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Travel Group Companies Merger: Main Aspects and Analysis Case Study


Introduction

The world of business can be regarded as one of the spheres of human activity that are constantly changing. Among other things, there is a wide range of practices that are used by companies to change their organizational structures, increase sales of products and services, and improve management processes. The merger is known as one of the operations that are widely used in politics, business, and economics. When it comes to mergers in the second field, it involves a consolidation of two or more companies into one larger business.

In fact, it is possible to single out a few types of merger transactions, and each of them has its own advantages and weaknesses for companies. The case that the given paper comments on are devoted to the fictitious company in the field of travel business (Travel Group) that has been formed after a series of merger transactions.

Organizational Structure of Travel Group

According to the case, Travel Group is a large public limited company that is headquartered in Germany; the company was formed four years ago due to a series of merger transactions. The company can be called an influential player in the world of global travel business – providing a wide range of services to more than forty million clients from different parts of the world, Travel Group is a tough competitor to other companies in the field. The total number of employees exceeds fifty-five thousand people. Travel Group provides its services with the help of a great number of travel agencies located in different countries, a few thousands of hotels, passenger cruise liners, and airlines.

When it comes to the organizational structure of the company that is discussed in the case, it is extremely important to analyze it with reference to the key concepts studied within the framework of systems theory. The systems theory regards all the existing systems as the combinations of patterns and the particular structures that can work as entities due to a range of dynamic processes. Within the frame of the open system model, an organization is often compared to a kind of a living being consisting of a few subsystems that collaborate in an effective manner and achieve the common goal.

The latter, in this case, is presented by the ability of a system to reach the balance, dealing with internal problems and mitigating external threats that exist for an organization. Open systems differ from the close ones because they do not rely only on internal resources; instead, open systems use external resources and opportunities and turn them into benefits for themselves and the external world. Travel Group discussed in the case presents the entire network of travel agencies; using external resources such as space, the organization makes efforts to apply them to create high-quality services for tourists and businesspeople. In the end, the organization gets financial benefits while clients do not have to worry about organizational issues related to their trips. Therefore, it is clear that the Travel Group is an example of an open system.

There is a number of subtypes of organizational structure; in the given case, Travel Group seems to possess a divisional organizational structure. As it follows from the information presented in the case, the structure of the organization presents a hierarchy which is rather stable. The company has a few subsidiaries, and they fulfill their functions with the help of a range of operational divisions.

For instance, when it comes to the subsidiary in the United Kingdom, it has a series of divisions (such as commercial, HR, PR, customer operations, etc.) and each of them is supposed t accomplish the clearly defined functions. More than that, it needs to be highlighted that the organizational structure of the Travel Group does not lack complexity: within each division, there is a separate hierarchy. Another sign that speaks in favor of sustainability and feasibility of organizational structure that has been established in the company is the fact that fateful decisions are made based on operational rules.

Another important question that needs to be analyzed is its future. It is widely accepted that open systems are more susceptible to unwanted external influence than the close ones that try to minimize it. Therefore, it is extremely important for the Travel Group to avoid influence (both internal and external) that can weaken the hierarchy and provide managers on different levels with an opportunity to rely on principles that run counter to general rules accepted in the company.

It is worth noting that preservation of stiff organizational structure presents a difficult task due to the fact that nowadays, a lot of companies are urged to implement democratic principles into the working process and provide employees with the freedom of choice in order to keep up with the times and be accepted in the global business community. Taking into account the significance of stiff structures for sustainability and competitive ability of companies, it is important that the senior management of the Travel Group has paid focused attention to the establishment of a clear division of responsibilities in the company.

The latter allows the management to control working processes in an effective manner and prevent the cases when subdivision managers try to conceal that mistakes were caused by the actions of their immediate subordinates. If structures of organizations are clearly defined like in the case of the company from the case, it helps managers to decrease the influence of the so-called subcultures that may appear within departments on the working process.

What is more, the same is true for the impact of the particular employees who claim to have their own vision of the best development path for an organization. As for the Travel Group, its internal structure was designed to eliminate any duplications in functions of the department. At the same time, there are still some differences between working practices and terms for employees as the latter used to be parts of different companies prior to the merger. The latter can be regarded as a potential threat to the success of the company in the future; this is why these differences have to be equalized with the lapse of time.

The Influence of External Factors on Travel Group

There is a range of external factors that may pose a threat to the business performance of Travel Group in the future. To analyze them and describe the situation for the organization in a detailed way, it is necessary to use models accepted in different countries.

PESTLE analysis helps to define factors related to different fields of activity that can have an influence on an organization (Zalengera et al. 2014). As it follows from the case, the most significant political factor influencing Travel Group is the threat of political instability and terrorism that reduces the return on sales. The case indicates that there have been a few cases when instability affected flights resorts and threatened the safety of tourists.

Among the economic factors, it is possible to single out the currency rate of exchange that is rather unstable and may provide the opportunity for speculation. At the same time, not all countries where TG services are available are experiencing upturns in economic cycles – therefore, the purchasing power of the population in different countries may vary, and some services and destinations can remain inaccessible for certain social groups.

