Decision-making is the process of setting a mechanism of regulation and operation in any setting. The difference between decision-making and implementing decisions is that the former deals with the process of creating the decisions while the latter is putting the decisions to use. In this case, it means that decisions cannot be implemented unless they exist or they are already in the process of being made. Organizations all across the world depend on decisions to continue or better their operations. Decisions are dynamic in nature but at the same time they are limited to only specifics of use. The dynamic nature of decisions means that one decision can be applied in several situations while at the same time; several decisions can be made to suit one situation. Inspite of whichever perspective one uses to make use of decisions, the technique of making the decisions depends on the issues at hand and the variables at stake (Carlsson, Fulle,& Heikkila, 2007).
Merging businesses is a practice that many organizations and companies tend to assume when there is an impending crisis or when there are opportunities to be explored. Considering the negative side, a company or an organization will merge with another so that they can cut on spending through joint efforts or exploring economies of scale if the companies were both in crisis. Production cost, technology, and market share are some elements whose negative side of depreciation may cause a company to consider merging with another. On the positive side, companies will merge not in the process of cutting down on spending but rather realizing new possibilities together. For example, Samsung as a manufacture of microprocessors and 3D microchips can merge with another organization like Apple, which manufactures high-end computers and handheld devices to explore the opportunity of using their technological innovations to make 3D devices (Desouzaa, 2006).
Heidelberg and Man Roland are both Germany printing companies that did not seem to be in good financial and operating status for best part of the period between 2004 and 2009. Following allegations that the companies which were almost going broke that they would enter a merger, this paper will reflect on how smart or otherwise the move was to be in case it hand been implemented. Inspite of the fact that there was mixed information from the press, it seems the decision making process did not come to an agreeable end after consideration of all variables.
Trouble in the economic sector is an eminent problem that every business finds itself in or has to fight. Following, the financial crisis of 2000 had it fair deal with organization as well as a bad part to it. Heidelberg which is a German Printing company had not attained the level of a large organization was one among those in the receiving end. The financial crisis was not a case of Heidelberg alone but rather an issue that was facing majority of the large economies. Given that Germany is a member of the European Union, the issues of financial crisis was even a hard smack on the faces of organizations that belong to the member states of the EU. The EU Commission in return does not allow economic matters to be handled privately by member states when big issues like the financial crisis occur. In this case, the problem that was supposed to be Germany’s and the rest of the EU member states to handle alone resulted into a joint effort to equate change and see the economy change (Dyer, 1990).
The case for Heidelberg is not surprising that is started occurring almost five years later. In the economic and financial sectors there are two players and between them exists private and public organizations. The public sector is more government owned while on the other hand is the private sector that is owned by individuals and non-governmental groups. The advantage of public sector when it comes to such economic crisis is the fact that the government through lending usually protects it. Heidelberg belongs to the private sector and with the issues that were facing every other organization it was left alone to fend and cater for its problems. Five years done the line, small companies like Heidelberg started to merge in order to invest their abilities in dealing with competition but Heidelberg did not. Towards the end of 2008, Heidelberg was almost entering a bankruptcy state that almost crumbled its financial strength trying to deal with it (Harbi, 2001).
Man Roland’s Issues
As a digital print manufacturer competing with every other company doing the same, Man Roland was and still is faced with competition problems. Consider an organization that is listed under the public sector competing with Chinese and Japanese companies that sell their products for almost half the price Man Roland’s. Now consider a situation where the same case applies but the market share is too minimal and is invested with many other organizations from all over Europe. The digital era we are in has provided a large market for technological and digital equipment. It is through this that most organizations keep entering the market while unfortunately the market size does not seem to reflect such change rationally. For companies like the Man Roland which is government controlled and bound by the EU Commission does not have much of a choice when deciding on what to do exactly to deal with the competition from internal and external forces (Hsieh, Sh, & Lu, 2004).
