Case summary
Hewlett-Packard (HP) is a company that specializes in the manufacture of various electronic devises and provision of technological solutions. The company faces stiff competition from IBM and various Indian companies. The company strives to improve its competitiveness and market share through acquisition.
However, the company has not been successful in improving its competitiveness using this strategy. HP acquired Electronic Data Systems (EDS) in order to improve its competitiveness in the market. When HP was acquiring EDS, EDS had the second largest second largest market share in the tech services market.
IBM was the market leader, with HP coming at a distant fifth (Wheelen & Hunger, 2012). Therefore, acquisition of EDS would have improved HP’s competitiveness significantly. However, the acquisition did not increase the HP’s competitiveness due to various factors.
Issues
One of the major factors that reduced the effectiveness of the acquisition is the differences between the organizational culture of HP and EDS. Frequent change in HP’s organizational culture created several problems to the company. Engineering excellence was one of the major attributes of HP.
However, change in leadership of the company led to significant changes in the organizational culture. In addition, the management structure of EDS and HP did facilitate the integration of activities of different highly skilled employees within the organization (Wheelen & Hunger, 2012).
The case provides a clear illustration of the importance of the organizational culture for the success of an organization. The organizational culture is the unspoken code within an organization aids the activities of the organization. Therefore, it is vital for the organizational culture to improve the efficiency of the organization.
The case also shows the importance of change management. A company should ensure that it does not undertake changes that contravene its organization cultures. Carleton Fiorina introduced changes that contravened HP’s organizational culture. This necessitated the employees to undertake drastic changes in their activities. Having efficient change management would have enabled HP overcome some of the problems it was facing (Nilakant & Ramnarayan, 2006).
An organization should have efficient strategic management. Strategic management enables a company to make decision that would improve its efficiency and competitiveness. HP lacks efficient strategic management. Acquisition does not advance the goals of the company. The company should undertake strategic decisions that would improve the company’s identity.
Differences in the organizational structure of EDS and HP created several problems. The organizational culture may empower employees or give more control to the managers of the organization. EDS managers had vast powers, which enabled them control the activities of the employees. On the other hand, HP empowered its employees to enable them perform their activities better. Differences in the organizational structure hindered the integration of the activities of both companies.
Questions
Did acquisition of EDS improve the competitiveness of HP?
The acquisition of EDS did not improve the competitiveness of HP. This is because EDS continued to advice clients to buy systems from other vendors. HP should integrate EDS activities into HP’s operations. In so doing, the company will use the EDS expertise to improve the sale of its systems. However, HP has not integrated the activities of EDS into its activities.
Should managers consider the organizational culture of a company before acquisition?
Organizational culture is one of the most important factors that determine the success of a company. Manager should consider the organizational culture before acquiring a company. This is because clash in the organizational culture may pose several problems to the acquisition. It is critical for an organization to have efficient change management. This would guarantee the success of various changes within the organization.
References
Nilakant, V. & Ramnarayan, S. (2006). Change management: Altering mindsets in a global context. London: SAGE publications.
Wheelen, T.L. & Hunger, J.D. (2012). Strategic management and business policy: Toward global sustainability, thirteenth edition. Boston, MA: Pearson.