Include a background statement to introduce what you will write about. Summarize the scenario, but do not restate the scenario. Identify key points, the stakeholders, setting, and situation.
The case study is about the decision-making of the chief executive officer of D2Hawkeye, Chris Kryder in 2009 January where he was to make a tough decision of selling his company or retaining it. Because of the great financial depression in 2008 and the company being declared bankrupt during the previous years, D2Hawkeye has performed dismally and Chris is contemplating selling the company to Atlantic Analytics, which had made an offer of accruing the firm. D2Hawkeye deals with developing and providing medical analytics in the United States. The main issue in the case is are that D2Hawkeye is the leading company offering medical analytics in the united states but Atlantic Analytics has offered a lower price for the sale. Another tough decision Chris is considering is to sell part of D2Hawkeye to a private equity partner. The key stakeholders of the company include the six partners who started the company, angel investors, and 270 employees.
Discuss the specific issue and secondary issues and how they relate. Support your analysis and explain your reasoning.
The main problem issue in the case study is how to grow the medical IT enterprise, D2Hawkeye in the face of financial problems. The secondary issues in the case study include the sale offered by Atlantic Analytics with a lower price, the option of selling the company to a private equity partner. The major issue and the other secondary issues relate in many different ways. The two secondary issues related to the first major issue in that they try to offer solutions to the major issue which is affecting D2Hawkeye Company. D2Hawkeye Company is a company that has growth potential and has numerous opportunities in the market to explore. However, its dream for expansion is hindered by financial incapacity. The company, therefore, needs a financial injection to boost its growth and this is offered from two available options, sale to Atlantic Analytics or sell part of the company to an equity partner.
Decide how to “solve” or manage the issue. Consider who should be involved: what their responsibilities might be, strengths and weaknesses, and so on.
It is evident from the case study that D2Hawkeye needs financial injection either internally or externally. in deciding on how to solve or manage the issue, the essay proposes that D2Hawkeye be acquired by another company in the industry or form a merger with its competitors other than selling it to another company. According to Nina (2012p.56), a merger occurs when one organization is combined and disappears into another organization. computer literacy. This will facilitate the introduction of the ICT curriculum in the college that is can be comprehended by the Dubbo teaching staff. The Acquisition, on the other hand, is a term used in describing an ownership transfer. This could be in form of the purchase of the business assets, stock, and a merger of the organization buying the business (Chakravorty et al 2012p.119). During the negotiation for merger and acquisition, bother management and employees of D2Hawkeye and the acquiring or partner company should be involved. The responsibilities of the management of both companies include negotiation for agreeable terms between the companies. Moreover, the input of the improve its customer service to its clients. The associates or the employees is also paramount for them not to feel insecure about losing their jobs after merger and acquisition.
The strengths of merger and acquisition as a solution to the problem issue facing D2Hawkeye according to the American Management Association (2003p.27), include:
- Acquisition of a larger competitive advantage while the companies that are rigid to changes are left behind. This eventually can lead to drastic losses in profit and market share of an existing market
- Entry into new markets
- Elimination of competitors
- analysis shows that the project was entirely beneficial. The major areas of expenditure for the project were on transport, Acquisition of assets and expertise
- Transfer of skills
- Efficiencies increase
- Saving of costs
- Consolidation of power and control over markets and governments
However, the disadvantages of mergers and acquisition as observed by Gleich et al (2010) include:
- Loss of the skilled employees by the corporation except those in the leadership position and this is costly
- Employees retrenchment leads to loss of motivation and this could result to lose in productivity and revenue reduction
- Improper or rushed new structures of the new organization
- Improper management due to increased costs
- Duplication if the merger is on companies that have been producing similar products
- Resistance to any change initiatives in the future.
Identify at least two alternative solutions and analyze their strengths and weaknesses (or describe why they would or would not be effective).
Other alternative solutions to the problem issues facing D2Hawkeye would be for the company to form strategic alliances or to acquire loans from financial institutions. A strategic alliance according to Mockler (1999) is an agreement formed between two or more parties for them to pursue agreed objectives that are needed while the organizations remain independent.
Beamish (1998p.84) pointed out some of the strengths and weaknesses of strategic alliance. The strengths include:
- Instant market access, or the speeding of entry into a new market
- The exploitation of new opportunities in the market to strengthen the position of the corporation
- Sales increase
- Gaining new technology and skills
- Development of new products with more profits
- Sharing of resources and fixed costs
- Enlarging the distribution channels of the corporation
- Broadening of the corporations political and business contact base
- Gaining greater knowledge of international culture and customs
- Enhancement of the corporate image in the global marketplace
However, the weaknesses include:
- Less equity stake or weaker involvement of the management
- Less efficient communication
- Due to the partners present, there is the fear of market insulation
- Poor allocation of the resources
- Loss of control over important issues like operating costs, product quality, and effecting the rate of premiums. For instance, an insurance firm that operates with many employees (Beamish, 1998p.84)).
On the other end, Bates et al (2003pp 25) pointed out that the loan capital implications are the incurred interest rates that are high. The banks upon giving out loans to business entities always impose high-interest rates, and this eventually results in an increased companies cost of operation. Moreover, the financial institutions require collaterals for the loans to be given out. This impedes the business especially those which does not have any securities.
Select the best alternative and explain how you will measure effectiveness.
The best solution which is ideal for this case study is to merge and acquire. To evaluate the proposed solution of merging or being acquired if it is effective, the following should be used as criteria. Evaluation should be done yearly to ascertain whether the following have been achieved.
- Whether the company has acquired a larger market share of the existing market
- Whether the company has entered into new markets
- Whether its competitors have been eliminated
- Whether the company has acquired new assets and expertise
- Whether there has been a transfer of skills between the companies
- Whether efficiency has increased
- Whether they have saved costs
- Whether the company has consolidated power and control over markets
Chakravorty. J. N., Sardar. P., Mahavidyalaya. C., (2012). Why do Mergers and Acquisitions quite often Fail?. New York, Nova Science Publishers. Vol. 5 (5)
Gleich, R., Kierans, G., & Hasselbach, T. (2010). Value in due diligence contemporary strategies for merger and acquisition success. Farnham, Surrey [U.K.], Gower. Accessed from http://public.eblib.com/EBLPublic/PublicView.do?ptiID=581312.
Mockler, R. J. (1999). Multinational strategic alliances. Chichester, Wiley.
Nina. T.D. (2012). Determinants of the Strengths and Weaknesses of Acquiring Firms in Mergers and Acquisitions Nina. T.D. (2012:A Stakeholder Perspective. International Journal of Management Vol. 29 No. 2 Part 1 June 2012