Short description
What follows is a brief description of the two companies:
HP
It all began in 1938 when two electrical engineering graduates of Stanford University, William Hewlett and David Packard started their business in a garage in Palo Alto. In a year the partnership as Hewlett-Packard and produced for the year 1947, HP has taken over. The company has since been the most prosperous of its profit grew by five and a half million dollarsin 1951 to about $ 3 billion 1981 The pace of growth has no limits when HP revenue income increased to $ 42 billion in 1997. Starting with the production of audio oscillators, the company has its first computer in 1966 and was until 1972 that introduced the concept of a personal computer through a first calculator, which was further enhanced in a personal computer in 1980. The company is also responsible for the laser printer, which has announced the introduction of this year1985
Compaq
The company is best known as the Compaq Computer Corporation. This was business, which started as a personal computer company in 1982. He had the charm of being as the largest manufacturer of devices for personal computers around the world. The company was founded by two senior managers of Texas Instruments. The company name came from-to "Compatibility and Quality". The company introduced its first computer in 1983, according to a price of $ 2995.Although portable, the problem was with the computer, which seemed to be a suitcase. However, there were major economic benefits from the computer because there are more than 53,000 units sold in the first year with a revenue generating $ 111 million.
Reasons for the merger
A very simple question that arises is that if HP was proceeding at a rapid pace that, what was the reason why the company had merged with Compaq? Carly Fiorina, the CEO ofHP in 1999, had played a key role in the merger, taken in 2001. It 'was the first woman to have taken as CEO of a large company and the first outsider. They worked very efficiently, while traveling over 250,000 miles the first year as CEO. Their main objective was to modernize the culture of the company by HP. He insisted on the very lucrative business. This shows that it was very extravagant in their approach as CEO. Despite the growthmarket value of the shares of HP 54.43 to 74.48 dollars, the company was still inefficient. That was because they could not achieve the targets due to the failure of the two companies and industries. HP was forced to cut jobs and also the privilege of Price Waterhouse Coopers to participate in the care of their exam passed. So the job of Fiorina has been threatened. This meant that it was an improvement in the internal policies of the company is not sufficient for business successSuccess. Ultimately, the company had planned something else with confidence. It 'was decided that the company would acquire Compaq in a stock transaction, shareholders' equity amounted to 25 billion. Originally, this merger was not expected. It 'started with a phone conversation between the CEO of HP, Carly Fiorina and President and CEO of Compaq, Capellas. The idea behind the meeting was to discuss a licensing agreement, but began a discussion of competitive strategy and, finally, aFusion. It took two months for further study and approved in September 2001, the boards of both companies to merge. Despite the decision of the CEO of HP, the merger was strongly opposed in society. The two CEOs believe that the only way to combat the growing competition in terms of price, was to have a fusion. But the thought of investors and other stakeholders that the company will never be able to have customer loyalty when Compaq products are soldwith the HP logo. Besides these, there were questions about timing of the members of the organization together. This was due to change in organizational culture. Although this is a serious problem in terms of fusion have been CEO of HP, Fiorina the same thing as justified by the fact that the merger would have eliminated a serious competitor in the PC market as provided in those days. He said the company's market share is expected to grow,doubled with the merger and the unit would work. (Hoopes, 2001)
The advantages of fusion
Although it is useful, very few people seemed in the beginning, was the firm resolve of Fiorina, who was to be able to stand by their decision. Wall Street investors and all his company had gone against the shovel their ideas with the slogan that made it 1 +1 = 1.5 with their fancy way of expansion. Fiorina had like this, that after the merger, the company,Not only have a greater market share, but also the doubling of production units. This means that the company to expand significantly in volume. His dream of competing with the giants of the industry would be, IBM is also true. He was of the opinion that it would sink a large part of the redundancy in the two companies, the internal costs for advertising, marketing and shipping, as would happen with the merger. This would produce the least damage to the collection of revenue. He usedthe ideas of competitive positioning to justify their plans for the merger. He said that the merger and consolidation of the ideology is not based on diversification. You could also defend the charges against the amendment, the HP was. He was of the opinion that HP has always changes to be encouraged as it is to be innovative and courageous steps. He said the company needs in line with the creativity, development and editing. This merger was the ability to provide accuratethe same thing. (Mergers and Acquisitions, 2010)
Benefits for shareholders
Here are the ways in which the benefit of society to be, its shareholders can:
Unique opportunity: the position of the company is well-connected with the merger. The reason was that now the same value would have been cool, improve leadership skills, would be to gradually improve the skills and so would the sale and strategic differentiation would have been better than theexisting competitors. In addition to this, you can also access the functions directly from Compaq to reduce its cost structure in the industry's largest. Finally, you might also see an opportunity to reinvest again.
