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Major Project: Similar Change in two Companies.
Acquisition of New Companies by Technology Corporations
In the technology Industry, changes are the daily occurrence and they always bring about improvements and increase the clientele base. It is for this reason that two of the most influential firms in global technology decided to acquire new firms. Oracle Inc and SAP are two of the most influential and well established firms it the global technology industry (Stone, 2004).
Oracle Inc is a multinational company that has been around in the technology industry for the longest time. The company specialized at first in making computer hardware however in 2004, the company acquired Sun (Stone, 2004). This is a company that deals in the development of software. It allowed the Oracle to be able to penetrate into the enterprise application market. The market for the company’s products increased as the clients were able to purchase the hardware with already installed software.
SAP is a company that initially dealt in the production and sale of software, but with time and after the acquisition of Sybase, it ventured into the sale of computer hardware. SAP is a company known for consistency and it deals with its products (McDonald et al, 2006). The acquisition of the company was a counter-reaction to the acquisition of Sun by Oracle Inc.
Oracle Inc and SAP were companies that related very well because they were all in the technology world but in different areas. Oracle Inc dealt with hardware while SAP dealt with software. However when Oracle Inc acquired Sun and ventured into an industry dominated by SAP rivalry started. This led to competition for both hardware and software markets (McDonald et al, 2006). The companies are now dealing with both markets and continue to acquire more companies in an attempt to outdo each other.
The two companies are very similar; this is because they adopted a change by acquisition of other companies, in order to venture into a market where the product they produced initially can find a bigger clientele base.
- Brief Description of the Firms
In the competitive world of technology and software development change is a constant and real factor and flexibility is necessary. This is the reason as to why in 2009 Oracle Inc, one of the leading firms in IT bought Sun at $7.4billion. This was to combine the two in order to increase the market share control of the firm in the industry and to increase their client utility level (Ries, 2013). In the same industry, a competing firm, Germany’s Sap, bought a California based company that deals in software, Sybase, at $5.8billion (Inc. Kogent Learning Solution, 2011).
The two companies were able to acquire companies that deal in software in order to increase their clientele base and market share control. Once the companies acquired the software companies, they were able to offer their customers more and better services. This is because the customers could be able to access their services via smart phones. This was a response to change in technology and consumer taste and preference.
- Need for change
In any industry, when a company makes a major change, it is taking a big risk. At times it stands losing millions of dollars so the question is: why should the company take the risk of changing?
The main reason is to increase the profit margin. This is because changes in the business are inevitable because there are changes in consumer preference with time. At the same time increases market share-control. This not only increases the market and clientele base for a company. It also creates the insistence aspect in the clients, this means demand will no longer be responsive to increases in price and this is the same as being at the top of the pyramid in the industry.
- Changes Experienced after Acquisition of Sybase by SAP
- External Change: Market Structure
The acquisition was not to allow for SAP to venture into a new market; this is because Sybase has a small market share especially on database. It was simply to offer the clients of SAP a new improved option and expand in-memory to the already existing applications. This would increase consumer utility and create insistence. But the acquisition meant that Sybase would be no more as it would become part of SAP. The fact that the two companies are from different countries, was a breakthrough in the global market, however in the American market, there was a decrease in popularity (Information Week, 2010).
b). Internal Change: Administrative Structure
There will be an incorporation of both working cultures. The employees from both companies were brought on board; this is because there was need to have all the necessary knowledge and experience combined (Thomasch, 2009). New contracts for the employees from Sybase were drawn up under the new management.
- Changes experienced after Acquisition of Sun by Oracles Inc
a). External Change: Market Structure
Sun is famous for production of hardware. The acquisition exposed Oracle to a new market; this is because it was formerly famous for the production and sale of software. Diving into a new market led to drastic changes n the strategies employed in marketing and sale. Oracle Inc made the two a pair, in order for a client to purchase hardware; it had to come with the software. Software was to be sold to already owners of the hardware.
b). Employee resignation and shift in production
Due to the acquisition most of the employees from Sun resigned, this was inclusive of the CEO and the engineering team. This led to great shifts in the production and sale of the products. At the same time it became a challenge to be resolved up to date (Thomasch, 2009).
- Comparison of the two companies
a). The Similarities
Both companies deal in the IT world. They offer software and applications to be used in increasing business transactions by customers. They have e-business as their main basis. They have also improved and increased in capacity and market share by mergers, acquisition and partnerships (Inc. Kogent Learning Solution, 2011).
b). The differences
- Product line SAP improves and enhances the core product it started with while Oracle moves towards fusion. This makes SAP to be more stable and predictable and Oracle to be innovative and visionary as well.
- Cost and implementation period Oracle experiences a 20% less cost in production of its products and also takes less time to implement a change in the products compared to SAP.
- Benefits and Business application SAP’s applications are more practical and preferred by most businesses as opposed to Oracles applications. This means that SAP has more benefit over Oracle in awareness and exposure in the business circle.
- Flexibility Oracle is more flexible and easily adopts changes in the industry and this means it easily meets the needs of the customers. SAP is based on bureaucratic processes that take long and make it to be less flexible and decrease the rate at which changes are implemented.
- Image analysis
The change will be as a result of a well planed and strategically placed plan. It is due to pressures from the external forces like change in market and consumer preference and internal forces like change in employee and management structure, or even improvement in innovation. These forces will be directed at the managing team and there is need to come up with the best alternative to navigate through the forces and come out victorious.