When it comes to factors that belong to the social sphere, it is important to note that there are intercultural differences between employees in different departments that can cause conflicts in the company. More than that, increased attention must be paid to career attitudes of employees: due to the fact that employment terms for specialists still depend on the company they worked for prior to the merger, there is a threat of strikes and protests caused by inequality that exists between employees. Also, the executive management needs to consider the prevalence of age groups among employees working for the company and design practices helping to prepare young specialists for the sphere.

In terms of technological factors that may influence the business performance of Travel Group, they include improvements that need to be implemented in order to make working practices safer and less time-consuming. For instance, the use of e-ticketing systems has been introduced due to that reason. The next group of factors that may have an influence on working practices and financial outcomes for Travel Group are legal factors; in case of the company, it is clear that all practices used in departments and employment terms must align with labor law and be non-discriminatory for all groups of employees working for Travel Group.

In particular, the company has to give consideration to the salary level of employees in order to exclude gender and racial wage gaps in the organization. Otherwise, it may have a detrimental influence on the social image of the company and cause the unwillingness of young specialists belonging to minority groups to collaborate with Travel Group and their subsidiaries. At last, there is another group of factors that may have an impact on the organizational performance of any company; these factors are related to the current environmental situation.

Among factors belonging to this group that may pose a threat to the company, there are the necessity to reduce carbon emissions and the amount of waste that appears due to the activity of the organization. In addition, a wide range of environmental threats for the company exists due to unpredictable weather conditions in certain locations. At the same time, there is a threat of local contagious diseases that can be extremely dangerous for foreign tourists and even cause significant customer attrition.

According to the concept of five forces that have been developed by Porter, there are five primary factors that can have a significant influence on the organizational performance of companies (Dobbs 2014). The threat of new entrants and substitutes does not present significant risks for the company as it operates in different parts of the world and, therefore, its employees and department managers are able to keep track of the global situation.

At the same time, there is still industry rivalry with other companies in the travel industry operating on a global scale; due to that, the company needs to ensure transparency and introduce innovations to remain competitive. The influence of suppliers (or business partners) and customers is manifested in the growing power of labor unions, unstable purchasing power of customers that influence their purchase decisions, and demand for services that can change due to external problems such as wage levels, weather conditions, and political stability.

As is clear from the examples, there are various threats for different subdivisions such as the prevalence of political threats for airline or social threats for the HR department. To some extent, the PR department may face a combination of all threats considering that they are responsible for information exchange with the global community. Applying McKinsey 7S framework to the case, it can be said that the establishment of shared values of Travel Group requires improvements associated with structure and staff (problems related to employee inequality must be prevented) (Singh 2013).

Achievement of Sustainability: What Can be Improved?

According to the case, there are three measures that are not related to financial performance that will help to define whether Travel Group as a parent company does its best to improve organizational performance. The latter include customer satisfaction, employee engagement, and sustainability. As for sustainability, it is believed to be crucial for companies related to the travel industry. Corporate sustainability of companies offering services for tourists is strictly interconnected with the combination of two factors: the use of proper destinations and the ability of tour operators to provide services that do not have a detrimental influence on the environment of the planet and health of employees and clients.

In order to achieve sustainability goals, the management of the discussed organization needs to focus on improvements related to different elements of organizational structure. According to the framework proposed by Peters and Waterman, the so-called McKinsey model, the key elements that have a significant impact on organizational performance and competitive ability of a company include skills, style, systems, staff, shared values, strategy, and structures.

To develop recommendations that can have a positive impact on the organizational performance of Travel Group it is necessary to understand the role of sustainability and its accurate definition. Nowadays, it is widely accepted that a business can be called sustainable in case if it manages to minimize the negative impact that working practices have on the environment and quality of life of both employees and clients.

Therefore, companies that can be called sustainable should also use a range of methods to protect human rights. Then, it is worth noting that sustainable companies are required to ensure that the principle of sustainability is taken into consideration during decision-making processes in any department or subdivision. The principle of unity is extremely significant in the case of Travel Group – its subsidiaries operate in different parts of the world, and if cultural norms in some departments contradict the values that help to achieve sustainability, it can pose an additional threat to the organizational performance of Travel Group.

Discussing the areas for development and growth that act as predictors of success and sustainability for the given organization, it is necessary to give pride of place to the ability of upper executive management to foster innovation aimed at improving the effectiveness of employee’s work and turning the organization into the green business. In fact, according to the case, the company has already started adopting technologies that possess enough potential to reduce the negative impact of Travel Group’s working practices on the environment.

For instance, the case indicates that the company makes attempts to implement measures helping to reduce waste. Continuing on the topic, it needs to be said that a few recommendations related to the aspect of activity can be identified. First, it is known that the company provides its services with the help of numerous types of transport including cruise liners. As for the letter, it is important for the Travel Group to attract more specialists in maritime transport who will be responsible for transport inspection to reduce the risk of water pollution. At the same time, special consideration must be given to SO2 emissions caused by the use of fuel containing sulfur (Qin, Yin & Cao 2017).