Through this dilemma, Man Roland and Heidelberg were made to merge a process of dealing with the competition. However, Man Roland is much larger organization than Heidelberg and the merger could be prevented from happening from this. During confirmation of the merger from the CEOs of both organizations, they alleged not to have held such talks even after Bloomberg newsroom reported and printed on this. It seems the issue of merging a private sector organization with a public sector organization under the circumstances of varying operational margin did not auger well for Man Roland. Whether the issue is a merger, an acquisition, a joint alliance, and any other type, it is clear that Man Roland has more to complain about than Heidelberg in terms of market share, rising competition, and being larger than Heidelberg. Overall, a decision that would solve the issues that every organization is faced with in terms of the merger depends on a strategic standpoint of addressing each side equally considerately as the other (Huanga, & Chub, 2008)
Theoretically, it is hard to put two sick people in the same bed and hope that they will recover together. In reality, if these people are put to bed together they have the potential of infecting each other and even worsening their situations. However, in the case where the equation is unbalanced, one of the people can be sacrificed in order to save the other. For example, a patient suffering from advanced lung cancer can be used as leverage for a patient suffering from kidney failure. Technically for the case of organizations, it is hard to hope that the same management that took those companies to the problems they are in would collaborate to make the situation better. It is also hard to imagine that one of the organizations is at a better situation than the other would give up its positive variables for the sake of the other. Considering this case, a merger for Heidelberg, which lags behind Man Roland in terms of technology and recognition, would be facelift while at the same time damaging the chances of Man Roland (Imoto, &Yabuuchi, 2008).
In terms of how much the two companies would like to benefit financially and economically, it is obvious that the objectives and goals of each organization is different from each other. The founding of each of these organizations was a result of pursuing already formulated objective and goals, a merger for them would result into a situation that derails the companies from their specificity in following their goals. The problem with derailment of objectives is the possibility of incurring negative aftershocks of the situation while at same time there may be uncertainties that could lead to closures. A mistake in the management of either side leads to the negative results that would be felt and carried by both the sides. For this case, a merger is a probability entity that has the potential of attaining all, some, or none of its objectives (Janic, 2002; Lawson & Longhurst, 2006)).
The problem at hand that may lead to a company seeking to merge is lack of finance for future expansion. The company therefore will merge with another company so as to get finance from other stakeholders such as the minority shareholders of the subsidiary company. This way, the company is able to secure its future and also be sure that it will indeed expand to its greatest heights.
The risk tolerance or profile of mergers must be carefully analyzed both by the holding company and the subsidiary. The two must analyze if they are really ready to enter into an agreement that will last concerning the future merger. The risk profile must include possibilities of losing finance and the variations in profits ranging from one year to another.
There is also a possibility of wrangles coming in between the majority and minority interest. The minority interest represents the remaining percentage of interest by minority shareholders in the subsidiary company after the acquisition is done
The negative results that would be expected from the merging of these organizations using the theory of two sick people in one bed would be furthering the negativity of the situation. The models of operation, the set of objectives, the aims and goals of each organization, the scope of operation, and the strategic options for avoiding and dealing with crises are different for each individual organization. The differences of these organizations in terms of how they implement change and how they operate would lead one organization to be in the receiving end. Considering the option of dissolution from the merger, would leave the already used organization powerless with no business options to alleviate its predicaments. On the other hand, the organization that uses the other for its survival would be left uncovered and inspite of the period that it enjoyed positive results, it would be vulnerable to major risks like subsiding of market share and diseconomies of scale (Steffens & Martinsuo, 2007).
The fact of two almost unable organizations merging to make some positive change in the way they operate would be hindered by the inputs they contribute to the merger. One organization may be merging with the other so that it can solve its problems therefore neutralizing the positives of that organization. Operating at mediocre standards will not only paralyze the probability of fair business results but also the chances and strength of expansion.
Some of the uncertainties include the management of the group company in future. It is difficult to establish how this will be done since the company is now bigger. The current management might not be endowed with the expertise to manage the group company.
There are also uncertainties regarding future expansion. The subsidiary company is new and the operations could change due to the acquisition. This is in regard to the profits made by the company.
Further, there are uncertainties regarding the expenses that will be incurred after the acquisition. This is relevant to the holding company since the expenses affect the net profit. This will have to be considered before the acquisition is done.
Accounting for the group company will be more involving. It is uncertain how this will be done as well as the amount of work force required to help in consolidating the financial statement. Altogether, it will be an added expense to the company.
Expected Value Analysis
Merging Man Roland and Heidelberg could be considered a positive thing if they join forces to attract a larger market while the same time getting rid of their personal problems of bankruptcy and unfavorable competitiveness. The benefit of the merger to Man Roland is that it would be in a position to get Heidelberg’s client base while Heidelberg does the same. It seems a balanced equation if both benefit from each other but considering the possibilities, a stabilized mode of operation would lead to the increase of overall customers. If there are issues to be considered outside the merger is how to convince unmotivated customers that the merger has anything new to offer them. Customer satisfaction cannot be achieved by simply making a company big or by cutting the cost of production. Although insignificant in some areas, motivating employees through models like Gainsharing is important to increase the output of an individual employee while putting the organization in a position of maximized profitability (Meade, 2002).
The issue of competition does not end by merging efforts but instead urges the competition to up its model of doing business. As Heidelberg and Man Roland consider merging, other organizations may consider doing the same thing in order to attract the benefits of mergers. Through merging, small organizations become large and therefore put up strengthened foundation that stabilizes their outreach and recognition. On the other hand, large companies or organizations merging can mean disaster for the small organizations considering merging. This can be explained by considering an organization whose operation costs X million dollars and attracts 30 percent of the market; on another case, an organization whose operation costs 1.5X million dollars and attracts 32 percent of the market would make it unbearable for smaller organizations operating at 1/8 X million dollars with a market share of 3 percent. When merging, the large companies would be operating at a cost of 2.5 X million dollars and attracting a market of 62 percent. Given that economies of scale play a role in this situation, the large organizations would cut on operation cost at about 15 percent of the 2.5 X million dollars and increased output would result into a 5 percent increase for market share. Assuming that there are 13 small organizations competing for the remaining 38 percent, an increase of 5 percent for the market share of the merged large organization would lead to a 5 percent deficit in the market share of the small organizations. For this case, a merger for Heidelberg and Man Roland would open the
marketing eyes of other organization hence leading to a further crumbled situation (Pheng, 2006).
Decision Tree Structure
Merging Heidelberg with Man Roland is both a good move as it is a bad one. It is good if there are economies of scale that would result from the merger in terms of accruing benefits that would lead to expansion and exploration of new technologies. However, the negative results of the merger are obvious in that one of the companies may be used by the other company as bait and advantage in crises. (Tian, Kwok & Liu, 2004). Away from what may be positive or negative of the merger, there are situations and variables that may make it impossible for the merger to work.
Different managements that will not change even after the merging are likely to influence each other while at time resulting to conflicting interests. In this case, conflicting interests and influence are likely to drive to the organizations into bigger problems than they are in currently without the merger. How is this possible? Consider that Heidelberg targets Europe and more specifically Germany only while at the same time Man Roland targets the entre of the EU25 nations and other international markets. The influence that Heidelberg would have on Man Roland is to urge it to focus fully on a smaller market. On the other hand, Man Roland would try to influence Heidelberg to expand its operations beyond Germany to cover a larger market and avoid the pressure other EU25 national organization may put on the Germany market framework. On the hand of conflicting issues and interests, Man Roland may be willing to use a model that would be profit maximizing while Heidelberg wants to use a model that maximizes employee performance (Pohekar & Ramachandran, 2004).
In such a situation, the conflicting models although beneficial to the organization would be damaging to the decision making process. In a merger, the organizations may be in terms where each organization holds the same privileges as much a equal rights in the decision making process. Considering that an idea by one organization must be seconded by the other, it means that in an event where this other organization has a different opinion would want the former organization to approve of it. In this situation, there would be no agreement at all or there could be implementation of non-effective decisions and policies as a strategy of one organization pushing for approval of its proposal to the other (Powera & Sharda, 2005).
Some of the multiple objectives of include maximizing profits while minimizing the cost of a product. These two must be pursued by the merger so as not to lose out on customers and as well make reasonable profits.
Performance of the company must be improved while at the same time minimizing on the cost of fuel. These two are also conflicting objectives and as such, a balance has to be struck.
Attitudes to Risk
A positive attitude towards risk is important since it enables the company to avoid the occurrence of such risks. They also are made manageable in case they occur.
The management of the group company must have a positive attitude towards all the possible risks. It is important that uncertainties of income be removed through increased advertisement and marketing. (Tian, Kwok & Liu, 2004).This will lead to increased sales levels.
It is also important that the risk of poor management be managed through indulging experienced managers and supervisors fit for the job. This will lead to increased sales by the company.
At the same time, the group company must manage the risk of increased expenses through cost reduction methods. These include economies of scale that lead to reduced costs of raw materials and other goods.
