See instructions and use some of ideas in ppt doc in the essay
On May 17, 2021, AT&T and Discovery Media, both powerhouse content owners in the media industry, announced an enormous $43 billion strategic business combination: both entities are spinning off their programming assets and each are acquiring ownership into this new media company (for AT&T: its WarnerMedia movie studio and production assets, CNN, HBO, DC comics, and its other TV networks; for Discovery: its entire cable TV network portfolio—Discovery channel, Food network, HGTV among many others). The parties both will co-own the new merged entity, to be called “Warner Bros. Discovery,” which is slated to become the largest collection of global media assets in the world. write an assessment of this proposed merger. address the following topics: •Broadly speaking, what do you suppose is the strategic vision behind this merger? Explain and propose a vision statement for the new entity. •More specifically, how is this proposed combination responsive to the external market trends (opportunities and/or threats) you see in the media environment? Explain. •According to any one of the assigned articles from this class, is a merger (acquisition) the right form of business combination for this transaction? Explain. •Is this the right innovation response given the trajectory of change you see occurring in the industry? Explain. •What might you see as the biggest implementation challenges in this combination? Consider structure, processes and culture. Comment on your perceptions of or suppositions on the strategies behind what might be driving this development. Cite research where necessary to support the credibility of your arguments. I will not grade this report as though there is a right/wrong answer here…write about this development incorporating elements of our class topics into your assessment. Demonstrate your ability and confidence to evaluate strategic business issues on some academic level having taken this course. If you need more background on the deal, click here for a good summary of the transaction: https://about.att.com/story/2021/warnermedia_discovery.html But do not waste time trying to read up on all aspects of the complex financial transaction. Use some of the models displayed in the powerpoint as discussion points Outback Steakhouse: Going International Strategy Formulation The Congruence Model Strategic Analysis: Macro-Environments Industry Structure Firm Resources and Capabilities People Formal Organizations Culture Critical Tasks Outputs Strategy Implementation: The Congruence Model The ‘Big 6’ Components of Implementation -- Overcoming the challenge of implementation The Strategy Implementation Action Agenda 1.Strong Strategic Leadership -- Research & Analysis skills -- Vision Strategy Formulation 4. Good Communications -- Make the case for change -- Build consensus --Preside over process 3. Effective Action Plans --Participation required at all levels Corporate, Business, Functional -- “SMART” goals Tactical plans 5. Supportive Operating Systems --Information for Management Evaluation and Feedback 2. Reward Systems Strategy --Built into strategy formulation --Requires accountability 6. Proper Organization Structures --Assess resources / capabilities --Right organization design --Supportive culture Informational Control Informational control deals with both the internal & external environment Do the organization’s goals and strategies still “fit” within the organizational design? Two key issues: Structures: Are they appropriate to the nature of monitoring the external environment? Systems: Are they adequate to monitor the internal environment? Financial Reporting systems HRM systems Remember, informational control is primarily concerned with whether or not the organization is obtaining the best fit between its goals and strategies and the external strategic environment – is the organization “doing the right things”, given the external situation and the internal capabilities of the organization. Informational control addresses the assumptions and premises that provide the foundation for an organization’s strategy and, depending on the type of business, such assumptions may relate to changes in technology, customer tastes, government regulation, and industry competition. Therefore, managers must scan and monitor the external environment, both the general environment and the industry environment. In addition, conditions can change in the internal environment of the firm, requiring changes in the strategic direction of the firm. Changing internal conditions can include the resignation of key executives or delays in the completion of major production facilities. 3 Behavioral Control: Boundaries that institutionalize behavior and norms Boundaries and constraints can be useful: Boundaries and constraints = rules that specify behaviors that are acceptable and unacceptable. Boundaries and constraints play a valuable role in focusing a company’s strategic priorities - concentrating effort and resources in key businesses while closing others can provide the firm with greater strategic focus and the potential for a stronger competitive advantage in the remaining areas. Short-term objectives and action plans represent boundaries that help allocate resources in an optimal manner and channel the efforts of employees at all levels. Performance is enhanced when individuals are encouraged to obtain specific, difficult, yet achievable, goals. Action plans are critical to the implementation of chosen strategies. Unless action plans are specific, there may be little assurance that managers have thought through all of the resource requirements for implementing their strategies. In addition, unless plans are specific, managers may not understand what needs to be implemented or have a clear time frame for completion. Finally, individual managers must be held accountable for the implementation. 