Merger Global Implications of the Tap/Iag Merger

Merger

Global Implications of the TAP/IAG Merger

In order for any merger to be successful achieved and the two venture to remain profitable in the future, careful consideration of environmental and industry factors as well as certain internal features of both companies involved in the merger must be undertaken. This type of comprehensive internal and external analysis, such as a standard SWOT analysis, would provide a general overview of any of the different risks and potential channels for rewards that such a merger would face (Campbell et al., 2011). A more detailed examination of certain features can also be beneficial, however, not only in helping to forecast certain challenges and outcomes, but also in illuminating the importance of key decisions and the methods by which they are made. An overview of the internal components of organizational structure, culture, and leadership in regards to the merger between Air Portugal (TAP) and the International Airlines Group (IAG) demonstrates the benefits of such detailed analysis.

The airline industry is currently highly competitive; analyzed in the framework of Porter's Five Forces it can be seen that although the threat of new entry is minimal and there are actually some legislative exit barriers, rivalry is still quite high due to virtually non-existent switching costs, low supplier power, and the decreasing importance of brand identity (Johnson et al., 2010; Parker, 2011). This means that an organizational structure with tighter control on costs and a more singular focus to efforts and perspectives would likely be most beneficial (Johnson et al., 2010). In this light, the merger makes sense for both companies (TAP would be moving from a state-run to a private company, which is good for competitive purposes) and for the global airline market, which is in sore need of increased efficiency (Parker, 2011).

Significant problems could potentially arise due to the very different organizational cultures present in TAP and IGA. An examination of the political, economic, and social factors influencing the development of each organization's culture makes this quite simple to see, and such analysis can also help determine the likely success of the merger and some of its impact on the global airline industry (Campbell et al., 2011). The fact that TAP is currently a state-run airline gives it less of a profit-driven culture, which has translated into a certain lack of efficiency that has likely permeated into other aspects of the overall culture of the organization, and the motivation for the airline's sale is largely driven by current political and economic upheaval in Portugal (PAJ, 2011). IAG, meanwhile, was formed by two for-profit carriers and has an increasingly regimented and ambitious administrative culture (Parker, 2011). Attempting to mix these two cultures will be no small task and could require (almost certainly will require) massive reorganization of both physical assets and human resources, however with proper planning it could be quite successful.