Mergers And Acquisitions - Sun and Planets Spirituality AYINRIN -
Learning to Play in the New “Share Economy”
From The Palace Of Kabiesi Ebo Afin!Ebo Afin Kabiesi! His Magnificence Oloja Elejio Oba Olofin Pele Joshua Obasa De Medici Osangangan broad-daylight natural blood line 100% Royalty The God, LLB Hons, BL, Warlord, Bonafide King of Ile Ife kingdom and Bonafide King of Ijero Kingdom, Number 1 Sun worshiper in the Whole World.I'm His Magnificence the Crown.
For Spiritual Consultations, Spiritual divination reading, Guidance and Counseling, spiritual products and spiritual Services, offering of Spiritual Declarations , call or text Palace and Temple Phone and Whatsapp contact: +2348166343145, Phone And WhatsApp Contact : +2347019686274 ,Mail: obanifa87@gmail.com, Facebook page: Sun Spirituality.Website:www.sunspirituality.com.
Our Sun spiritual Temple deliver Spiritual Services to Companies owners, CEOs, Business brands owners, Bankers, Technologists, Monarchs, Military officers, Entrepreneurs, Top Hierarchy State Politicians, and any Public figures across the planet.
Author:His Magnificence the Crown, Kabiesi Ebo Afin! Oloja Elejio Oba Olofin Pele Joshua Obasa De Medici Osangangan Broadaylight.
HBR’s
fictionalized case studies present dilemmas faced by leaders in real
companies and offer solutions from experts. This one is based on the
case study “Acquiring Zipcar: Brand Building in the Share Economy,” by
Susan Fournier, Giana Eckhardt, and Fleura Bardhi (Boston University
School of Management, 2012).
Henry
Beyer walked up to a Mini Cooper in the city parking lot across the
street from his office in downtown Houston. He waved his brand-new
VillageCar card near the door handle and got in.
“It
looks like someone left something behind,” his colleague Tony Cummins
said, reaching into the back and picking up a pair of socks. He laughed;
Henry grimaced.
The
two were executives at Beacon Car Rental, one of the industry’s most
established and respected firms. Henry was the senior vice president of
operations. Tony, the chief marketing officer, had suggested taking a
drive so that they could talk about Beacon’s latest
acquisition—VillageCar. He knew that Henry would be making the call on
how to integrate the car-sharing company, and he wanted to bend Henry’s
ear about it.
“Have
you ever been in one of these things? I thought we weren’t going to
fit,” Henry said, looking around the inside of the Mini. Both men were
more than six feet tall.
Tony
admitted that the car was a strange place to meet. “But I wanted to
talk with you,” he explained. For the past five years, Henry had led the
integration of all Beacon’s acquisitions, and he had the process down
to a science. Bloomberg Businessweek
had featured the firm in an article about companies that take speedy
approaches to M&A while remaining sensitive to the human costs.
“This
one is going to take a little more time than usual,” Henry said, “but I
assured Mark this morning that we’d get it done, like we always have.”
Mark Lewis was the CEO.
“Still, I don’t want us to lose sight of what a game changer this acquisition is,” Tony said. Henry rolled his eyes.
“Let’s not overstate it,” he replied. They’d been having the same conversation for months.
“It can’t be overstated,” Tony said. “Think about it: We’re not in a rental car, we’re in a shared car.”
“Rental, shared. Same difference.”
As
they turned onto Fannin Street, just a few blocks from their office,
Tony pointed out another VillageCar, and then another. Instead of
sitting in rental car lots, they were parked in dedicated spots in
public areas, for easy access. One was a Prius, the other a Nissan
pickup truck. “We’ll be able to tap into a big demographic that dreads
being seen in a Ford Taurus from Beacon—or in anything from Beacon,” he
said. “These are people who get dewy-eyed about sharing. When they get a
VillageCar, they’re making a statement that they want to access things, not buy them. It’s anticonsumerist, pro-environment, pro-community—everything Gen Y loves.”