4 6 Where to Enter? Porter’s Diamond Theory of National Advantage How Nations develop Competitive Advantage Progressive Change Most common form of change encountered in industry Evolutionary (not revolutionary) change is occurring. Progress occurs incrementally, though it may have a major impact long term Can be challenging to observe, react to. (“Boiling frog”) Strategic options: Build resources and capabilities incrementally, to develop competitive position & to respond to changes Secure feedback and respond as appropriate Examples: Banking, etc. Creative change Change typically occurs when activities (relationships) with customers and suppliers remain stable, but the assets used to engage them are changing Examples: Movie/TV industry: (relationships with talent/audiences stable; new production or distribution technologies creates change) Education: (students need/want to learn, but ways to enegage with them are evolving) Strategies: Retain customer strengths by reinforcing existing relationships Adopt or acquire new assets/expertise as needed; spread risk over multiple clients/projects Intermediating change Core assets of a firm remain valuable/viable (brand, technologies, patents, equipment, etc.), but activities/relationships (with supplier and/or buyer) change, become fragile, become pressured, and/or ultimately must be restructured Common as businesses mature, or as social trends change – difficult to manage Examples: Music industry: Music recording technologies have not substantially changed, but artists have (they want more control) as have customers (prefer to digitally download at no/low cost) Soft drink industry: Core brands, botting and distribution assets are still valuable, but customer tastes have changed, impacting profitability Strategies: Adapt to new customer/supplier demands; Find new ways to extract value from your core assets (New services/products, diversification) Radical Change Relatively unusual Impacts both assets and activities of the firm. Typically follows mass introduction of some new disruptive technology, government action (regulation/deregulation) or mass societal change Transformation of industry does not occur quickly. Can remain profitable for some time while changes occur Time to develop strategic options: Exit or restructure dramatically (high risk) Harvest where profitable Pursue incremental improvements to keep up with pace of change Examples: Landline phones; Overnight letter delivery, Travel agencies Implementing Innovation Leverages Existing TechnologiesRequires New Technologies Requires a New Business Model Disruptive Innovation Radical Innovation Leverages Existing Business Model Routine Innovation Architechtural Innovation Reasons for Mergers and Acquisitions 1. Increased market power Sources of market power include size of the firm, resources and capabilities to compete in the market and share of the market Horizontal Acquisitions Acquirer and acquired companies compete in the same industry i.e., McDonald’s acquisition of Boston Market Vertical Acquisitions Firm acquires a supplier or distributor of one or more of its goods or services; leads to additional controls over parts of the value chain i.e., Walt Disney Company’s acquisition of Fox Family Worldwide. Related Acquisitions Firm acquires another company in a highly related industry 12 Reasons for Mergers and Acquisitions (Cont’d) 2. Increased diversification - New growth opportunities - Reshaping firm’s competitive advantage - Learning and developing new capabilities 3. Overcoming entry barriers Cross-border acquisition: headquarters in different country 4. Cost of new product development and increased speed to market Buy or build? On average, most new business propositions require 10 years before generating recurring positive cash flows and net income. 13 From “Notes on Corporate Strategy” Value-Creating Diversification requires passing: The Better-Off Test Would a business combination result in greater competitive advantage than if each existed independently on their own? Economies of Scale/Scope Synergies created? Increasing/Preserving value added in vertical integration investments The Ownership Test Does owning the business result in greater competitive advantages than other forms of interaction? Do Mergers and Acquisitions Create Value? The Empirical Evidence: Acquiring Firms Target Firms M&A Activity creates value, on average, as follows: •no value created •value increases by about 25%, short term M&A activity creates value, but target firms capture it at outset. Creating long-term value is the real challenge. 15 Problems in Achieving Merger/Acquisition Success Inadequate evaluation of acquisition target Loose valuation methodologies Will often try to complete the deal too quickly before other potential buyers begin a bidding war. Managers will often focus on the attractive features of a candidate, while giving less attention to the negative features. Importance of the Due Diligence process Problems in Achieving Merger/Acquisition Success 2. Poor understanding of how diversification activities will be coordinated with existing businesses. Will acquisitions remain stand alone or be integrated? Often driven by tax or other economic rationale instead of operational or strategic considerations Problems in Achieving Merger/Acquisition Success 3. Integration Difficulties - Differences in organizational cultures. - Acquiree employees made to feel “secondary” – A brain drain can result - Different industry norms result in incompatible policies across businesses - NBC in the GE world Problems in Achieving Merger/Acquisition Success Financial Pressures caused by the acquisition Large or extraordinary debt Junk bonds: financing option whereby risky acquisitions are financed with money (debt) that provides a large potential return to lenders (bondholders) Inability to achieve anticipated synergies – Cost savings that never materialize Problems in Achieving Merger/Acquisition Success (Cont’d) 5. Too much diversification created Diversified firms must process more information of greater diversity Management attention gets diluted Larger scope may cause managers to rely too much on financial rather than strategic controls to evaluate performance of business units Acquisitions may become substitutes for innovation 20 Problems in Achieving Merger/Acquisition Success (Cont’d) 6. Managers get overly focused on acquisition processes Diverts attention from matters necessary for long-term competitive success Extended focus on acquisition tactics Search for viable acquisition candidates Complete effective due-diligence processes Prepare for negotiations Managing the integration process after the acquisition causes: Increased focus on rationalizing