company, and its organizational culture was mainly influenced by the American ways of life, which was more liberal, as compared to the German ways of lives, which is more conservative (Nogeste, 2010). Due to these conflicting ways of lives, the employees of these two organizations could not work together, hence the company was unable to effectively carry out its mandate, or achieve the objectives set forth by the merger. In regard to the association between eBay and Skype, DePamphilis (2010) denotes that this is the major factor that made this association to fail. For instance, scholar denotes that eBay had business interest in online sales and auctioning, while Skype had business interest in voice communication. These two lines of business operations are very different, and they require different strategies and managerial operations for them to be successful (Nogeste, 2010). On this basis, these two organizations operated on a different business culture, that was based on the kind of products and services that they offered. On this note, Ferenczy (2012) denotes that this was a very bad business decision that eBay engaged in. For instance, Scholar denotes that the structure of the eBay system was built in a manner that it was not necessary for customers to talk with each other. All that was needed was an email message, and a transaction occurred. However, the system Skype was built in a manner that it was necessary for two parties of communication to communicate with each other, through a voice message (Smith, 2010). This was against the principles and the culture of eBay; as a result, the two companies were incompatible with each other. Levi, Li, and Zhang (2010) further goes on to denote that the business culture of eBay was conservative, and this is depicted in the manner of their operations, while the business culture of Skype was liberal, and this was characterized by the liberation of the voice data. On this basis, the association between eBay and Skype could not last longer. However, Nicholls (2012) denotes that clash of cultures was not the major reason for the failure of the association between eBay and Skype. According to scholar, the biggest reason as to why the association between eBay and Skype failed is on their incompatible technological systems. Scholar gives an example of the merger that occurred between Sprint and Nextel in 2005 (Smith, 2010). These companies are operating in the telecommunications sector, and sprint in a bid to increase its market share, paid 36 billion dollars for the acquisition of Nextel. However, because of an incompatible wireless technological system, the two companies were unable to achieve success in their operations. This saw a massive loss of workers, and revenues. The 2008, and 2009 years were the worst for the company, and this is because the company made losses amounting to billions of dollars. This is the case of the association between eBay and Skype. The technological system of Skype was only able to support voice data, as opposed to written data. On the other hand, scholar denotes that the technological system of eBay was able to support written data, as in email messages as opposed to voice data. Integrating these two technologies was difficult for eBay, and hence the company was unable to meet the objectives of the acquisition/ merger. Goldberg (2012) further denotes that the other reason for failure of mergers is lack of innovation once a merger occurs. Shim (2012) gives an example of the acquisition of MySpace by News Corp in 2005. This was a great idea by then, since the intention of News Corp was to use My Space into driving traffic into their websites. However, once the acquisition occurs, My Space stopped innovating, resulting to loss of potential traffic to facebook. Liamputtong (2013) denotes that this is case that involved eBay and Skype. In the view of scholar, incompatible technologies was not an issue, and this is because if the two companies spent a considerable time and resources into identifying a compatible technology, then it was possible to find a solution to this problem. Based on this literature, the most important issue that the researcher will have to examine is the role of technology in this merger process. However, because these two companies did not wish to encourage innovation and look for a solution to the technological problem facing them, then their association had to fail. This research will therefore examine these assertions and come up with a conclusive decision. Research Design: Research Methods This research will use qualitative and quantitative methods of data collection, and it will be based mainly from the results of questionnaires, interviews, library research, internet research, and from information emanating from newspaper articles (Bryman, 2008). Interviews: Interviews refer to a face to face communication between an interviewer and an interviewee for the main purpose of gaining information pertaining to a certain issue. The reasons for using an interview is because it helps the researcher to acquire a more in depth and detailed information concerning a specific issue (Bryman, 2008). This will therefore be very useful in this research, as it will help the research to get an in depth information on the real causes of the failure of an acquisition of Skype, by eBay. Questionnaires: The researcher decided to use questionnaires because they are able to actively engage an individual in finding opinions and facts about mergers and acquisitions. Questionnaires also have a