“I
know I’m an ops guy and you’re the marketing guru, but I don’t buy it,”
Henry said. “The experience just doesn’t feel special to me. The guy
before us didn’t fill the gas tank, and he barely showed up on time. He
didn’t even wave as he ran off. What’s so pro-community about that?
Apart from the empty gas tank and the socks, this seems exactly like a
rental. Why should the VillageCar deal be any different from Starr?” The
year before, Beacon had acquired a smaller rental car chain that had
hundreds of locations in the Southwest.
Tony
shook his head. “You know I think we mishandled Starr. It was clear the
brand had cachet in the region, which we could have leveraged. But we
ended up integrating it to death. If we treat VillageCar the same way,
we’re going to lose all the potential benefits and miss out on a huge
opportunity.”
“We’ve
gone over this already,” Henry said. “The goal should be to use our
scale, capabilities, resources—everything we’ve got—to make VillageCar
more profitable. It’s going to benefit from our fleet-purchasing power.
And its in-town parking spaces will help us build our presence in urban
areas. Not to mention, it will give us access to a younger customer
base.”
“But
this is our opportunity to get in on a trend,” Tony said, rapping
gently on the dashboard. “More and more people are opting out of owning;
they’re willing to pay to temporarily access something. It’s not just
car sharing. It’s music sharing, bike sharing, apartment sharing,
designer clothing sharing, dog sharing. Even dogs, Henry! That Forbes cover story
estimated that the share economy will be a $3.5 billion category this
year. I’ve said it before, and I’ll say it again: The best path forward
is to keep VillageCar separate—the operations, the branding,
everything.”
“Come
on—we both know the costs of that,” Henry said. “Mark would balk at the
inefficiencies.” The CEO was known for running a tight ship. “And we
haven’t seen any evidence that VillageCar’s model is a radical departure
from ours or that its customers behave differently. Sure, there are
things about the model we should adopt—hourly rentals, more-convenient
locations. Fine. But when it comes to cars, ‘sharing’ is just a fancy
word for ‘rental.’ The only thing customers are sharing is the crap they
leave in the backseat.”
A Third Opinion
Later
that afternoon Annabel Howard, Beacon’s CFO and Henry’s boss, leaned
back in her chair. “I’m hardly ever the tiebreaker,” she said.
“We don’t want you to settle anything. We just need another opinion,” Henry told her. He and Tony replayed their debate.
“What’s
the big deal? Clearly a full integration is the most cost-effective
approach. We’ll get rid of the overlaps, maximize the synergies, and be
done with it,” Annabel said. “I have no interest in creating an unwieldy
bureaucracy. Managing multiple brands, running separate IT systems,
setting different price structures—it would be a mess.”
Henry smiled at Tony, gloating a little.
“But
this is different,” Tony countered. “VillageCar isn’t like Starr or any
of the others. Starr was a straight-up rental car company, same
business model as ours. It gave us access to a new geographic market. I
thought there was some marketing benefit to retaining the brand, but you
all disagreed, and I lived with it. This is a much bigger opportunity.”
He
leaned across the desk. “Think about it from a risk management
perspective, Annabel. This may be just what we need.” Their industry was
struggling. The basic business model hadn’t changed in 30 years, and
Beacon, like all the other major players, was forced to compete more and
more on price. Annabel had been saying that this was a big risk and was
turning car rentals into a commodity, with no way to win.
“Hmm—I hadn’t quite thought about it that way,” she said.
Now
that he had her attention, Tony kept going: “Maybe we need to go out
with VillageCar in front. We don’t want to miss the boat, like Kodak did
with digital photography. Maybe it’s time to shake things up.” He told
her he’d been at the VillageCar headquarters the previous week with
Mark. “The energy there is great. We need some of that: the start-up
feeling that anything’s possible, that we can change the world. I worry
that if we gobble the company up and treat it like a business unit, we
won’t innovate on our existing model, and we’ll be left behind.”
The three of them were silent for a moment. Then Henry spoke: “We’d be adding costs instead of taking them out.”
“That’s true,” Annabel said. “But maybe the costs of not changing our model would be even bigger.”
Consumer Research
A
week later Henry hurried down the hall to Tony’s office. He knocked but
then quickly opened the door without waiting for a response.
Tony swung around in his chair. “What’s the emergency?”
“Remember what I said about sharing being hype?” He set a paper down on Tony’s desk; it was an article from the Journal of Consumer Research.
Tony stared at the title and abstract, trying to decipher the academic language.
“Bottom
line,” Henry said, “this is a study of car-sharing customers. Out of
all the things they value about their experience, the biggest one is
access. The environment and community aren’t even on their radar. They
care about affordability and convenience, just like Beacon’s customers
do. Functionality is all that matters.”
Tony up picked the paper, stared again at the abstract, and shrugged.
“Take
my word for it,” Henry said impatiently. “I’ve been studying this for
the past hour. And it’s pretty clear: We need a clean, straightforward
integration, like I said. We get VillageCar’s customers, we can adopt
its shorter-rental model, we take over its locations, but ultimately we
give those customers what they want: good prices and convenience. And no
socks in the backseat.”
“And
the name? We’re going to kill ‘VillageCar’?” Tony asked. “No one over
there is going to like that. They agreed to the acquisition assuming
we’d keep their brand intact.”
“But
we didn’t make any promises. I say no separate brands.” Henry argued
that two brands would be too complicated for customers; they wouldn’t
know which company they were dealing with.
“That’s
not necessarily true,” Tony said. “Look at Toyota and Lexus: two
different brands, two entirely separate consumer groups. Yet everyone
knows they’re the same company. Besides, if we merge the brands, we
alienate the VillageCar customer base. It’s growing every day, and we
don’t want to lose those people. Their loyalty is fanatical. They don’t
call themselves ‘villagers’ for nothing. They’ll revolt, and
VillageCar’s employees might join them.”
“If we just gobble the new company up, we won’t innovate on our existing model.”
“‘Villagers’—hah,”
Henry said. “Maybe that’s what VillageCar’s marketers call them, but I
doubt customers call themselves that. This study shows that the
emotional connection is a sham. VillageCar’s not about community. It’s
about finding the most convenient, economical way of getting from point A
to point B.”
“If
that’s true, why are our customer bases so different?” Tony asked. “Why
is everyone in the world talking about the share economy? Why is that
market ballooning?”
“Nice Wheels”
Henry had already ordered by the time his son Kyle showed up at Jasper’s restaurant.
“Sorry
I’m late,” Kyle said. “My marketing professor wouldn’t stop talking.”
Kyle was studying business at the University of Houston. He and Henry
tried to meet for lunch once a week. This was their favorite spot,
because it had outside tables and amazing burgers.
Henry
asked Kyle if he was liking the class. “Yeah, it’s interesting
stuff—how to make people want things they shouldn’t,” Kyle replied.
Henry laughed. “Is that what you’re taking away from it?”
“More or less. Hey, can I get a ride back to campus after this?” Kyle asked.
“Sure—if you’re OK going in that,” Henry said, pointing to the Audi A3 parked on the street in front of them.
“Nice wheels,” his son said. “Did Mom really let you buy that?”
“No way. I’m renting it. Or accessing it—I’m not sure what to call it. It’s from this company we just acquired,” Henry said.
“You told me about that last time. VillageCar, right? I’ve seen a few of those on campus.”
Henry
explained that he was on the hook to decide about the integration.
“Everyone’s talking about how your generation is different, how sharing
is the wave of the future. But it seems like just a fad to me.”
“Well,
I’m not sure how to integrate companies. But I do know something about
my generation, and we’re definitely not like you,” Kyle said. Henry
rolled his eyes at the familiar refrain. “I’m not being a pain, Dad. I’m
trying to help. Listen, I’m not into buying things. I just want to use
them when I need them. I remember you told me how proud you were when
you and Mom bought your first car—that Nissan—right after you got
married. You remember everything about it—the smell, the salesman’s
name, where you drove first. But I don’t really care about stuff like
that. I don’t want to own lots of things. You’ve got a wall of CDs; I
have this,” he said, holding up his iPhone.
Henry
listened intently. Kyle had a point. If Beacon took its typical
approach, it risked losing a whole generation of consumers like Kyle.
“Owning
weighs you down,” Kyle continued. “Forces you to commit. Look, today
you have an Audi. Tomorrow you can have a van and go to Home Depot. You
can try different things out. Not owning is liberating.”
Henry
watched his son take a bite of his burger. He was amazed that his
kid—he still thought of him as a little boy—was starting to sway him.
“It’s
a marketer’s dream, isn’t it?” Henry said grudgingly. “Telling
customers that your product lets them change their identity by the
hour.” It was an appealing prospect when he looked at it from this
angle. Going out to customers with a message like that could transform
the problems that had been plaguing rentals for years. But he knew his
decision couldn’t be all about marketing. He had to consider
efficiencies, too.
“So help me sound smart in my marketing class,” Kyle said. “What are you going to tell the CEO?”
What Would You Do? Some advice from the HBR.org community
What should Henry recommend for the VillageCar integration?
The Experts Respond
Marc McCabe is the product and business development lead at Airbnb.
Henry
should listen to Tony: VillageCar should remain as independent from
Beacon as possible. The two companies have very different business
models. A rental is something you use for several days when you go on a
business trip or a vacation. A shared car is something you use for a
short time to run errands, move a piano, or impress a date. VillageCar’s
customers don’t want what Beacon offers. They want flexible access to a
car on a regular basis.
Henry
is right that VillageCar’s customers care about convenience, but they
also believe in community. Those aren’t mutually exclusive ideals; in
fact, they’re interconnected. In the sharing economy, community is a
bond around a common ideal. In the case of VillageCar, that might be
convenience and affordability, or the ability to change up your car when
you want to.
At
Airbnb we help our customers bond around common ideals: being able to
stay anywhere, to meet other people, to have an adventure. The focus of
our marketing is on fostering the community that makes sharing possible.
We motivate our users by giving them opportunities to connect with
people who have similar values and interests. That’s how we ensure that
the listings on our site are treated with the same respect people would
show to a family member’s home. It’s how you ensure that fewer socks are
left behind.
Henry’s
concerns that the sharing economy is a fad are unfounded. There are
myriad reasons why businesses based on sharing have come about now.
First, advances in technology play a major role: Five or six years ago,
people didn’t have the tools, and consequently the confidence, to
conduct these types of transactions. Second, the economic downturn has
forced people to think about what they own and what they need—and to
question whether they need to own things in the way they previously
have. Media is a good example. Ten or 12 years ago, you had to break the
law to access music through the internet. But now that you can legally
access any song with a couple of clicks, what’s the point of owning a
CD? Specific trends like that one may continue to evolve, but the
sharing economy is here to stay.
There’s a trend toward independence when an acquisition is a potential disrupter. Think of Google and YouTube.
Tony
says that VillageCar’s employees will revolt if Beacon subsumes the
brand, and I think he’s right. Chances are, the cultures of the two
businesses are dramatically different. Those of us who work in a sharing
business want an environment where the pace is fast, the atmosphere is
fun, and decisions are made quickly. We see ourselves as pioneers in an
emerging field. If Henry wants to make full use of what VillageCar has
to offer, he needs to be mindful of why its employees come to work every
day and what makes them happy.
