Case Study A. T. Kearney Ltd.
A T Kearney was acquired by Electronic Data Systems (EDS) just over a year ago. Many consultants were concern about the ability about this 2 very different organizations, with different skill setsand cultures, to work together in blending their services into a broad, seamless continuum. Senior consultants wondered about the implications it would have to be made for these 2 companies to benefit fully from the acquisition. Summary of the Facts The acquisition of A. T. Kearney Ltd. , an international management consulting firm, by Electronic Data Systems (EDS), an information systems company, raised many issues.
Among these was the issue of how to leverage the merger in terms of providing strategic consulting and information systems solutions to clients. Should the two firms cross-sell each other’s services? Should A. T. Kearney call on existing EDS clients and vice-versa? Should the two firms work together to secure new clients? The case focuses on the chairman of A. T. Kearney Ltd. in Canada as he prepares to deal with the above issue. Once this issue has been worked through, there is an opportunity to deal with sales management issues arising from this decision.
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For example, if cross-selling is to be encouraged, what incentive scheme might be appropriate? The purpose of the case is to show how sales management decisions must be driven by marketing strategy and the desired customer interface that marketing strategy implies. Analysis EDS, the leading pure-play global services company, provides strategy, implementation and hosting for clients managing the complexities of the digital economy. EDS brings together the world’s best technologies to address critical client business imperatives.
It helps clients eliminate boundaries, collaborate in new ways, establish their customers’ trust and continuously seek improvement. EDS serves the world’s leading companies and governments in 55 countries globally. EDS reported revenues of $18. 5 billion in 1999. The company’s stock is traded on the New York Stock Exchange and the London Stock Exchange. Recommendation Mergers should exhibit the following five characteristics in order to be considered potentially viable candidates for a successful merger:
1. Compatibility between company mission statements and direction. What are you trying to do? What are they trying to do? If they relate closely, you have the first element. 2. Beneficial economies of scale. If you will be larger, will you truly be better? Some larger companies cannot respond as quickly to market changes due to their size and the challenge coordinating new directions to employees. Economies of scale are not always beneficial, so make sure you can quantify that having more of one direction is what you want. 3. Cultural synergy.
If one company’s culture is jeans, foozball machines, cut-throat hiring/firing, and shoot-from-the-hip decision-making and your company requires process and forms for most activities, good communication and values employees highly (no layoff policy), you may have a big challenge on your hands. 4. Headquarters in same city/geography. If your company is headquartered in the neurotically fast-paced, job-focused Silicon Valley and the other company is based in Atlanta, founded on values of southern comfort, you might have a big problem.
Two companies should be headquartered near each other to maximize the return on the investment and maximize the economies of scale. Also, it is harder to communicate halfway across the country than it is to communicate someplace 10 miles away. 5. Demonstrable positive growth. If buying a company will give your company the entry into a new market – where they have technology that would take far longer for your company to create than to buy, then it makes sense to buy. Or, if their success in a market has consistently eroded your ability to be successful in multiple business segments, it might be beneficial to learn from them.
There are two ways to do that: hire their people, or buy their company. Conclusion A merger is like a marriage – it’s all about people and their ability to work together in a way that benefits the combined enterprise. The basis for a successful acquisition/merger includes a common understanding of the reasons for the merger, a considered assessment of what both sides bring to the party, and complementary product lines and geographic markets. In addition, there must be thorough due diligence on both sides, a recognition of potential problems, and the ability to exploit synergies.