Negative results of the Merger
The difference between a merger and an acquisition is that the latter is a situation where one company buys off the empire of the other and may decide to change brand names or assume the same brand names. A merger is a situation in which an organization comes together with another as business partners to produce similar products and services. Considering the case of Heidelberg and Man Roland, the situation can be viewed as a case of one capable organization trying to acquire the positive sides of the other organization. In other words, the technological deficit of one company would be compensated by the technological surplus or strengths of the other (Saaty, 1983).
The theory of the bed and two sick people can be reversed to work for the case of organizations that would consider merging. Inspite of the fact that one organization’s infection may infect and worsen the situation of the other, still the situation of one organization can get help by helping another organization in dealing with its problems. so how does this come to fruition? The fact that an organization is different from the human body, strategic moves can work better for one organization than equally effective medicinal intervention would work for an organization. In this case, the theory that two sick men would not help each other recover by sharing the bed does not apply in all considerations for the case of organizations (Steuer, 2003).
An organization that is operating at X amount of money above the standard cost and attracting 20 percent of local market and suffering from lack of customer satisfaction may merge with another that is attracting 20 percent of European market, operating at 2X amount less than the operation cost, and suffering from too much competition from other organization would settle the situation a bit (Tavana, Kennedy, Joglekar, 1996). When considering a case of two people suffering from transmittable flu and skin disease, it is likely that the one suffering from flu will be infected with skin disease and this will also occur in the vice versa. However, if the person suffering from flu was immune to skin disease and the one suffering from skin disease had an herb that would heal flu at a certain degree the situation for the flu-infected person would improve. On the other hand, if the guy suffering from skin disease was immune to flu and had a cure for flu and the guy suffering from flu had a cure for skin disease would lead to the improvement of the one suffering from skin disease. For this case, the situation for Heidelberg merging with Man Roland can be made to work, if the Heidelberg worked towards using Man Roland’s technology to improve its customer satisfaction efforts. In the same way, Man Roland can make use of Heidelberg’s local market share to expand its regional market share and deal with the increased competition from other industry players (Tian, Kwok & Liu, 2004).
For the case of Heidelberg and Man Roland there is use of technology, expansion of market share, dealing with competition, making decisions as a unit rather than individuals, dealing with the factors of differing organizational sizes, objectives, goals, and operational models.
At the event of merging, the merger acts like the new focus of the organizations rather than their individual objectives and goals. By this, the purpose of merging should draw the goals and objectives of the merger. To do so effectively, the organizations should dissolve their individual goals and objectives and assume other joint ones. For this case, formulation of objective will not be for the sake of Man Roland or Heidelberg but rather for both Man Roland and Heidelberg.
Decision-making and operational models are almost alike and they are taken care of the formulation of objectives and goals. When objectives are for the sake of the merger rather than individual organizations, decisions made will not be affecting one side of the merger but the whole package.
The issue of organization size is not a factor to be considered when it comes to merging for returns can be shared according to the ratio of contribution each organization brought into the merger. However, it is likely; that the bigger the size of a partner the more influence it will have towards the success or failure of the organization. To balance this, the extra size of an organization can be neutralized through lending to the other organization so that each organization contributes at a ratio of 1:1.
The issue of competition translates directly to the market share of an organization. By merging, economies of scale are not supposed to be pocketed as profits; they should rather be treated as capital from reinvestment for refining technology, enhancing customer satisfaction techniques, enlarging the margin of market share by making a positive impact in terms of customer requirements (Vaidya& Kumar, 2006).
Heidelberg and Man Roland are both Germany Digital Printing Companies that were faced by the challenges of bankruptcy and unfavorable completion respectively in the period between 2004 and 2008. Because of this, the organizational management boards decided that merging would work out for them in that each organization would put what is left of its pride to business as a partner of the other. This decision was both a positive and a negative considering that the outcomes of the market cannot be predicted this decision was trial and error (Zhou, 2006).
The decision of this kind involves, invokes, and revolutionizes extra efforts in making variables work, cooperation for organizations, and opportunities respectively for the better of the organizations. However, given that it is not easy for organizations to agree on everything when it comes to decision making and implementing policies, a neutral point should be reached to eliminate chances of conflicting interests. Bottom line when considering mergers, the individual objectives and goals should be dissolved and new ones that are considerate of each side adopted.