MGMT5904 Managing Organisational Change

Answer

Case Study: AMAZON & ZAPPOS

In this case, the main issue to be discussed is organizational challenges/concerns/issues.

Company overview

Amazon Company is a customer-centric organization focusing on consumers, sellers and enterprises. Amazon serves its consumers through the retail website with a major focus on product selection, price and convenience. On the other hand, Zappos is a leading online seller of consumer shoes. The company stocks more than 3 million pairs of shoes, handbags, apparel and accessories. Additionally, the company specializes in more than 1000 unique brand (Engleman, 2010). Through its website, Zappos is able to distribute stylish and affordable footwear. In 2008, the company reported a total of $ 630 million in revenue.

Amazon and Zappos had a merger deal. The reasons why Amazon took the merger deal include; Amazon saw a growth opportunity of growing through acquiring the Zappos brand. Secondly, Zappos was interested in keeping its brand and culture whereas Amazon supported its vision as a self-governing company (Wind & Rhodes, 2017). Lastly, Zappos had the feeling that, it was in the best interest of the shareholders to sell according to the present valuations being paid by Amazon. The merger between Amazon and Zappos is the biggest acquisition for Amazon. In the first quarter of their merger, there has been a reported increase in sales valued at $ 3.5 billion. This has surpassed the $ 3.43 billion sales of products for Amazon Company (Lashinsky, 2010).

Theoretical framework

Amazon acquired Zappos in 2009 for a total of $847 million. The two organizations have been having controversial organizational approaches that has pushed the staff to work in unusual and creative manner. There were certain conditions which were to be reached before the merger was signed. For Amazon, the condition that was to be met is that Zappos was to retain an independent organizational culture and the normal ways in which it has been conducting its organizational activities. After the first quarter of the merger, Amazon was able to reach its objective. As an illustration, the $ 1 billion acquisition of Zappos was a major achievement for Amazon  because Zappos return rate increased above the normal value. There were certain interesting aspects of the acquisition. An example can be given by the increased uncertainty regarding revenue.

However, there had been certain organizational challenges being faced in regard to the merger acquisition. One of the organizational challenges/issues that had been affected by the merger includes the adoption of a single organizational culture to create harmony when it comes to organizational practices and operations. As an illustration, Zappos and Amazon are two different organizations. Zappos considers its culture and brand to be an important asset. This also applies to Amazon. However, a merger could not function properly with two different organizations having two different beliefs and vision. This would be difficult to penetrate the market. Some of the key organizational values in Zappos include the creation of “fun and little weirdness” and establishment of a positive team and family spirit.

Zappos practices an organizational culture that can be described as the ten-commandment culture. It is considered to be one of the biggest cultures in the organization. The success of the culture could be affected due to the new management. This kind of organizational culture is different when it comes to Amazon. As an illustration, Zappos was transparent to their employees about their financial statements. The company shared its financial information such as operating profits, performance metrics. The sharing made all employees express themselves without fear. This made the management process easier. For some time now, employees working at Amazon had been facing certain unethical behaviors. This created a controversy between employees from the two organizations.

Zappos employees felt that the merger would affect their job performance (Andjelic, 2010). In addition, Amazon considered the Zappo’s organizational culture to be extreme and it would take a while for its adoption. The two organizations had to deal with frustrated employees because of the new type of management system that had been introduced. To ensure that the interest of the two organizations are served, employees from the two-organization had to have meetings that were considered tiresome. This frustration seemed to affect their performances and job engagement (Ma, 2013).

Change process that was introduced to address the organizational issue

Amazon acquired Zappos with an objective of reaching a targeted financial objective. The merger acquisition was valued at $ 1.2 billion and Amazon made a promise that once it has achieved its objective, it would terminate the merger. Dealing with the difference in organizational culture required an understanding of the needs of the two different companies. When it came to solving the different organizational culture, holacracy was introduced. Holacracy is a form of organizational structure and operation where the organization will replace the conventional management hierarchy. Being that there were two organizations, the two parties presented their issues for discussion with an objective of reaching an agreement on how the interests of each organization will be served (Pearlson, Saunders & Galletta, 2016).

