Zappos-Amazon Companies Merger: Organizational Culture

Introduction

The acquisition of Zappos by Amazon is a good example of the complications of combining two companies that have different organizational cultures. Although the merger between the two companies was mostly inspired by developments in the market place, the usual expectation is that the values and cultures of the smaller company are often absorbed by the big one. The Zappos and Amazon case is unique because both companies sought to maintain a certain degree of independence after they merged.

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Consequently, within the Zappos-Amazon merger, there is the question of what types of barriers exist in relation to effective intercultural communication. For instance, how is the merger going to affect the deep-rooted organization communication cultures of both companies? One important consideration in the course of this research is that Zappos’ tremendous growth trajectory has mostly depended on the company’s strong culture and insistence on top-notch customer service.

The company’s culture is based on the philosophy that when the customers are happy, the employees are happy and the company’ overall outlook is also good. According to Zappos’ chief executive officer (CEO), the company is mainly driven by culture. Therefore, the communication professionals of the newly merged Amazon and Zappos should develop a communication strategy based on Zappos’ former organizational culture that integrates employees into this new organization culture by incorporating intercultural communication because the merger creates a new organizational climate and communication networks.

Background

The complexity of merging organizational cultures is addressed by Tjan in an article where he draws four lessons on culture and customer service based on the actions of Zappos’ CEO (Tjan, 2010). In this article, the author reckons the need for establishing a company culture early on in the merging process. Therefore, it is the responsibility of the new communication professionals to put in place measures to address the pending merger issues.

This article also outlines the willingness of the management in the course of merging organizational cultures. Core values are noted to be an integral part on any new organizational culture. Another article by Bill Taylor is titled “Why Amazon is Copying Zappos and Paying Employees to Quit” also has some important connections to the organizations’ merging organizational cultures. In this article, the author addresses the impact that Zappos’ company culture has had on Amazon.

In another article, the authors address the process of building high performance cultures by using the Zappos-Amazon merger as an example (Warrick, Milliman, & Ferguson, 2016). This article outlines several key drivers in respect to the successful merging of any two organizational cultures. The last article that is addressed in this case study urges companies to form partnerships through mergers as opposed to integrating their cultures. According to the authors of this article, partnering produces long-term results when it is compared to merging (Kale, Singh, & Raman, 2009).

There are various important concepts that apply to the Zappos-Amazon merger. First, the underlying issue in this merger is whether the two companies efficiently influence each other to create a bigger company value. Furthermore, the merger is expected to gauge if the two companies can align their objectives and grow their long-term goals as one unit. Zappos was founded in 1999 primarily as a company that sold shoes online.

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The company’s culture is shaped by the company’s desire to deliver the best customer service to its clientele. Consequently, the company is known for doing things differently than other companies, a factor that is key to Zappos’ corporate culture success. Prior to the merger, there were concerns as to whether Tony Hsieh, Zappos CEO would give up on his highly regarded culture in favor of Amazon’s way of doing things. However, the compromise was to have Zappos operate as an independent identity, with its own organizational culture. The acquisition of Zappos by Amazon was subject to various impending changes in regards to the two organizations’ communication strategy, intercultural communication, communication networks, and organizational climate.

Rationale

The communication professionals of the newly formed Amazon-Zappos company should base their communication strategy on Zappos’ prevailing organizational culture because it is part of the company’s culture and brand. Therefore, part of the value that Amazon is set to gain from Zappos is the asset that is Zappos’ organizational culture. Zappos has a unique organizational culture, which is mostly aimed at delivering good customer service.

It is important to note that some of Amazon’s earlier acquisitions have failed due to abrupt changes in organizational culture. For example, Amazon acquired “Endless.com” a previously profitable company, which failed because of oversights during the integration of the two companies. Zaremba points out that culture is an important aspect of any organization because it lays the groundwork for other organizational contexts (2014, p. 215). In reference to its past acquisition failures, Amazon was looking to acquire a company that would easily fit into its intercultural communication sphere. On its part, Zappos had thriving intercultural communication policies that were built on the need to understand customers, processes, and businesses.

An article on mergers and acquisitions reiterates the need for multinationals such as Amazon to partner with the companies that they acquire instead of integrating them (Kale, Singh, & Raman, 2009). This article advises companies to avoid the practice of assimilating the businesses that they acquire, and instead allow them to remain independent. This approach also encourages companies like Amazon to retain the top management of their acquisitions.