The need for change will be a constant factor. This is because the industry is dynamic and is greatly influenced by the changes in technology. The management team will have to come up with an organizational culture that embraces flexibility. Designed to adopt to any changes in the industry. This means there must be clearly set practices that are capable of ensuring that with every change in the industry the steps taken will lead to a improvement in the organization.
The management will ensure that with time the firm grows to be strong enough to handle any change in the industry. This will be by training staff and creating better strategies to handle change. Adapting to changes will be easier as the firm will have grown and developed in that environment.
Part 3: Diagnosis
A diagnostic model is used to come up with the best actions to be taken by a company in order to meet the needs. Different companies in different industries will have different diagnostic models (Rupp, 2010). The model is usually based on the proper analysis of the firm and its environment, identification of the key variables and proper research into the factors affecting the company (Harrison, 2005). This is followed by interpretation of data and statistical analysis that allows for a proper conclusion.
Oracle Inc is a company that has been around for years and was once the biggest company in terms of capacity and revenue in the industry. However poor marketing strategies and managerial decision have made it to be surpassed by other more recent firms. SAP is a firm that is based on bureaucracy but down the years there have been many mistakes and errors made that have cost a lot of time and money. The two companies are trying to come up into the market, but there is need to ensure they are healthy commercial enterprises that will not succumb to economic factors of the business cycle (Samson, 2012).
An efficient diagnostic model for the two companies is the four frames of organization model. It is a holistic model that takes a pragmatic analysis at the business and is time efficient.
- The Diagnostic Model
The four frames of organizations model is meant to ensure that all aspects of the firms are well catered for. It analyzes the following four sectors of the firms:
- Structural frame.
This focuses on the structure and functioning of the firms in the following areas:
- The hierarchy of power and authority – it should be based on bureaucracy where the roles and responsibility of each and every position are clearly outlined. The functions are predetermined to ensure proper coordination, accountability and responsibility. The chain of command is clearly outlined and every department has a head that is to be responsible for the actions of the subordinates (Levy, 1986).
- Specialization and division of labour– the required technical qualification and experience for a position. The proper roles should be enhanced to ensure there is efficient utilization of all factors of production for maximum output.
- Set goals and objectives for the firm– these should include all long term and short term goals and objectives and a futuristic plan for expansion in both size, magnitude and market influence (May, 2010).
- Control and coordination mechanisms– these are supposed to ensure that the actions of the employees and their roles are in line with the already set goals and objectives of the firm.
- Human Resource Frame.
- Harmony- there should be harmony between the needs of the employees and the needs of the organization.
- Work relationship- there should be a good work relationship between the juniors and the seniors. A well structured working environment that offers space for competition, innovation and growth.
- Compensation package- this is to ensure that the firm stays competitive and its labour is well satisfied.
- Political Frame
- Equitable distribution of power– this is to aid in meeting the vested interests of all stakeholders in a democratic way. It also allows for all the stakeholders to feel they are equally represented.
- Tactics and conflict resolution strategies-it is meant to ensure that people follow the rules and at the same time the rules lead to efficiency performance by the labour force without any conflict of interest.
- Symbolic Frame
- Work Culture- focuses on symbolic meaning of actions, words, occasions and even physical structure. It represents the history, the present and the history to be made.
- Image Maintenance – the image of the company will be a product of the culture. The work and the output will determine how the firm will be viewed and the PR of the products in the market (Levy, 1986).
Application in Oracle Inc.
Oracle Inc is a dynamic organization that can easily adopt changes; however there are areas that can be improved like:
- The structural frame of the company should be based on bureaucracy. This is because it requires having a properly and clearly outlined rules and processes to be followed when enacting a change.
- Political frame of the company should be looked because it should encompass the needs of the employees and the company as well. This will aid in ensuring that a repeat of what happened when the company tried to acquire another smaller company and all the employees later on walked out including the president of the company.
- Current marketing strategies need to be changed. It should encompass trying to create and ensure insistence by the clients. Sales have been decreasing for Oracle since 2005 after it hit the $6.2 billion revenue mark. This can be attributed to increase in competition from Microsoft in database. It can also be attributed to the poor decision to acquire firms that have been long term rivals. It decreases the moral of workers.
- In an oligopolistic global market structure, price wars always lead to loss for both companies. Due to price wars with SAP on customers the companies have both experienced losses. They should embrace non price marketing strategies.
- The symbolic frame should be established, the company should formulate a culture that will represent their signature products and improve their PR to the public.
Application for SAP
- Political frame should be used to ensure that employee’s and company’s needs are all catered for effectively with minimal conflicts.
- Human resource frame should be addressed by ensuring there is dynamism. Bureaucracy has held the company back that operations costs dig a deep hole in the revenue (Pahl, 2009). It takes SAP twice the time it takes Oracle Inc to make software. Inefficiencies in the operations and management will lead to losses.
- Structural frame should be well established especially on specialization and division of labour which fosters innovation. Currently the company is on the verge of losing $1.6billion to Oracle because they copied their software. Innovation leads to originality and such cases can easily be avoided. Training their employees to know the customers taste and adjust their products to suit them.
- Market diversification – just like how Oracle has diversifies from hardware to software, the company should do so as well in order to increase the market and revenue. This also opens new doors to more discoveries. This can be the expected potential changes.
- SWOT Analysis
Both companies have strengths and.............
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