Introduction
In the contemporary business sphere, international companies have taken on different growth and expansion strategies. A merger is one of the most commonly adopted approaches. Ravenscraft and Scherer defined a merger as a statutory combination of at least two companies by transferring the properties of one business to another thus forming a single corporation (45). Commentators such as Stewart, in his regular New York Times Column, stated that merging gives rise to several issues including monopolistic powers, and management concerns (par. 1). Recent reports indicate that Google would be merging with AbbVie. Given Google’s environment, the issues that Stewart discussed, especially management conflicts, might indeed arise (Stewart par. 1).
Problems and Solutions
Problem
Google has a virtual-based working environment, which is defined by the company’s reliance on the Internet. The entity specializes in a range of internet-related products and services. For instance, it provides a search engine service through which users are able to attain information about virtually everything, drawn from diverse sources. Aside from this, the company offers a set of tools intended to assist businesses, irrespective of the type, succeed in e-commerce.
AbbVie’s environment is entirely different from Google’s. It is a research-based biopharmaceutical organization that specializes in the research, development, and production of a range of medical drugs. Given the contexts of the two companies, it follows that the intended merger will take the form of vertical integration. While AbbVie uses Google’s services for research, the industries in which the two companies trade differ. Therefore, the possible challenges that the merger will face are closely related to those experienced in vertical integration.
Each of the two companies has a different management team and business model. Therefore, it would be extremely difficult to combine the two businesses into one successfully. According to Jain, Kini, and Shenoy, maintaining the top management from Google and AbbVie may be a challenging course. If one company is not well represented, it is highly possible that management conflicts might arise (597).
According to Ravenscraft and Scherer, at the heart of organizational success is the active participation of the top management. The management team is responsible for making strategic decisions (53). However, if conflicts arise, the ability to make such decisions becomes ineffective. Consequently, plans, strategies, goals, and operations diverge rendering an organization incapable of achieving its purpose. In light of this, if a working solution not achieved, the long success story that each company has registered throughout their respective histories might come to an end.
Solution
To avoid the above potential issue, it would be recommendable that Google and AbbVie set out a clear organizational structure for the management of the new entity to be formed after merging. Aside from this, attractive and intelligently structured incentives, including financial enticements, should be provided. A clear organizational structure is essential since it could be used for monitoring and driving success (Jain, Kini, and Shenoy 600). Therefore, through a clear structure, conflicting areas will be easily determined, and changes made. Incentives are meant to motivate the management to work towards a common goal thus eliminating the chance of conflicts.
Conclusion
In conclusion, it is clear that the intended merger between Google and AbbVie could give rise to potential threats. As discussed, challenges could be experienced when attempting to integrate the top management teams from the two companies. If the process is not carried out appropriately, management conflicts and subsequent detrimental effects on the merger’s purpose might occur. It is highly recommended that a clear organizational structure, along with intelligently structured incentives, be established to eliminate the conflict threat and its effects.
Works Cited
Jain, Bharat, Omesh Kini, and Jaideep Shenoy. “Vertical Divestitures through Equity Carve-Outs and Spin-Offs: A Product Markets Perspective.” Journal of Financial Economics 100.3 (2011): 594-615. Print.
Ravenscraft, David, and Frederic Scherer. Mergers, Sell-Offs, and Economic Efficiency. Washington, D.C: Brookings Institution Press, 2011. Print.
Stewart, James. When Media Mergers Limit More Than Competition. 2014. Web.