This is good advice for the professionals of the newly formed Amazon-Zappos entity. If the communication professionals base their new strategy on Zappos’ former organizational culture, they have a chance to find out early on if their approach is working. The authors of this article refer to this approach as ‘partnering’ and they claim that the results of this approach have already been proven during the Ulker Group’s acquisition of Godiva (Kale, Singh, & Raman, 2009).

The main advantage in using this approach is that if accommodating the culture of the acquired firm is not working, the acquiring entity can gradually integrate the intercultural communication aspects of the two companies. The communication professionals of the resulting entity have to consider the advantages of this simple approach. Furthermore, a strategy that is based on Zappos’ former organizational culture is the only way of tapping into the proven benefits of this company’s intercultural communication abilities.

Another benefit of developing a communication strategy that is based on Zappos’ former organizational culture is that employees are easily integrated into the new organizational culture even in the context of a new organizational climate. Zaremba’s guide in reference to multinational expansion recognizes the cultural complexities that accompany activities such as mergers and acquisitions (2014, p. 221).

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Furthermore, most of the outlined approaches to multinational expansion are primarily based on a company’s ability to utilize effective intercultural communication practices. The goal of any company when seeking to expand is to continue to invest in long-term ventures. In the case of Zappos, Amazon is seeking to enjoy the long-term benefits of combining the two companies. By adopting Zappos’ former organizational culture, the company’s internal corporate culture does not change but only external factors shift. Therefore, Zappos is able to continue to focus on its growth agenda. On the other hand, Zappos’ success helps Amazon to achieve both its internal and external goals.

The core essence of Zappos’ organizational culture includes independence and the desire to deliver an all rounded satisfaction for customers, vendors, and employees. This is a broad approach to intercultural communication and it is an asset that is worth preserving in the new acquisition-setup. In the article on building high performance cultures, the authors explore the value of Zappos overall culture (Warrick, Milliman, & Ferguson, 2016).

The article also points that organizational culture cannot be built without the input of the management. Consequently, the involvement of communication professionals in the Zappos-Amazon acquisition is very important.

Another reason why the communication professionals should favor Zappos’ former organizational culture is that the resulting communication networks are advantageous to employees of the two entities. Assimilation, socialization, and identification are key factors in regards to communication culture (Zaremba, 2014). Furthermore, it is important to note that organizational socialization occurs in stages. In the light of these facts, the communication professionals are expected to handle the transition in organizational culture by favoring Zappos’ culture. This approach ensures that the stages of organizational socialization are taken into account in the course of formulating a new culture. In an article that appeared in the “Harvard Business Review”, the author tracks the results of organization socialization between Zappos and Amazon (Taylor, 2014).

According to the author of this article, Amazon is imitating Zappos’ mode of socialization by offering employees money to quit working for the company. This is a good manifestation of transitions in organization culture. Imitating Zappos gives Amazon a chance to evaluate the success of various forms of organizational socialization. The evidence from resulting modes of socialization because of merging organizational cultures shows that the communication professionals are on the right path by adopting Zappos’ former organizational culture.

Conclusion

The Amazon and Zappos case study provides an example of what transpires when two different organizational cultures come into contact. The recommendation is for the communication professionals to favor Zappos’ former organizational culture in the new set up because this approach is the most effective one. The goal of any acquisition or merger is to combine strengths in order to create more solid entities. In the case of Zappos and Amazon, the latter should recognize the former’s organizational culture as part of the acquired assets. Retaining employees is yet another reason why the communication professionals should favor Zappos’ former organizational culture. All available evidence indicates that this is the most viable approach in the Zappos-Amazon scenario.

References

Kale, P., Singh, H., & Raman, A. (2009). Don’t integrate your acquisitions, partner with them. Harvard Business Review. Web.

Taylor, B. (2014). Why Amazon is copying Zappos and paying employees to quit. Harvard Business Review. Web.

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Tjan, A. (2010). Four lessons on culture and customer service from Zappos CEO, Tony Hsieh. Harvard Business Review. Web.

Warrick, D. D., Milliman, J. F., & Ferguson, J. M. (2016). Building high performance cultures. Organizational Dynamics, 45(1), 64-70.

Zaremba, A. J. (2014). Crisis communication: Theory and practice (3rd ed.). New York, NY: Routledge.

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