Individual Case Study on
4th Febuary 2011
In a merger, cultural differences are more vital to overcome then fighting for equal power or profits. (Harford, 2003) The marriage of Alcatel and Lucent was never going to be easy. To some extend the merger was a good business step. Lucent's with its wireless business nicely complemented Alcatel's global image and its prowess in fixed-line and broadband. However their cultural differences were among many challenges that Alcatel-Lucent had to face during the merger. One was hierarchical and centrally controlled, the other entrepreneurial and flexible were among the many differences that caused the company to suffer in sales, stocks and employees. (Massie, 2007)
1) Referring to the case, what conditions and negotiation factors pushed forth the merger in 2006 that were not present in 2001? (8 marks)
One of the factors that the merger happened again in 2006 was because of the increasing number of new competitors in the telecommunication industry. Business Monitor International (2010) quoted that “Alcatel acquired Lucent for US$13.4bn with hopes of facing down the increasing competition in the market from ZTE and Huawei as well as larger rivals that had also gained scale from mergers and acquisitions”
If Alcatel and Lucent were to stand alone it would not be able to compete with new giant companies such as ZTE and Huawei. They needed each other in order to survive in the industry in 2006, something they were not worried about in 2001. As mentioned in Barron’s article in August 2006, the current condition in the industry caused both companies to be pushed into each others arms out of desperations in order to survive a brutal and even more competition in the future.
Sometimes companies merge in order to survive or to be more powerful. (Harford, 2003) In this case, Alcatel and Lucent did exactly that; to survive and be “truly global” as mentioned by Mr. Tchurk.
Another factor is the negotiation in 2006 was more detailed and fair then in 2001. Both companies were clearer on the amount of control they have. This time around it was more “merger of equals” rather then Alcatel trying to take over Lucent like in 2001. This can be seen by the company’s name being renamed to “Alcatel-Lucent” in 2006. This shows both companies have respective power in US and Europe and equal amount profit in both their region including Asia (Austen and Bajaj, 2006).
2) Research the status of the merged company at the time of your reading of this case. What has happened in the industry since the merger, and how is the company faring? (10 marks)
Since the merger, the company did have some up’s and down’s. Today Alcatel-Lucent has about 78,373 employees working in the organization. For about last six consecutive months the stock price has strengthened and during the last 12 months company’s net sales was $20.17 billion. (Savvy Stock Picks, 2011)
Savvy Stock Picks (2011) quoted that Alcatel-Lucent has more “products, solutions, and transformation services offerings, which enables service providers, enterprises, governments and strategic industries (such as transportation or energy) globally to deliver voice, data and video communication services to the consumers”. The Company now has expended their business into 4 segments; Carrier, Application Software, Enterprise and Services. The growth and profit of Alcatel-Lucent is fairly divided between both the company and all operations and new technology comes under one name which is “Alcatel-Lucent”.
Alcatel-Lucent is growing stronger and becoming one of the tough competitors in the industry. Besides Europe, US and Asia, Alcatel Lucent has now expanded into Middle East and Africa to compete better with new entrants such as ZTE and Huawei Technologies. (Business Monitor International, 2010) This shows that...