Changing Corporate Structure to Respond

Changing Corporate Structure to Respond to Acquisition

It is not uncommon for a company to acquire another competitor's company. Acquisitions allow a company to grow itself rapidly without having to build new stores in new locations from the ground up, nor hire thousands of new workers, nor find new distribution partnerships. In this example the company Safeway will acquire the company Sobeys. Sobeys is a large food retailer only in Canada; the chain has stores within all ten Canadian provinces. Safeway is similarly a large grocery retailer, but serves areas in the United States and Canada. This acquisition of Sobeys will affect both companies in positive and negative ways; it will equate to changes in ownership, ideology, and practices. In the following paragraphs, the effect of the acquisition on the executive team, the geographic markets, store brands, distribution network, store locations, and number of employees will be analyzed and reviewed. In the end it will be shown that acquisitions of competitors create many complex changes to both the company that acquired and the company that was the target of the acquisition.

The first item that will be reviewed is the impact of an acquisition on the executive teams of the companies. Both Sobeys and Safeway have executive teams in place, and it is clear that when the acquisition takes place that there will not be room for all of these people in the newly formed executive team. It is commonplace for acquisitions to destroy an executive team's continuity for many years following the acquisition. For example the company may only have one Chief Executive Officer, one Chief Financial Officer and so on. Additionally these companies will likely see a higher turnover in the executive team in years following the initial acquisition. Bill McEwan is the Chief Executive Officer at Sobeys and they also have Directors for each of the ten Canadian provinces. In total Sobeys' executive team totals 14 employees (Sobeys 78). At Safeway Steven Burd is the Chief Executive Officer and there is a much larger executive team of 38 in total (Safeway 16). Through the acquisition many of Sobeys' executive team will need to transition to new roles, or decide to leave the company. Those that are able to continue in an executive role may very well need to relocate from the Sobeys' headquarters in Stellarton, Nova Scotia to the Safeway headquarters in Pleasanton, California (Yahoo).

The changes made to the geographic markets of the company are the second item being reviewed. The acquisition of Sobeys into Safeway will allow Safeway to expand quickly into new geographic markets. Today Sobeys is in ten Canadian provinces (Sobeys 2). This equates to Sobeys' serving 814 communities (Sobeys 8). Alternatively Safeway is predominately in the United States. They are in the Western, Southwestern, Rocky Mountain, Midwestern, and Mid-Atlantic regions of the United States and also in Western Canada (Safeway 2). Their footprint in Canada is small, but with the acquisition will quickly be large and cover all ten Canadian provinces. Safeway will be able to be fully emerged in the Canada geographic markets. This will be a positive affect for Safeway, and quickly help them build their company throughout Canada.

Thirdly the effect that the acquisition will have on the company's brands will be reviewed. The brands that both Sobeys and Safeway carry differ. This means that through the acquisition that the product brands carried in the store will be affected. Sobeys carries many private label organic product lines certified to meet highest standards of organic goods. They do carry national brands, but the carrying of the private label products makes them stand apart (Sobeys 11). Additionally Sobeys introduced two new brands "Compliments Organics" and "Compliments Balance" to their brand line recently (Sobeys 22). Safeway differs by focusing on successful known brands, bringing on new brands that match the consumer preferences (Safeway 12). Safeway carries an array of grocery items, food, and general merchandise, as well as having specialty departments, such as bakery, delicatessen, floral, and pharmacy, as well as coffee shops and fuel centers (Yahoo). Because of acquisition, the specific brands to only Sobeys will most likely be terminated. Instead Sobeys will take on the products carried at Safeway. Outside of product brand, they will need to determine their company brand. After acquisition the name of the stores will change, and decisions will need to be made for what division and service brands they want to use.

An integral piece of the grocery stores are their distribution centers and networks that supply them with their products; this is the fourth factor changed by the acquisition. Both companies have their own distribution networks that they rely on to get the products to their stores day in and day out. Sobeys has 21 distribution centers serving their stores in Canada (Sobeys 8). Safeway has 17 distribution centers; this includes 13 in the United States and 4 in Canada (Safeway 23). If Safeway and Sobeys distribution centers overlap in a particular area, they may see a merger of the distribution centers, to consolidate their financial impact in that area. Overall Safeway should see positive impacts from acquiring the distribution centers of Sobeys. Safeway will be able to add the 21 Sobeys distribution centers to their already owned 17. Additionally, Safeway will have a greater ability to get into new distribution channels. They will have more power to create new partnerships with partners Sobeys has worked with.

As the fifth item the number of stores will be drastically changed through the acquisition. Safeway has 1694 stores in Western, Southwestern, Rocky Mountain, Midwestern, and Mid-Atlantic regions of the United States and also in Western Canada (Safeway 2). In the same way Sobeys 1300 stores in ten Canadian provinces (Sobeys 2). Safeway will see a change similar to the geographic changes shown above. Safeway will quickly be able to expand by acquiring the 1300 Sobeys stores. It will almost double their store location size, and further their geographic footprint. By acquiring that great number of stores, they will reach many new customers and locations that they have not previously. Safeway's stores are mainly in the United States, with just a few in Western Canada. After this acquisition they will have stores that cover Canada in every province, which will help expand the company into areas they otherwise may not have.

Lastly, as reviewed above we saw the acquisition of Sobeys by Safeway will have an effect on the executive team, but it will also have an effect on the regular employee and the overall number of employees. Sobeys employees approximately 85,000 employees, while Safeway employees approximately 180,000 full-time and part-time employees (Safeway 24). These are employees that work in the grocery stores themselves; the checkers, baggers, stockers, and so on. And also include the employees that work at the corporate locations; the accountants, human resources, and so on. During the acquisition employees from both companies will have changes. First some employees will feel extra stress and fear losing their jobs. It is known that Safeway won't need twice the number of accountants and human resources, so these feelings by the employees are founded. In addition to the loss of employees and their emotional transition through the acquisition, employees will face the change of the two company's cultures coming together. Both groups of employees, from Sobeys and Safeway, will be coming from a work community of different cultures and styles. All employees will need to learn the new work culture, which can be challenging.

The above shows the impact of Safeway acquiring their competitor Sobeys. The acquisition affected both Safeway and Sobeys in positive and negative ways. The acquisition changed the executive team, the geographic markets, store brands, distribution network, store locations, and number of employees in the companies. The executive team and entire number of employees will see a drastic change; some will take on new roles and some will lose their positions completely. Safeway will drastically expand its market by taking over Sobeys. It will grow to expand the entire Canadian geography as well as almost double the number of stores it owns. In addition to this Safeway will have one less competitor in the marketplace, and be larger which will make it easier to stand against the other competition in the marketplace. The decision for a company to acquire another company is a massive and critical decision. The company acquiring must be ready to undertake the challenges involved, as well as the target company needs to be a proper fit with the other company. All of these changes mean many years of possible turbulence for the company and its employees, but if done carefully and mindfully the company will come out of the situation with a large financial and market gain.