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Organizational change refers to restructuring the way an organization conducts its business, change in business culture, change in roles and management, change in mode of business operations, technological changes and changes in the behavior and attitude of employees. Many organizations have gone through successful changes while others have failed while pursuing changes. To be successful the change should be implemented in a timely and professional manner.
The case study being InBev Company which is a subsidiary of Anheuser-Busch, the company came into existence through organizational change which involved the merger of two companies, the Interbrew from Belgium and Ambev from Brazil.
The organizational change took place on 13th July 2008. The company acquired Anheuser-Busch Companies, Inc for an estimated total of $52 Billion which led to the formation of Anheuser-Busch InBev in the United States of America. (Clarke1994).
The reasons as to why the companies underwent organizational change were because of both internal and external factors which aimed at improving the performance of the company. The internal factors included the management decisions, policies, internal controls and the attitude of employees while the external factors were change in technology, change in the legislation, economic changes and social cultural changes.
The external factors like change in technology would lead a company changing to modern technology through replacing the obsolete technology, employing technologically savvy individuals and buying new equipments. Changes in the economic environment like increased interest rates, inflation, boom, recession, would make the organizational undergo major changes to keep in line with the changing environment. Changes in government legislation such as prohibiting the production of a particular product would lead to a company changing its operations altogether. The social cultural changes would lead to a company changing its operations, for example a change in the beliefs, eating habits and also in methods of dressing. Demographic changes would make an organization change its operations. Demography is the composition of the population of people. The aged would require certain products, ladies would require different products like cosmetics while children would also use a different category of products such as toys and therefore for an organization to remain in operation it has to change in response to this changes. Competition from other firms would lead an organization to change in order to remain relevant in that industry. This would involve changing the way the organization delivers its products to customer and reducing its prices. This can be so where the organization is in its maturity stage where production is standardized and the competition is high meaning that firms need to maintain their customers.
The internal factors that would lead to change in an organization are the financial position of the firm. If a firm has a low profitability with poor financial ratios it’s bound to change. This would involve altering its capital structure such as an issue of new shares to expand activities, obtaining securities such as loan stock. In addition to this, the employees form an integral part of the organization and they can lead to change of organization culture. An organization has to pay its employees competitive salaries, bonuses, leave and other allowances since they can lead to change in organizational through strikes and go slows and employee turnover can make an organization restructure. Also an organization can change as a result of media exposure. This is through negative publicity which can lead to a change in the entire operations of the organization.
The organizational change can be in the form of a change in the company’s mission, vision, core values and objectives; it can be in the form of mergers and acquisitions, restructuring the operations among others. Change in the organization can also take the form of programs such as Total Quality Management and Business Process re-engineering. How the organization changes depends on the needs of the organization, the industry the organization is in and the long term goals. The change can be in the form of altering the organization structure, it can involve laying off workers to reduce the operation costs, it can be in form of redundancy, dismissal and early retirements to its staff. The change can be in the form of restructuring the company’s capital structure through the issue of new shares and obtaining loan stock as well as issue debentures and preference shares. Other forms of how an organization can change is through mergers, acquisitions and amalgamations where two or more companies are dissolved to form one firm in order to benefit from the benefits of operating as a single unit. Another form of organization change is where the organization changes its brand name. This is in a bid to enter new markets and be attractive to the existing customers and prospective customers.
In our case study of InBev, the organizational change that took place was in the form of merger. The reasons that led to this change are many and varied. To start with organizational change could lead to synergy. This refers to the economies realized when the performance of the combined firm is higher than its separate firms. Synergy results in areas such as in marketing and distribution, financial economies, strategic fit and differential efficiencies in the utilization of assets and human resources.
Many are the benefits that are derived from organizational changes (Economist 2001). InBev Inc would benefit from the acquisition of Anheuser-Busch Companies Inc through economies of scale and synergy. Synergy would arise from the combined management, technology, manpower, expertise and eliminate duplication of functions (Holland 2000).
Secondly, the change in the form of a merger would lead to a greater asset backing. This is where the merger would be driven by the need of a company seeking another with substantial asset value. This is particularly so for risky companies in the service industry such as consultancy, Information Communication Technology, Research and development among others.
The acquisition will bring forth tax advantages. The acquisition will reduce tax obligations of both companies as tax will be charged on a single entity rather than as two separate entities. This however is not a reason prompting an acquisition or merger (Fallon 1990). Also a highly profitable company that pays higher taxes may acquire a firm with accumulated tax losses. Where legislation allows, acquisition of the loss making firm will reduce the tax burden of the merged firm
The acquisition would lead to risk spreading and diversification through geographical and business segments that lead to exploitation of new markets (De Cagna 2001). However this motive is questionable since in most empirical studies, individual shareholders are able to diversify risk more efficiently than companies. The acquisition of Anheuser-Busch Companies, Inc led to exploitation of the unexplored markets by both firms, and led to a reduced competition between the two firms as they would trade as one.
The organization will require a strong management team with strong managerial and communication skills that will be able to calm and guide the employees through this change process. These means that while carrying out a merger the companies involved should consider the financial, legal, economic and human aspect in order to have a successful acquisition (Axelrod 2001).