Running Header: AIR FRANCE-KLM

Air France-KLM

Air France-KLM

Introduction

The 21st century has brought upon the business community drastic changes, which have caused these companies to make monumental changes. The globalization of the business communities has meant that the organizations are vulnerable to more competitive forces, and they must make strategic decisions, to adequately deal with these pressures and enhance their market shares. Companies can no longer afford to make reactionary decisions in this environment, and they must make the necessary changes within their structures, to achieve sustainable growth (Lorenzoni & Baden-Fuller, 1995) . In this era the activity of organizational mergers and acquisitions has been increased exponentially, as companies have realized that they must pool their resources to become competitive in the global market. This activity however is implemented among the smaller and the giant organizational entities; where the multinational firms look to strategically acquire certain smaller companies to attain certain technologies or strategic skills (Buksbaum, 1999). In this perspective the dilemma of cultural conflicts is relatively easier to resolve, as the employees from the smaller company can adjust to the established culture.

In the cases of mega mergers such as the Air France and KLM merger, the situation is completely different. The main reason why large multinational organizations choose to merge with an organization of a similar size is that one of these firms is facing difficulties. The merger is commonly a last resort strategy, where it is implemented to save the company from imminent collapse. The reason why companies of this size do not seek to merge is because it is a very large scale commitment by both of the companies. As in the case of Air France-KLM, the companies are at a risk of losing their established markets, and venture into high risk endeavors. In these companies the organizational cultures are well established and much harder to adapt to the new environment. The merger is at a risk of combining the resources of two conflicting business entities, which might not be able to work on a collaborative basis. It is due to this reason that the well established premier airlines giants, had to critically analyze their options. The merger of these firms will help them become of the biggest airlines entities in the world, while on the other hand if the merger was not successfully implemented, it will cause these companies to lose their well established customer market. The two companies successfully merged in 2004, and the organizational entity of Air France-KLM was formed.

Discussion

Air France-KLM: Nature of the Merger 

The eventual merger between Air France and KLM took place only after a successful proven history of strategic alliances among various airline companies. Numerous companies had implemented the strategy of forming alliance within the industry, to be able to increase their coverage and passenger base. The Star Alliance established in 1997, was a highly successful alliance. In 2006, the Star Alliance ran up to 16, 930 daily flights to 842 airports in 152 countries. In 1998, the airline entity of One World ...