While the coming year will undoubtedly usher in new products and innovation, it will also bring corporate change to many retailers, distributors, and manufacturers. Many companies will consider consolidations to enhance their strengths, reduce competition, or achieve financial or operational benefits. According to MarketWatch, M&A activity in 2024 has seen a resurgence, and it’s anticipated there will be a 21% increase in 2025. We are already witnessing consolidation across may sectors, where large brands have historically become larger by gobbling up smaller competitors. But significant generational, societal, and technological changes must be considered by executive leadership to ensure successful mergers, acquisitions, and business transformation.
This article is part of Branding Strategy Insider’s newsletter. You can sign up here to get thought pieces like this sent to your inbox.
Brand Change By Other Names:
Merger: Two similar size companies come together to form a new entity. Both companies typically cease to exist, forming a new company/brand.
Acquisition: One company purchases another company. The acquired company may continue to operate under its original name, as a subsidiary, or be absorbed entirely. The acquired company loses its autonomy.
Consolidation: When two or more companies combine to form an entirely new company/brand. Different from a merger because both original companies are dissolved, and a new brand is created.
Horizontal Integration: When companies in the same industry and at the same stage of production or service combine. Horizontal integration often reduces competition and leads to economies of scale. For example, two flooring companies merging would be horizontal integration.
Vertical Integration: When companies at different stages of production or the supply chain consolidate. For example, a flooring manufacturer acquiring a retail chain is a form of vertical integration. This helps control the supply chain and reduces costs.
Conglomerate: A conglomerate is a type of consolidation where companies in unrelated industries combine. This can help diversify a company’s business interests and reduce risk since poor performance of one industry won’t negatively impact the entire conglomerate.
Culture vs. Strategy
Regardless of the motivation for undertaking their consolidation strategy, management will first come face-to-face with one simple truth articulated by Peter Drucker: “Culture eats strategy for breakfast.” Culture is all about the people. Culture influences behavior. Culture informs the belief in what works and what doesn’t. People haven’t changed that much—at least not over the last 100,000 years. We’re still tribal. And we’re wired to survive by being risk averse.
The Risk Of Failure
Almost 40% of M&As end in failure, so says McKinsey & Co.. Consolidation programs fail to achieve their goals due to employee resistance. In addition, 5.6% of organizations label themselves “resistant to change.” While we can intellectually agree with the Greek philosopher Heraclitus that “the world is in constant flux” emotionally we are highly suspicious about the “flux” that could impact our career path or our livelihood. Many would argue that “Three Cs of Marketing” (Company, Customer, Competition) should add a fourth C: Culture.
Brands create their own culture, internally and externally. The stronger the brand, the stronger the brand culture. When a brand merges, acquires or is acquired, the culture and its status quo are disrupted. Since brands exist through the lens of internal and external perceptions, marketing must be part of the change strategy. Without factoring in informative and persuasive marketing communication, along with transparent and supportive leadership, you run a high risk of fermenting an internally toxic “we don’t do things that way” environment that is counterproductive, or an externally alienated “who are these people now?” customer base that challenges continued loyalty and sales.
Accelerate Your Job Search With Marketing’s Most Advanced AI Career Coach
Brand Culture Struggles
As a leader, you must be aware of the impact change will have on your employees and how to help:
- Job insecurity and anxiety
- Help by communication and realistic timelines
- Cultural clash and identity confusion
- Help by bridging gaps and team building
- Increased stress
- Help by defining roles and preventing burnout
- Reduced job satisfaction
- Help by rewarding contributions to the transition process
- Loss of key talent
- Help by retention programs, employee engagement
- Negative impact on Work-Life Balance
- Help by flex hours, remote work options
Jane Gentry, a well-known business consultant, addresses the high stakes in her article “Unveiling the Hidden Impact of Toxicity on Your Business” by citing a recent study: “… a company stands to lose $12,489 in costs from replacing one toxic worker, which is almost double the figure a company gains from hiring a “superstar”. This figure does not include savings from avoiding litigation, regulatory penalties, or decreased productivity as a result of low morale.” How often have we heard that people, be they employees or customers, are the most important asset to the brand. Some will never adapt to the change for whatever reason. But as for the good ones that do, they need to be kept.
Creating A New Brand Culture
Derrick Daye, a brand consultant with The Blake Project observes: “Most organizations neglect the importance of developing a strong brand culture before communicating their value to the outside world. Management from these companies haven’t thought about how they can expect their employees to deliver a consistent brand experience to their customers when they are not offered a culture of brand consistency themselves.”
During a recent rebrand of a large floor covering company that had acquired two of their competitors, the understanding that employees were at the center of competitive advantage led my partners and I to put as much emphasis on the internal marketing and training for the leadership team as we did the new name, tagline, logo, website, etc. It’s that important. Given that the most trusted source of information during change is the employee’s immediate supervisor, internal marketing must permeate all the way through—from the C-Suite to the warehouse floor. And as with any marketing effort, continuity, consistency, and reinforcement are key.
The Role Of Marketing
Rather than glossing over or paying lip-service to marketing support for the change, smart management will give it careful consideration and additional budgeting, thus increasing the probability that they will succeed. In addition to hiring a brand consultancy to guide the process, marketing plays an indispensable role in creating:
- New brand strategy
- The goal here is to augment or increase brand equity—not lose it. Does the brand follow a transition phase or a complete departure? And what is the brand story that supports it? Better to have an unbiased third party to help you sort that out.
- New brand integration
- Portraying a unified identity is vital through name, design. This includes a brand standard, signage, uniforms, give aways, etc.
- Communication strategy
- Coordination of internal and external campaigns that are key for morale and customer retention and growth. Careful consideration should be given to timing, with internal stakeholders first, followed by customers, then the public at large.
- Customer retention and relationship management
- Listening to and addressing pain points. Understanding that most assume the worst (price increases, limited selection, loss of representation, etc.) and not the benefits to them.
- New marketing position
- Refine and enhance, based on new product and service offering. You did this for a reason. Now you have a clean slate to communicate that.
- New value proposition
- Analyze opportunities and articulate for competitive advantage. What differentiates your consolidation in the marketplace? What can you offer now?
- Sales and lead generation
- Align with sales to develop new pitches and campaigns. Discover new markets not available to you before and introduce your new brand.
- Digital and content strategy
- Prioritize online presence, PR, blogs, videos, social media, and website(s) to promote and inform. Remember, it will take frequent reminders to alter perception regarding your new entity.
- Reputation and crisis management
- Be ready to address misinformation or bad publicity. Be proactive in addressing potential concerns, such as customer overlaps and conflicts.
Managing a consolidation correctly can ultimately mean a strategic advantage for your brand growth. Managing it poorly can create a cultural wall it cannot overcome.
Paul Friederichsen is a partner and brand strategist at The Blake Project.
At The Blake Project we are helping clients from around the world, in all stages of development, redefine and articulate what makes them competitive at critical moments of change from the inside-out. Please email us for more.
Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education
Post Views: 24