reputation of finding information from the largest number of people as possible, and hence it is an effective method of gathering data and information. It is important to denote that the researcher did not required detailed information from people filling the questionnaires, and on this basis, the design of the questionnaire consisted of short questions, that required an either yes or no answer. Library Research: The researcher will conduct a library research for purposes of acquiring information concerning the research topic. The library will give me an access to a variety of resources, and this includes journals, books, and newspaper articles concerning this merger and acquisition of Skype, by Ebay. Journals are useful in this research, and this is mainly because they are peer reviewed articles, acceptable by scholars in the various subjects that they talk about. On this basis, the researcher will manage to get reliable and accurate information from these resources. Internet Research: The researcher will conduct an internet research on the failures of the merger and acquisition. The researcher will particular have an interest on the websites of the two companies, and the various economic websites operated by reputable organizations (Liamputtong, 2013). The internet is rich with information concerning this issue, and on this basis, chances are high that the researcher will get relevant and accurate information that will provide an answer to his research. Sample of Design The sampling method that the researcher will use is the random sampling technique. It is important to denote that the population of this research will be employees of the two organization, and students of business and management (Cooper and Schindler, 2008). Under Random sampling technique, the scholar will visit the department of business studies, and ask randomly pick students who will fill the questionnaires. However, the students under consideration must have knowledge on mergers and acquisitions. The scholar will also pick any employees of the two organizations and conduct an interview on the reasons of the failure of the merger/ acquisition (Liamputtong, 2013). In picking these employees, the researcher will have to seek their permission first, and book an appointment with them, for purposes of conducting the interview. Unit of Analysis: As mentioned in this research, the researcher will use questionnaires, library research, interviews and the internet research. To achieve reliability and relevance in this study, the researcher will have to look at the results of each and these sources, for the main purpose of finding consistency. Information that is inconsistent will be removed, and information that is consisted, will be integrated into the findings and discussions of this research (Liamputtong, 2013). It is also important to denote that the researcher will use statistical methods in analyzing the results from interviews and questionnaires. This is by identifying the number of people in agreement with an issue, and the number of people who are not in agreement with an issue (Zikmund, 2013). This will be possible because the structure of the questionnaires will be a yes or no answer. Data Sources: As mentioned earlier, sources of data will emanate from books, journals, newspaper articles, results from interviews and questionnaires (Vogt, 2008). Those interviewed will be workers of the two organizations, and questionnaires will be filled by students of business administration and management. Discussion: In conclusion, this research will provide information on the causes of the failure of most mergers, and in the perspective of the association between eBay and Skype. This is a very important managerial study, and mainly because it will provide skills on how to handle and manage the expansions strategies of an organization. It is important to understand that mergers and acquisitions are very important methods of expanding, and their successes, will most definitely improve the performance of a business organization. A good example is the merger between Norwest and Wells Fargo, which has made the company to be one of the best and biggest brands in the banking industry. On this basis, an acquisition and merger if effectively handled, will improve the fortunes of a company. References: Bryman, A. (2008). Social research methods (3rd ed.). Oxford: Oxford University Press. Cooper, D. R., & Schindler, P. S. (2008). Business research methods (10th ed.). Boston: McGraw-Hill Irwin. DePamphilis, D. M. (2010). Mergers, acquisitions, and other restructuring activities an integrated approach to process, tools, cases, and solutions (5th ed.). London: Academic. Falk, R. S., & Jebejian, S. (2010). Mergers & acquisitions 2010: what you need to know now. New York, N.Y.: Practising Law Institute. Ferenczy, I. (2012). Employee benefits in mergers & acquisitions: 2012 -2013 edition.. S.l.: Kluwer Law International. Goldberg, R. A. (2012). Mergers & acquisitions 2012: trends and developments. 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The art of M&A strategy: a guide to building your companys future through mergers, acquisitions, and divestitures. New York: McGraw- Hill. Trompenaars, F., & Asser, M. (2010). The Global M & A Tango How to Reconcile Cultural Differences in Mergers, Acquisitions and Strategic Partnerships.. Oxford: Infinite Ideas Ltd.. Vogt, W. P. (2008). Selecting research methods. London: SAGE. Zikmund, W. G. (2013). Business research methods (9th ed.). Mason, OH: South-Western. Read More