Case Study -
On June 24, 1998, Edward Leonard, of Creston, BC, a diamond driller working for Terramundo Drilling, was kidnapped by members of the Revolutionary Armed Forces of Colombia (FARC) in northeastern Colombia. Leonard's captors wanted to negotiate a deal for gold mining shares with Greystar Resources., a gold mining company from Vancouver and the owner of claims in Colombia's Santander province for which Terramundo and Leonard were contracted to drill core samples.
Leonard's boss, Terramundo's Norbert Reinhart, wanted to purchase his employee's freedom by paying $100 000 to the FARC guerrillas. On October 6, 1998, in a meeting with the guerrillas, Reinhart and the ransom money were exchanged with Leonard. While Reinhart was hoping to walk away with Leonard after the money exchange, the FARC realized that Reinhart was the president of Terramundo and thought that in him they had an even better hostage. After 94 days of captivity, and complex negotiations between the FARC, local contacts, and Canadian governmental and company officials, Reinhart was released on January 8, 1999.
The case shows the dangers of frontier mining (which has had a strong tradition in Canada) and illustrates some of the potential challenges for employees on international assignments. At the same time, the case has started a strong debate about the responsibilities of companies operating in industries and geographic regions dangerous to their employees, and the necessity for precautious actions and support structures protecting international assignees. (In the same year in which Reinhart was taken hostage, more than 2100 people were kidnapped in Colombia, including at least 43 foreigners.)
1. Was it the right decision in the first place for Terramundo to operate in a region well known for being controlled by FARC guerrillas, and in which kidnapping was a very common way to fund FARC activities?
2. Did Reinhart do the right thing to get involved in the way described and help his employee? What were Reinhart's alternatives and options?
3. What can companies operating in industries such as the mining or oil business do to protect their international assignees? What should be the role of the HRM function?
4. when sending your employees into remote and dangerous geographic regions, should all employees (i.e., both home and host-country employees) get the same employment support and workplace safety and security support? Does reality reflect your response?
Case Study - MOLSON COORS AND ACQUISION
The history of Molson started over 220 years ago when John Molson invested in a little brewery. Over the past two centuries, Molson had acquired a steamship line, a luxury hotel, and a theatre. In 2005, Molson and Coors merged to become the third-largest beer maker in the world, with a market cap of US$8 billion. After two centuries of M&A experience, one would expect Molson to be an expert on the management and integration of acquisitions. This case will describe two acquisitions, both breweries-one successful and the other a failure.
In 2002, Molson acquired Brazil's second-largest beer maker, Kaiser, for US$765 million. Four years later, the company was worth US$68 million, thus experiencing one of the worst corporate losses in Canadian business history. The acquisition was costing $100 million a year just to survive, and Molson lost 50 percent of the market share. Analysts suggest that one of the reasons for the failure was the use of North American management techniques in the very different South American business climate. The company should have delegated decision making to local operators and had at least one independent director on the board from Brazil. The bureaucracy in Brazil is overwhelming, and it is vital to have local partners who understand this. The second error was the attempt to bring the Brazilian beer, Bavaria, to Canada in an attempt to penetrate the premium beer category. This too was a disaster, one not helped by the soft-porn marketing campaign, and Bavaria is no longer being sold in Canada.
In 2005, Molson Coors Brewing bought a craft brewer, Creemore Springs Brewery, for $17 million. The brewery had $10 million in sales. Interestingly, Molson spent $20 million on the transaction costs associated with the merger.
Creemore was a highly successful small-time brewery, making what some experts on beer called one of the two best lagers in North America. The image of a small- time brewer that did not advertise and cared deeply about the product was at risk when Creemore was acquired by Molson, which specialized in mainstream beers.
Creemore produces about 40 000 hectolitres of beer (about 12 million bottles), as against the 48 million bottles produced by Molson Coors. It is very tempting to view the acquisition of Creemore as creating opportunities for economies of scale, entering new markets, and all the other reasons companies acquire other companies. Indeed, some of the advantages have occurred: Creemore uses the larger company's distribution systems and gets better discounts on purchases. But Creemore decided not to use Molson's canning operations, which can produce 1000 cans a minute, and instead retained a production facility in Creemore, producing 21 cans a minute. Creemore has the same brewmaster and almost all the same employees and management has almost complete decision-making authority.
1. Using HR Planning Notebook 12.2, what do you think were the reasons for the acquisitions in both cases?
2. Develop the HR plans under these two scenarios: (a) a full integration of Kaiser and (b) the hands-off acquisition of Creemore Springs.