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AOL Time Warner’s Bitter Sweet Break Up Team SWAT (Chintan Patel, Neil Dudich, Saurabh Palkar, Soumik Mandal, Vivek Vadakk...
Case of Indigestion: The Pre-Merger, Post-Merger and Spin Off Stock:175 Billion Stock:95 Billion <ul><li>2000: Small fish ...
Critique: Environment    Strategy   Fit ENVIRONMENT ENVIRONMENT STRATEGY STRATEGY AOL Time Warner Industry - Growth of su...
Critique: Leadership    Strategy   MisFit <ul><li>Ample Leaders but no Able Leaders:  Leadership failed to execute on the...
Critique: Strategy    Structure   MisFit AOL –Flat  TW –Divisional  Monstrous Matrix Pre-Merger Structure Post-Merger St...
Critique: Strategy    Structure   MisFit Legend:  Blue: AOL  Leader  Green: Time Warner Red: Main Divisions Yellow: Sub ...
Critique: Strategy    Culture    Structure   Mis Fit STRATEGY STRATEGY CULTURE STRUCTURE Poor S   C    Sy Fit CULTURE ...
Recommendation All they needed was some Krazy Glue to bind them together forever
Recommendations <ul><li>What were they thinking?  </li></ul><ul><ul><ul><li>Immense cultural differences </li></ul></ul></...
Recommendations <ul><li>“ You Can’t Stop Staring at Me!” </li></ul><ul><li>- New slogan to infuse energy into the organiza...
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AOL - Time Warner\'s Merger and its Failure

An Analysis of the AOL Time Warner Merger and its failure with special focus on the environment, strategy, structure, cultural aspects and their fits.

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AOL - Time Warner\'s Merger and its Failure

  1. 1. AOL Time Warner’s Bitter Sweet Break Up Team SWAT (Chintan Patel, Neil Dudich, Saurabh Palkar, Soumik Mandal, Vivek Vadakkuppattu) Leadership in Organizations
  2. 2. Case of Indigestion: The Pre-Merger, Post-Merger and Spin Off Stock:175 Billion Stock:95 Billion <ul><li>2000: Small fish with big teeth (stock) eats big fish with small teeth </li></ul><ul><li>2001 – 2009: Small fish gets massive indigestion and big fish isn’t faring too well either </li></ul><ul><li>2009: Small fish and big fish decide to go separate ways </li></ul>Revenue 5 billion Employees 15,000 Revenue 27 billion Employees 70,000 AOL Time Warner
  3. 3. Critique: Environment  Strategy Fit ENVIRONMENT ENVIRONMENT STRATEGY STRATEGY AOL Time Warner Industry - Growth of substitutes Seeking Cyber Foot Print Market - Rise of Broadband Non-Operational Distractions Economic Conditions - Tech Asset Bubble Poor Timing Unrealistic Expectations for Growth Partner with top cable provider to use their cable wires to support provide broadband internet Partner with strong internet provider to distribute content over their platform and reach to millions of subscribers Perfect E  Sy Fit Good but not a Perfect E  Sy Fit
  4. 4. Critique: Leadership  Strategy MisFit <ul><li>Ample Leaders but no Able Leaders: Leadership failed to execute on the strategy to capitalize on the strengths of its two organizations to create an online empire </li></ul><ul><li>Control – Accountability: “No one at the top of the company really tried to persuade the people in charge of their brands that they needed to try to make this deal work.” </li></ul><ul><li>Lack of Motivation: Steve Case sold a significant block of his shares in AOL prior to the merger, reaping a windfall profit of $161 million </li></ul><ul><li>Strategy Drift: Failed to deliver on its promise of distributing TW’s significant film, publishing and music assets to AOL’s massive subscriber base. TW actually came out with internet services of their own, Road Runner. </li></ul><ul><li>Personality Conflict : Steve Case remained personally at odds with Time Warner executives which crippled plans to establish an online empire. </li></ul>LEADERSHIP Poor Leadership  Strategy Fit
  5. 5. Critique: Strategy  Structure MisFit AOL –Flat TW –Divisional Monstrous Matrix Pre-Merger Structure Post-Merger Structure
  6. 6. Critique: Strategy  Structure MisFit Legend: Blue: AOL Leader Green: Time Warner Red: Main Divisions Yellow: Sub Divisions Executive Committee Poor St  Sy Fit <ul><li>Structure favored AOL, 2/3 top positions filled by AOL - increased the feeling of inequality </li></ul><ul><li>Strategy: Symbiotic Relationship </li></ul><ul><li>Structure fueled the battle of control between marketing and content editors </li></ul>
  7. 7. Critique: Strategy  Culture  Structure Mis Fit STRATEGY STRATEGY CULTURE STRUCTURE Poor S  C  Sy Fit CULTURE STRUCTURE AOL Time Warner Use TWs cable to provide broadband internet Use AOL’s internet & customer base to increase cyber footprint High Tech Old-world Tight on finances/Cost Cutting Spendthrift Khakis and cotton shirt Suit and tie Small, younger company Very big, mature ( AOL was the size of a small division of TW) Compensation – Stock Options – Internet Trend Profit sharing – Old School Unitary Culture Diversified Management style- Top Down Improvisational Approach Generation gap – 20 something’s Gray beards Focus on meeting Wall St. Expectations Focus on organic business growth Flat Structure Divisional structure with Emphasis on Heirarchy
  8. 8. Recommendation All they needed was some Krazy Glue to bind them together forever
  9. 9. Recommendations <ul><li>What were they thinking? </li></ul><ul><ul><ul><li>Immense cultural differences </li></ul></ul></ul><ul><ul><ul><li>Cross selling was never Time Warner’s Strength </li></ul></ul></ul><ul><ul><ul><li>Leadership’s sixth sense should have told “something doesn’t feel right” </li></ul></ul></ul><ul><ul><ul><li>Merger wasn’t the only way to accomplish their goals </li></ul></ul></ul><ul><li>“ Synergies can’t be manufactured. In many cases synergies are more a myth than a reality. To the extent they exist it is serendipity” </li></ul><ul><li>“ Now that I have had the forbidden fruit  , how do I undo it? ” </li></ul><ul><ul><ul><li>Spin off AOL without any further adieu </li></ul></ul></ul><ul><ul><ul><li>Looks for ways to capitalize on the failed merger! </li></ul></ul></ul>
  10. 10. Recommendations <ul><li>“ You Can’t Stop Staring at Me!” </li></ul><ul><li>- New slogan to infuse energy into the organization and capture customer’s attention </li></ul><ul><li>KPIs to monitor the performance of the company and identify problem areas </li></ul><ul><li>Systems to Aid the integration of the two companies: </li></ul><ul><li>“ Our Einstein”: Allow free flow of ideas and good practices from one division to another </li></ul><ul><li>“ Our Family”: Convince each company of the value of the other company </li></ul><ul><li>“ Our Company”: Increase the sense of involvement among employees and facilitate the growth of the company. </li></ul><ul><li>“ We Weave”: Facilitate the integration of the two companies </li></ul>

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