Nowadays, the problem of emissions caused by the exploitation of cruise liners bothers the majority of people living in seaport cities, and this is why the unwillingness of Travel Group to solve this problem can encourage customer attrition. One of the ways to foster innovation in this field is to start using fuel that contains less sulfur. Despite the seeming obviousness of such a decision, the company will need to make a choice between more substantial financial expenses (causing increased prices for passengers) and a damaged reputation among environmentalists all over the world that will be followed by customer attrition.

Another recommendation related to the implementation of innovations encouraging achievement of sustainability includes reducing carbon emissions and resource-saving with the help of information technology. The latter include implementation of e-ticketing systems in all countries where Travel Group operates. In order to achieve two goals simultaneously (improve the reputation of the company and make a positive contribution into the development of industry), Travel Group can establish its own research facility where specialists will be creating the global data bank containing information concerning travel business in different countries, the catalog of destinations, etc.

The latter will help the company to achieve sustainability and differentiate itself among other influential players in the field of business. The use of innovation may cause certain implantation issues, and this is why executive management may need to find additional external sources of financing.

Another aspect of sustainability which is extremely important for the outcomes for Travel Group is their ability to establish a proper organizational culture that will help the company to meet the requirements that exist for companies in the industry and be included in the Dow Jones Sustainability Index (Van Stekelenburg et al. 2015). First, a sustainable organization must be based on cultural norms and values that are supported by companies on a global level.

Among other things, they include equality, diversity, safety, and accessibility of services. The listed values should be protected by the executive management of Travel Group as the case does not indicate that the company does its best to make these principles a part of the corporate culture. According to the framework proposed by Quinn that introduces a two-dimensional pattern that is used in order to analyze the current organizational culture of a company and assess its effectiveness, there are four components shaping this culture (Wiewiora et al. 2013). The components discussed by the author include hierarchy, adhocracy, clan, and market.

The first component presented by hierarchy involves the use of well-defined policies, and the Travel Group has already implemented a series of important decisions aimed at strengthening its multilayered structure by avoiding duplications of functions fulfilled by the subdivisions. Obviously, the organization does not use the principles of adhocracy that involves the establishment of structures that are extremely flexible – nowadays, the use of strong hierarchic structures seems to be a more appropriate alternative due to the specialization of employees. The market organization of the company is rather strong as it possesses a competitive ability.

As for the so-called clan organization, it is strictly interconnected with the set of values and motivational factors that exist for employees. In the case of the discussed companies, there is a lack of strong corporate culture due to the fact that the company was created due to the series of mergers. According to the case, one of the most urgent problems is related to inequality between specialists who used to work in different companies before the merger.

To achieve sustainability, ensure employee engagement and, therefore, improve financial outcomes for Travel Group, the company needs to make further organizational changes with regard to the principles of justice and equality – thus, wage policy may need to be reconsidered so that all employees are paid in accordance with the amount of work they perform and the degree to which they are responsible for actions of other specialists.

At the same time, it is almost impossible to achieve sustainability if the significance of diversity is neglected; in fact, the managers should do their best to exclude the possibility of conflicts based on intercultural differences and unequal attitude towards subordinates based on their heritage. In the end, the company must utilize the price policy improving accessibility of services for clients from different social groups.

Reference List

Dobbs, M 2014, ‘Guidelines for applying Porter’s five forces framework: a set of industry analysis templates’, Competitiveness Review, vol. 24, no. 1, pp. 32-45.

Qin, Z, Yin, J & Cao, Z 2017, ‘Evaluation of effects of ship emissions control areas: case study of Shanghai Port in China’, Transportation Research Record: Journal of the Transportation Research Board, vol. 2611, pp. 50-55.

Singh, A 2013, ‘A study of role of McKinsey’s 7S framework in achieving organizational excellence’, Organization Development Journal, vol. 31, no. 3, p. 39.

Van Stekelenburg, A, Georgakopoulos, G, Sotiropoulou, V, Vasileiou, KZ & Vlachos, I 2015, ‘The relation between sustainability performance and stock market returns: an empirical analysis of the Dow Jones Sustainability Index Europe’, International Journal of Economics and Finance, vol. 7, no. 7, p. 74.

Wiewiora, A, Trigunarsyah, B, Murphy, G & Coffey, V 2013, ‘Organizational culture and willingness to share knowledge: a competing values perspective in Australian context’, International Journal of Project Management, vol. 31, no. 8, pp. 1163-1174.

Zalengera, C, Blanchard, RE, Eames, PC, Juma, AM, Chitawo, ML & Gondwe, KT 2014, ‘Overview of the Malawi energy situation and a PESTLE analysis for sustainable development of renewable energy’, Renewable and Sustainable Energy Reviews, vol. 38, no. 1, pp. 335-347.

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