For Zappos, the management of the company had to be transparent to its employees. In such a scenario, the employees were being prepared psychological and mentally on the impacts of the merger acquisition by Amazon. Being transparent helped employees to stay focused and limit the change of attitude because of a new management that was to be introduced. With holacracy, every level in each organization was addressed (Banjo, 2017). A possible result is that all the team members were able to direct their energies in alignment with the mission and vision of their respective organization. Eventually, the full potential of each team member would be unlocked leading to an increased generation of innovative ideas. This can be supported by the fact that the merger was able to increase sales in products compared to its previous performances of the two organizations. This has been a success due to combined success and massive generation of new and innovative ideas.

The reason for the change process is that employees had not been used to a mixed style of management. There was a likelihood of their job satisfaction and engagement being negatively affected. This would affect the overall performance of the merger. In this circumstance, the organizations should continuously work on how to motivate and inspire their employees.

Recommendation.

Employees do find it hard to adopt a new organizational culture when it comes to a merger acquisition. This happens because they have been used to a particular style of management and the adoption of a new one will have both psychological and mental impact on the employees (Kerr, 2016). This was evident to both Amazon and Zappos employees. Therefore, the following recommendation will help in dealing the major organizational challenges affecting the two organizations. First, when it comes to merger, the two organizations needed to come up with a single organizational culture (Akter & Wamba, 2016). This would help in streamlining organizational practices. With a unified organizational culture, employees from both sides would be able to establish a positive relationship hence leading to an increase in job satisfaction and engagement (Bocris & Mahieux, 2017). Secondly, the two organizations needed to work on appropriate leadership and management styles. Being that Amazon was acquiring Zappos, their management would have avoided making fast changes in management style/leadership style. This is because it would affect the morale of employees hence leading to poor performances. As a result, Amazon needed to adopt the management that was previously being used so as to avoid colliding with the employees.

References

Akter, S., & Wamba, S. F. (2016). Big data analytics in E-commerce: a systematic review and agenda for future research. Electronic Markets, 26(2), 173-194.

Andjelic, A. (2010). From brands to behaviors: A sociology of attachment in the age of digital media. New School University.

Banjo S. (2017). Could Amazon step in a new direction and drop Zappos. Retrieved from: https://www.digitalcommerce360.com/2017/04/17/amazon-step-new-direction-drop-zappos/ accessed date 25/9/2015

Bocris, I., & Mahieux, S. (2017). Customer experience in an increasingly digital world. Journal of Digital Banking, 1(4), 309-320.

Engleman E. (2010). Amazon and Zappos, six months later: how they're fitting together. Retrieved from: https://www.bizjournals.com/seattle/blog/techflash/2010/05/amazon_and_zappos_how_theyre_fitting_together.html (Accessed date 25/9/2018)

Kerr, W. R. (2016). Harnessing the best of globalization. MIT Sloan Management Review, 58(1), 59.

Lashinsky A. (2010). Zappos: Life after acquisition. Retrieved from: https://fortune.com/2010/11/24/zappos-life-after-acquisition/ (Accessed date 25/9/2018)

Ma, C. C. (2013). Into the Amazon: Clarity and Transparency in FTC Section 5 Merger Doctrine. John's L. Rev., 87, 953.

Pearlson, K. E., Saunders, C. S., & Galletta, D. F. (2016). Managing and Using Information Systems, Binder Ready Version: A Strategic Approach. John Wiley & Sons.

Price III, R. A. (2013). Cash flows at Amazon. Issues in Accounting Education Teaching Notes, 28(2), 23-38.

Wind, J., & Rhodes, K. (2017). The Revolution in Innovation Management: The Challenge for Legacy Firms. In Revolution of Innovation Management (pp. 221-257). Palgrave Macmillan, London.