AOL-Time Warner, Tesco, Danone – the news today

This morning there were three news items that caught my eye. All related to changes in business strategy.

The first was a lengthy piece in the New York Times on the anniversary of the AOL-Time Warner merger. . It was then (and still is) the largest merger in American history. But, despite the hype at the time, it never fulfilled any of the promises that it hoped to. In fact, as the report points out:

"The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals. Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger."

The second was a piece in the Financial Times about Tesco entering the China shopping mall business. This article notes that:

"Residential property development is scarcely Tesco's forte: apart from a few flats above its shop in Kensington, west London, the UK retailer has never attempted anything on the scale of one 2,800 flat Chinese mall.

But Sam Crispin, a property consultant in Shanghai, says developing such malls is the way to get the best retail sites. "What Tesco is doing is making the most of its brand. It's an excellent example of what foreign businesses adapting to the local Chinese market should be doing more of."

And the third was a piece, also in the Financial Times, about Danone, whose CEO, Franck Riboud, gets very impatient with the short term approach to running a company has declared that by planning to stick with its water business in developed markets and focus on slow growth over the next 15 years. In this instance analysts were dubious about the decision.

Reading the pieces they seemed to share a common theme – making a significant, high investment decision with no way of knowing what the longer term outcome might be. In the AOL-Time Warner case it was a poor decision, and in the other two cases it's a question of wait and see. Nevertheless observers and commentators made their views known – which may well influence the way the decisions pan out – though it would be difficult to trace any cause/effect on this.

Musing on strategic decisions and the way they are dissected by outsiders to the company making them I was cheered by Lucy Kellaway's column beginninng "Cold air has been blowing out of the Arctic, and hot air has been blowing out of the mouths of business forecasters".

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