Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of BusinessTeacher.org.
Table of ContentsThe Change Analysis – Images of Change Comparison of Two Companies America Online Background Time Warner Background AOL Image Differences Time Warner Image Differences Image Analysis Matrix (Change Grid) Image Analysis Continued Conclusion References
The Change Analysis - Images of ChangeAs a company goes through a merger it must put together an implementation plan that includes a successful adaptation, adoption, and acceptance protocol to monitor and control resistance. As the merger persists the inevitable changes will impact the current leaders, organizational structures, internal and external relationships, resources and existing policies and procedures. These changes will push boundaries to include the organizations current work culture and operating standards. This was experienced in with the AOL Time Warner merger. This paper will cover the background of both companies, provide insight on how they compare to one another, overview of their differences, and analysis of their change images as they merged.
Comparison of Two Companies
America Online BackgroundAmerica Online (AOL), an internet service provider, grew rapidly in the 1990s. Users grew by 500% between 1992 and 1995 with its market cap peaking at $222 billion in 1999 (Duggan, 2018). After acquiring Moviefone and Netscape in 1999, AOL merged with Time Warner in 2001. Prior to the merger AOL was led by Steve Case. In 2000 AOL set up the purchase of Time warner with a 55% shareholder ownership in the new company, AOL Time Warner. In 2001, after the merger was approved, most executive positions within the new company, AOL Time Warner, were filled by AOL executives. In 2001 AOL’s stock fell 50 percent (Munk, 2007). In 2002, after SEC investigations of inappropriate accounting practices came out, the stock price dropped to $8.70 or roughly 85% from the previous year (Bodie, 2006). Time Warner executives started to replace AOL executives. In 2003 Steve Case resigned and the company was renamed Time Warner with AOL as one of its divisions. In December 2009 Time Warner spun off AOL all together and in 2015 Verizon purchased the remaining assets for $4.4 billion (Duggan, 2018).
Time Warner BackgroundThe story of WarnerMedia, formerly Time Warner Inc. was birthed 1990–2001; 2009–18) and AOL Time Warner (2001–09), one of the largest media and entertainment conglomerates in the world. It was founded as Time Warner following the merger of Warner Communications and Time Inc. in 1990, and after becoming a subsidiary of AT&T in 2018, it was renamed WarnerMedia. However, for the purposes of this paper we will refer to the later of the entity, Time Warner Inc. It consists of three major divisions: Home Box Office Inc. (HBO), Warner Bros. Pictures Inc., and Turner Broadcasting System Inc. Its products primarily encompass motion pictures and broadcast and cable television programming and distribution (Hall, 2018). The name Time Warner came from the merger of Time Magazine and Warner Brothers Pictures. The initial film company was incorporated in 1923 in Los Angeles as Warner Brothers Pictures, Inc., by Polish immigrant brothers Harry, Albert, Sam, and Jack Warner, who had started out with a nickelodeon in Newcastle, Pennsylvania, in 1903 (Hall, 2018). Time magazine first appeared on March 3, 1923 and sold 9,000 copies. Its founders, Briton Hadden and Henry R. Luce, sought readers among the 1,000,000 college-educated citizens in the United States at the time. The magazine made a modest $700 profit in its second year of publication; by 1928 its profits were $125,000 on a circulation of 200,000 (Hall, 2018). By the time the merger talks began, Time Inc. was the third largest cable operator in the country, including its 23 percent stake in Turner Broadcasting System. Despite initiating talks in late 1987, the merger that created Time Warner was not completed until 1989, in part because Time Inc.’s executives delayed the merger until official investigations into the financial scandals of both WCI and Ross were cleared up. Ross shared CEO duties until early 1991 when Nicholas left the company. Ross died in December 1992, and Gerald (Jerry) Levin became CEO of Time Warner Inc (Hall, 2018).
AOL Image Differences
- AOL’s success over roughly 15 years was an amazing expansion fueled by the internet boom and highly effective promotional capabilities in executives such as Robert Pittman
- AOL employees adopted a whole organization concept where everyone thought of the value of the company first and foremost. Every employee has the stock price on the bottom left hand side of their computer.
- AOL employees Expected to grow in the face of doubt. Their senior leaders imbued a feeling that AOL was special even while others faltered doing something similar.
Time Warner Image Differences
- Time Warner success over more than three decades stems from the ability to strategically partner with other successful large entities.
- Time Warner does not let past failures embody their objectives and the business strategic initiatives. They are merely lessons learned to add to their arsenal of greatness.
- Embracing the ever-changing modern technical savvy consumer demands and innovative products and services.