Strong Company: The company is committed to profitability, and services to increase access to a large extent. The company may also be a better time in research and development. Financial terms of the company in terms of operating profitand net cash on hand are also incremental.
Economics mandatory: the accumulation of expected profits of 13% in the IIP would be the first fiscal year. The company could also lead to a better segmentation of the market to provide for the generation of profits. This would go up to two and a half billion dollars in annual synergies.
Ability to run: as the level of integration in the planning process of the company, the probability that the value would be enormous. Together withthat the experience of driving a different staff structure would also be there. (Buy HP Compaq, 2001)
The opposition to the merger
In fact, there was only CEO Carly Fiorina, the merger was going for. This is a practical application of the agency problem that arises because of the change in the financial strategies of the entrepreneur and the administration. Fiorina was sure to lose their jobs if the merger was not effective. The reason was that HP can not be achieved in a position to demand targetsUnder his leadership. But the owners were against the merger, according to the beliefs of the owner:
The new portfolio would be less preferable: the company's position as a leading PC vendors would certainly increase the level of risk and involve a lot of investment as well. Another important reason is in this context that HP would be the main interest in imaging and printing no longer exist as a result of diluting the interest of shareholders. In fact, the owners alsoFeeling that it will be a smaller margin, and ROI (return on investment).
Strategic issues remained unresolved: the market position in high-end servers and services would remain, despite the merger. The price of the PCS should not be delivered to everyone. There are no material changes required for imaging and printing too. This merger would have no effect on low-end servers, including Dell, would be at the top and high-end servers, both IBM and Sunwould lead. The company would also be the benefits of outsourcing for the extra work that would have been bypassed. It is not guaranteed to improve the quality. Finally, the merger would not be the same in all the conditions of IBM as thought by Fiorina.
Giant Integrated Risks: There are examples of success with a big mergers have been. Generally, if the market does not support, such as mergers, are not good, as is the case here. If HP is not properly managed its organization,The integration would only add to the difficulties. It would be even more difficult under the present conditions due to competition between HP and Compaq. How sensitive to these risk conditions, the company would also vary their money caused more problems for the owner. The most important factor of all is that the integration of culture, which both companies would be a very difficult task.
Financial impact: This is mainly because the market reactions are negative. ToOn the other hand, the position was very different from HP Compaq. Since the company will make a greater contribution to revenue and diluted at the same time, HP would have the problems that are unlikely to flourish. This means that the creation of money from the stock market would have been difficult even for HP. In fact, this may not seem like a very lucrative merger of Compaq and in the future.
The fundamental problem that the owners of the company, the merger was that it was hindering the coreThe values of HP. They felt that it is better to preserve the wealth, rather than take chances with extravagant risks. This high-risk Fiorina was a bit 'acceptable to the owners of the company in terms of prospects.
So, as impressed this merger between HP and Compaq, on the side there was the commitment of the CEO, Carly Fiorina, on the other side was the strong opposition of the owner. This opposition continues from the market, including allInvestors in the company. So, this practical problem of agency has been very popular in view of the fact that they contain two of the most powerful hardware companies in the world. There were a number of options, such as change management, business management as the management and organization that could be illuminated when the question. But if this study can be best solved with a strategy of analysis. (HP-Compaq merger faces fierce opposition from declining stock prices of new shareholders2001)
Strategic analysis of the case
Pros
A CEO is always higher, such as a merger to be an opportunity to gain a competitive advantage over its competitors such as IBM, as applied in this case and also of some interest to shareholders as well. The following are the strategies that are related to the merger between HP and Compaq:
* With an eye on shareholder value: If you see this merger under the eyes of Fiorina, would ensure that shareholders havemuch to gain from it. The reason for the increase is the same in the control of the market. Therefore, the conditions were not suitable, from a financial standpoint, this would be a lot of truth to corporate profits in the future.
* Market Development: Two organizations involved in mergers because they want to expand its market position both domestically and internationally. The integration with a national company does not take much effort, but when a company mergesinternationally, as in this case, is a challenging task on its head. A situation is the in-depth scanning, significantly before the standing in the international arena. Here is the contest for HP Compaq became a big part, so that this merger certainly a lot of thought required. Organizations to merge with international companies for the first plant of its brands, and so people know what they are capable of and what the eye to the future. This is the reason that, after the merger ofProducts would also have the logo of Compaq by HP. Once the market is well known, not the brand HP Compaq creates suffering. They would be able to pull all Compaq customers as well.
* More and efficiency: Each company through the acquisition of another or the merger goes through a process, increasing its efficiency of operations and control over them to add the maximum extent possible. We see that HP now wants a larger amount of employees. The only factoris that they must be adequately controlled because they are of different corporate cultures. (Advantages of M:, 2010)
* Aid to use the resources: the monetary resources of an organization improvised, intellectual capital and resources provides a competitive advantage for companies. If these companies merge, many of the intellectuals to come together and work towards a common goal to excel with the company for profit. Here there is no denying the fact that theCompaq higher brain would have participated in forming the strategies of the company in the future.
* Risk management: if you can, especially an example of this case, the entry in this HP and Compaq merger, a reduction in the level of risk that have diversified business opportunities. The choice of options for the supply chain to increase production as well. Now, even though HP is a pioneer in the inkjet-based, not based on the layout structure of the products, the use is more expensive.It 'can handle the risk of taking the process plant layout and the cheaper things are based. Production and processing can be realized in different countries according to the feasibility of cost as an important issue.
* Potential Listing: Even if Wall Street and all investors of the company against the merger, if the IPOs are offered a development will definitely be there because of the booming profits and value of sales, the HP would this merger thing.
* Requiredpolitical regimes: When agencies take a dip in other countries, have different rules in this country who can look at the politics of place. When HP is already a pioneer in all countries, the Compaq used to do business, this would not be much trouble for the company. The company would only need a few minor rules with political parties in some countries, where there was more prosperous than the HP Compaq do.
* BestOpportunity: When companies merge with another company, then put on sale after the needs of society. This could also be partial. If HP believes that there is not much storage space you can do the same with a net profit climbed to sell. That depends on whether the company is now regarded asa to make an inventory or for a company to be.
* Other products, services and facilities: for copyright services, which improves the level of trade. Extra StorageServices and distribution channels to offer business value. Here, HP can increase all these values with Compaq as their prospects for integration. (Berry, 2010)
Cons
There are a number of mergers and acquisitions, the work before you actually start no. In the critical phase of the same application, the company knows that it is beneficial if they continue as a merger. This can occur in the merger between HP and Compaq because of the followingReasons.
The calls are not implemented: Why the difference of cultures, ambitions and risk profiles, many of the offerings will be deleted. As for the reactions of the owners of HP, this seems extremely unlikely. So, the motivation among the employees is very important in this case. This requires an additional effort by the CEO, Carly Fiorina. This could also contribute to their maintenance of their position in society.
Disclaimer: anti-competitive deals are often limited bychaired the rules of competition rules in a country. The result is the proper order and functioning of a society trying to separate them. To get a lot of unwanted marketing failures related to these conditions. Go here if that happens, then all the money that went with the publication of the joint would be a waste. Moreover, it would still need to promote as a unit. Even the packaging, where the entire stock of Compaq, HP was the logo would bemust be redone in a negative manner on further funding. (Broc Romanek, 2002)
Compatibility issues: every company is run on different platforms and ideas. Compatibility issues often occur because of problems with synchronization. In IT companies like HP and Compaq, many problems can occur, since both companies have worked on different strategies in the past. Now may not seem necessary for management to make changes to how HP Compaq. Just as the problemsbecome the biggest worry in those days.
Disaster tax: whether the company after the signing of an agreement to have some hope of return on the money that they did happen in, around and wants this merger, the profitability and sales. If for some reason do not develop the ability to reach this position, then have a sense abomination begins each other and charge each other for the failure.
Differences in human resources as a result of cultural aspectsDifferences, issues hospitality and hostility, but other questions may be beside the origin of the behavior of the merger.
Lack of determination: When involved with organizations, they have contingency plans in mind, they set a vision, but due to a number of problems as mentioned above, to achieve the development of the new company, its mission has been delayed. Incorporated company set a goal, and if the goal is not reached due to some failure of one of the two, then bothdevelop a degree of hate. Even collisions can occur due to response bias. (William, 2008)
The companies are involved in mergers and acquisitions, the more confident they're going to make a profit from this choice: risk management failure. This can be seen as with Fiorina. In fact, they are all over the world for this fight. If their self-confidence turned out to be hubris fails. Appropriate methods of risk management that must be takenwould take the consequences if the decision takes a recession. These risk factors should control the fiscal policy, production, marketing, production and storage, and human resources are the risks associated with the merger.
Sharing strategic
Marketing
HP and Compaq will now have the common channels for their purchasing decisions are. So the advantage is this concern that even for those materials that were initially high cost of HP would now be available at a cheaper price. End users are alsolikely to increase. Now the company is once again part of its competitive strategy, where the biggest concern for all time rivals IBM can be given. The benefits of this merger in the areas of marketing can be seen in the case of common branding, sales and service. The deployment process is able to improve their side with Compaq. Now the company can look forward to the sale, to cross subsidy and a reduced price.
Operations
The main advantage in this area isthat the position of the raw material. The style of working would make the same products and services with the ideas and synchronized in a real operational strategy. Like the philosophical and mechanical control systems would also be common operational strategy would now be top of most of the market. In this context, the two companies have now co-production, design and location of personnel. Thus, the operational strategy of HP would now useProcess based on system structure and function of these common values.
Technology
The technical management of the company can now be developed jointly. This is a disadvantage in terms of differentiation that HP had in the field of inkjet printers, but the benefits are abundant. With a combined product and process technology, the technology strategy of the merged company to promote the work very cheaply. This can be done by a commonResearch and development and design team.
Purchase
The acquisition strategy of the company would also follow a common mechanism. Here it would be raw materials, machinery and power are shared in order to lower the cost of new. This can be through a central mechanism with a buyer to keep lead a joint policy to be made in the eye. Now HP would have a similar attitude for both inkjet printers and personal computers to think. This is because the parameters for the productioncould also be performed under the same conditions.
Infrastructure
This is the most important part of strategies that would have been a result of the merger. The companies have common shareholders for the provision of necessary infrastructure. The source of leadership style capital, and legislation would be common. So would the infrastructure strategies should consider these things. This can be done by a common accounting system. HP has the ability to have a separateBilling system for the products it produces, but that would only provoke an internal competition. Thus, the benefits are realized through a common infrastructure accounting, legal and resource management system. This would ensure that the investment would improve the relations of the company. No investor would invest in one if Compaq HP follows a common strategy to hesitate.
HP now wants another fact that this merger would prove to guaranteeCompetitors in the presence of target and those of competitors such as IBM as well. In addition, the functioning of the market and the question about what needs to exist for its time. The company shall ensure that the business strategy that uses efficiently enough to help a future. The degree of diversification and must be carefully managed. This is because the products of both companies have performed exceptionally well in the past. Thus, the optimal degree of diversificationrequired under the context, so that the company is able to meet the needs of customers. This was asked by the owner of the HB in question, but must be made by the CEO Fiorina. (Bhattacharya, 2010)
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