Successful
acquisitions can take many different shapes. But when the acquired
company is a potential disrupter, I see a trend toward allowing
independence. Think of Google and YouTube, or Facebook and Instagram. In
both instances the established company smartly refrained from
completely taking over and rebranding. YouTube and Instagram were
allowed to keep doing what they do best and to stay small and nimble.
Beacon clearly has established its own model for handling M&A, one
that involves close integration. But if Henry and his colleagues want to
make a winning bet on the future of their industry, they’d be better
off giving VillageCar room to remain the unique organization it is.
Andre Haddad is the CEO of RelayRides.
Henry
has a point: In many ways VillageCar’s business is not that different
from Beacon’s. Both companies provide mobility for customers by buying
and managing a fleet of vehicles and offering those vehicles for a
certain amount of time. And despite what Tony says, VillageCar’s model
is not truly based on sharing and community. That’s just the spin the
start-up uses to differentiate itself from traditional rental car
companies. Real car sharing involves a peer-to-peer model, with no
intermediary. At RelayRides, for example, we don’t own a fleet of
vehicles, or even a single car. We own the software that allows people
who have cars to share them with people who don’t.
But
there are also important distinctions between Beacon and VillageCar.
Tony is right that the companies have different purposes and target
different audiences. Beacon primarily serves people who have cars of
their own. VillageCar aims to provide an alternative to vehicle
ownership. It serves urban young people who have chosen a lifestyle that
doesn’t require them to own a car—they can access one instead.
Beacon’s
corporate brand is designed to appeal to business travelers. VillageCar
is seen as an innovative, technology-focused start-up. Trying to merge
the two brands would be a complete turnoff for VillageCar users—and
possibly for Beacon customers, too.
Henry
needs to take these differences into account when making his
recommendation. He should push for integration, but only to a point.
Everything that isn’t customer facing should be merged, as Henry and
Annabel both advocate. Beacon should combine the back-end
operations—fleet acquisition, maintenance, and disposal. Inefficiencies
here are most likely what’s holding VillageCar back, and this is where
Beacon can offer its strengths.
Henry should push for integration—to a point. Everything that isn’t customer facing should be merged.
However,
the customer needs to see two distinct brands. Tony’s analogy to Toyota
and Lexus is apt. Those brands are completely different in terms of
what they stand for and the kinds of audiences they attract. Similarly,
the VillageCar and Beacon brands need to coexist separately. Making one a
sub-brand of the other would be a mistake.
I
can imagine handling it this way: Each of Beacon’s locations would have
two counters—one for the Beacon brand, the other for VillageCar. That
way the two brands would share buildings, systems, and fleets, but their
customers would have distinct experiences. VillageCar customers could
still rent by the hour and choose the car they want—and if they prefer,
forgo the counter altogether.
The
underlying aims of the VillageCar acquisition are to give Beacon access
to adjacent markets and to help the start-up run a more profitable
business. If Beacon treats VillageCar just like its other acquisitions,
it risks missing out on both opportunities.
How
to handle the VillageCar acquisition is not an easy decision, and Henry
has to keep all the immediate financial aspects in mind. But he also
needs to pay attention to what’s happening in the economy at large.
There’s a clear trend away from ownership and consumption. With
household incomes flat over the past 30 years, it’s challenging for
consumers to buy assets, especially ones that depreciate quickly, as
cars do. Although VillageCar may not use a true sharing model, it is at
least moving in the right direction.
Was this article helpful? Connect with me.
Follow The SUN (AYINRIN), Follow the light. Be bless. I am His Magnificence, The Crown, Kabiesi Ebo Afin!Ebo Afin Kabiesi! His Magnificence Oloja Elejio Oba Olofin Pele Joshua Obasa De Medici Osangangan broad-daylight natural blood line 100% Royalty The God, LLB Hons, BL, Warlord, Bonafide King of Ile Ife kingdom and Bonafide King of Ijero Kingdom, Number 1 Sun worshiper in the Whole World.I'm His Magnificence the Crown. Follow the light.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.