Image Analysis Matrix (Change Grid)
|Change Image||Basis of Image||Application to Company - Time Warner||Application to Company - AOL||Pressures for Change||Differs From Others How?||Unintended Consequences From Image|
|Director||In a merger, with different cultures it is also important to create a new mission statement and company values or imperatives so both teams have a single understanding of where the company is going and what is expected of each member which will increase acceptance and adoption.||Time Warner has always had a strong desire to become an organization that services all their consumer’s needs. Therefore, inquiring or merging with a competitor or an organization that does not provide the same service satisfies Time Warner’s strategic initiatives.||AOL takes over. They were not going to focus on tradition or the structure of daily activities. They will grow at the fastest rate possible and save the day.||As the world continues to advance, both organizations found that their portfolio would benefit from the merger. This acquisition would allow for them to own a big piece of consumer interests from media to services.||The merger of the two has had a significant impact on how current day acquisitions are implemented. The many CEOs since the AOL Time Warner days has shaped their futures in a world full of technical innovative solutions.||If AOL/Time Warner do not prepare their companies for the merger it will likely not be accepted and will ultimately lead them in a path of discovery outside of growing as one organization.|
|Navigator||In a merger, resistance is expected, and each company has a responsibility to console those that are not comfortable with the change but be prepared and understanding for those that do not welcome it.||Time Warner 's culture has always been strong, professional, and prepared for any change. The change that comes with a merger has the potential to shed light on the gaps or weakness within an organization.||AOL used every means possible to navigate legal ways to make their finances appear desirable to drive up stock prices.||Time Warner/AOL has culture conflicts that could negatively impact how the implementation of the merger. The need to have a plan of each phase would be likely the best implementation starting from the top-down and encourage each member of the new merged organization to take part in the activities of becoming a single organization.||This merger is different from other mergers because the magnitude of the impact it had on consumers, each company, and the nation. It was a competitive advantage acquisition that grazed the line of unethical due to it potentially causing a monopoly which is illegal in the US.||The failure to properly socialize and console the change would potentially carry a burden in future change which would lead to an increase in resistance, partnership or merge opportunities, or the ability to operate at its current potential. Change be navigated with care, concern, caution, and contingencies.|
|Interpreter||In a merger, it is necessary to communicate often with all levels of people in both organizations to decrease resistance, encourage acceptance, and lead by example.||Time Warner leadership team have successfully merged with other companies prior to AOL. They approached the merger with a plan considering all aspects from new name to new services / products, and how-to rollout the changes.||AOL installed almost every senior executive position within the new company framework. Those executives struggled to translate the new strategy to the Time Warner rank and file employees.||The acquisition has to take in consideration new service limitations based on conduit and content discrimination in order to meet legal requirements.||Other mergers may have similar implications, but what makes this merger significant is the amount of market share the two organizations have independently. The merging of two cultures, executive branches, and consumers requires diligence.||If the merging entity does not meet the requirements from an organizational and legal perspective it will impact the mergers success and potential lead to federal fines.|
Image Analysis ContinuedThe image that would best facilitate the change in this case is the navigator. The navigator looks critically and identifies external impacts on the organization. This includes changes in valuations due to industry wide and or market corrections. The tech bubble bursting wasn’t a complete surprise and should have been part of any risk analysis attached to the merger. Time Warner’s willingness to get in the middle of that high level of risk and let AOL take over at the tail end of the bubble shows Time Warner did not apply enough of a priority on this image of change. They could have given more credit to the concern’s voices by those with the navigator image of change. As a secondary image of change that had a large impact, the interpreter image of change could have made the difference between a multifaceted conglomeration and a tightly focused whole unit. With an organization this size and so diverse, it may not even be possible to get everyone on the same page. Clearly each organization interpreted the situation differently and focused their efforts with different priorities.
ConclusionAt $147 billion, AOL Time Warner was the most recent largest media merger in history, combining the old-world assets of Time Warner with the new-world growth of America Online. Promises by the bankers that synergies would be worth upward of $54 billion within AOL and another $29 billion at Time Warner (merger prospectus) were quickly forgotten amidst the largest write-down in corporate history in the first quarter of this year. With the bad timing of a change in accounting rules, the combined company took a $54 billion charge to goodwill carried on the balance sheet as a result of the merger (BERNSTEIN RESEARCH, n.d.). The differences between the two infamous entities created a wave in the business world of mergers and acquisitions. Both had undergone mergers in the past, but not quite as big as this merger.
- BERNSTEIN RESEARCH. (n.d.). The Mergers of the AOL Time Warner Group. DeVry University Library. Retrieved November 08, 2018, from http://eds.a.ebscohost.com.proxy.devry.edu:5050/eds/pdfviewer/pdfviewer?vid=1&[email protected]
- Bodie, M. T. (2006). AOL Time Warner and the False God of Shareholder Primacy. Journal of Corporation Law, 975–1002.
- Carlson, C. B. (2000, March). Lessons From The AOL-Time Warner Merger. [Editorial]. DRIP Investor. Mar 2000, 9(3), 8.
- Duggan, W. (2018, May 24). This Day In Market History: AOL Is Founded. Retrieved from Benzinga: http://proxy.devry.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&AuthType=url,cookie,ip,uid&db=n5h&AN=DBV5BEN40C9DD265BFD1FD6&site=eds-live
- Hall, M. (2018, September 18). WarnerMedia. Retrieved November 08, 2018, from https://www.britannica.com/topic/Time-Warner-Inc.
- Munk, N. (2007). Fools Rush in : Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner. Retrieved from Pymble, NSW: HarperCollins e-books.: http://proxy.devry.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&AuthType=url,cookie,ip,uid&db=nlebk&AN=212717&site=eds-live
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this assignment and no longer wish to have your work published on the UKDiss.com website then please: