Indigo Books and Music (Case Study taken from Robbins, Bergman, Stagg and Coulter (2006), page 347).
Prior to 2001 there were two big-box bookstore chains in Canada – Chapters and Indigo. Indigo was formed in 1996 by Heather Reisman who left her job as president of Cott Corporation, the beverage supplier, to found Indigo. It was the first book retail chain to add music, gifts and licensed cafes to store locations. By 2000 the chain had expanded to 14 locations across Canada. The other large chain, Chapters, was formed in 1995 with the merger of Canada’s then two largest bookstore chains – Cole’s and SmithBooks. In 2001 Heather pulled a shocking coup when her company took over the much bigger Chapters chain. Chapters’ losses were crippling the company, and its shareholders quickly approved the takeover bid.
What followed for Reisman was the task of merging the two organisations into one. Indigo and Chapters both had similar organisational structures – a functional-based design. Indigo’s corporate structure, for instance, consisted of departments such as marketing, human resources and retail. However, the new organisation suddenly had 90 big-box stores and close to 7000 employees. Moreover, with the takeover, Indigo gained control of the nationwide chain of 210 Cole’s Books and SmithBooks stores, as well as a new internet division, Chapters Online. The structure of the newly merged organisation had to change in order to incorporate these new businesses.
The combined company, Indigo Books and Music, is now Canada’s top bookseller. Its some 300 stores spread throughout the country’s provinces sell books, magazines, CDs and other items. Making the combined organisation run efficiently has been a major challenge for Reisman. Indigo lost approximately $48 million in 2002 even as the number of employees grew by 26 percent. Results for 2003 were somewhat better as the company posted a small $1.4 million profit. So Reisman must continue to address the issue of keeping the company profitable in a challenging retail climate. Despite the challenges, most analysts don’t doubt that Heather Reisman is up to resolving them.
1. When two organisations merge what types of structural issues do you think might need to be addressed?
2. What role do you think organisational structure plays in an organisation’s efficiency and effectiveness? Explain.
3. Would a mechanistic or a more organic structure be appropriate for Indigo? Why?
4. How might technology affect Indigo’s organisational design?
The question belongs to Human Resources Management and it is a case study about merger and acquisition of two book stores. The case study is focused more on the HR issues that arise out of mergers, which are mostly the neglected ones, with the prime focus being on financial issues. The solution discusses this further.
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