The merger responds to a careful consideration of development opportunities. It must be justified by the creation of value. Air France and KLM agreed to merge in order to make a synergy primarily economic in nature. Indeed, the synergies in economy, business, by increasing their sizes, including seeking economies of scale, correspond to a ‘decrease in the average unit cost of production, possibly with a increase in the volume'.
There are synergies possible to avoid duplication of fixed costs (advertising, R & D, government etc.). There are product complementarities to access into new markets or for stronger position (gain market shares) in core markets. Companies can also search through a merger of financial synergies, such as reducing the risk of bankruptcy, thanks to improved financing conditions and greater debt capacity (with lower interest rates ).
Having such a merger acquisition balance is often a resounding failure more than a success, or at least does not reach the targets. Many leaders explain these failures with the reason of poor implementation, "the idea was good, but we did not manage the personal conflicts, cultural differences, etc."
It is obvious that the size of the operation involves greater complexity, which increases the risks of failure. A number of important factors are possible:
-Absence of specific strategic objectives of the leader, it is necessary that the project fall within a specific strategic vision, he must be careful not to overestimate the benefits being persuaded by the existence of synergies.
-Estimating the difficulties and obstacles of predictable obvious inconsistencies are sometimes neglected, causing from the beginning the failure of efforts in the project.
-It is necessary to assess the market, taking into account a number of criteria such as legislations, the attractiveness of the sector, pressures and competitive position, development potential, market shares, profitability prospects, the quality, innovation potential, geographic coverage, the possibility of sharing the cost and revenue synergies, asset quality, staff, etc.
-Difference in size between the firms: Different sizes makes integration more difficult.
-Organizational and cultural incompatibility: Too many differences make it difficult to integrate. It is difficult to forecast the operation to measure the degree of correlation between the two merging entities.
Many other factors may also intervene and effect the success of the merger:The risk of delays - in fact, sometimes the purchases of raw materials and also the harmonization of methods, such as computer software are sources of slowdown. Similarly, some analysts believe that during the transition period following a merger, productivity goes down by 50%. We must therefore question the ability of the company to withstand such a shock.
There is also some risk of departure of key people who disagree with the proposed merger and leaving the company, especially highly courted by head offices,.
A merger often involves profound changes, often accompanied by downsizing. Then the risk of social conflicts should be evaluated from the analysis phase to establish possible preventive measures.Much of the failure of merger or acquisition can be attributed to problems related to human resources.
Tags: merger of Air France and KLM, Management and Human Resources, alliance strategy
[...] The sales of Air France-KLM are now up 58%. In all markets, the group's desire is to coordinate the different but complementary trade policies of both companies in order to enrich the experience and know-how. This implementation was carried out quickly, especially in the fields of management and operations management. This translates into a reduction in trade spending abroad by renting together, wherever possible, their offices and agencies, and renegotiating all assistance services at the airport. Local organizations of the two companies have also been segmented into: - "coordinated markets" served by both airlines and where it has maintained the existing structures - "complementary markets" where the two companies are not present, but benefits from the Trade Partner - some markets where integration is more advanced, being led by one leader - A merger involving commercial synergies a-Sales and Distribution Cost savings are now done with the coordination of the sales structure of the two companies. [...]
[...] III) Marketing Analysis 1 - Marketing Mix a-Product For summer 2006, Air France-KLM pursued its strategy of profitable growth with capacity (available seat kilometers) which grew by on long-haul network + On the medium-haul international network + On the metropolitan lines - The long-haul The group continued its expansion during the summer of 2005 on its most dynamic markets: Asia 11.4 47 flights per week joins China with the arrival of a fifth destination (Chengdu) 36 weekly flights to India with the arrival of a fifth destination (Bangalore). [...]
[...] Capital of Air France-KLM Before the merger: The French state shareholding in Air France was important because the company was ultimately not fully privatized. For KLM, the capital was mainly in the hands of private shareholders and investors, the Dutch state had a small part of the capital.The company was already privatized. After the merger: The main effect on capital is the privatization of Air France that is to say that the French state represents less than 50% in the new structure. [...]
[...] KLM is one of the most active companies on the internet and it offers discount rates for online orders 1 - The alliance strategy: Alliance with Skyteam To reduce costs and bring more customers, Air France, with three partners, created on 22 June 2000 a global airline alliance with SkyTeam. This alliance allows Air France with its partners, to increase its marketability and its network, that is to say its number of destinations, while reducing the number of calls, which improves the comfort of its customers. [...]
[...] Management and Human Resources Structural organization of the two companies before and after the merger 1 - Since the merger The Air France-KLM company's annual turnover reached 19.08 billion Euros in 2005, representing a workforce of 106,000 of which 73,400 were of Air France. Ø Flowchart: Managing Team Chairman: Jean-Cyril Spinetta CEO: Pierre-Henri Gourgeon CFO: Philippe Calavia Human Resources: Jean-François Colin Communication: Francois Brousse Air France proposes a model based on social cohesion, and responsive and professional development of employees. [...]
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