Vivendi Case Analysis Essay Example

take the Company in a different direction. Messier’s vision was to simplify CGE and return the company to its core activities. Those were Utilities, Communications, and Construction and Property. Messier also embarked upon reducing CGE’s leverage by selling assets which were peripheral to the central activities. In the pursuit of the company vision,

Messier created alliances with cash rich partners to supplement CGE’s resources in fast growth areas with high capital requirements and entered into a partnership with the French railroads getting access to the digital optical fiber network needed to provide broadband services. In addition, Messier established a corporate office, developed policies for capital allocation and addressed the issue of how to improve the management of CGE’s human resources. He also initiated programs aimed at the creation of shareholder value and changed the incentive system to reward managers based on their respective return on investment targets.

After 2 years at the helm of CGE, financial analysts and shareholders rewarded his performance pushing the price of the stock up by 72 percent, beating the French stock index CAC40. In 1998, Messier addressed the company’s shareholders and reviewed his vision for the company, and the reduction of debt and return to profitability that had occurred under his leadership. Looking forward, he asked shareholder to approve CGE’s merger with Havas and the renaming of the company to Vivendi.

He explained that merger showed the company’s commitment to building a stronger presence in communications, expanding beyond the traditional base of water, utilities and property management. The utilities business, while maintaining its strong domestic position, would be focused on international expansion and the development of multi-service

contracts. Construction and property, while not expected to have a decisive financial effect, would once again be focused on becoming attractive to investors.

In the communications business, Messier looked to merge Cegetel, Havas and Canal+, combining talents and creating substantial value through financial and operational restructuring. Additional agreements with Bertelsmann, a German publisher, were also expected. During the next two years, Vivendi acquired and sold businesses at a very rapid pace, with the telecommunications and media business witnessing a lot of reshuffling under Messier. Is this a good strategy for the company? Is this a good strategy for the Vivendi investor? Messier’s strategy was not good for the company.

The strategy of costly acquisitions was also not good for the Vivendi investor. Vivendi spent billions of dollars acquiring companies which did not properly align the company’s core competencies. The insight that made use of the unique resources, coordinated organizations and configured the multi-business activities was missing. The enterprises that Vivendi acquired did not have common resources on which to draw from. A lot of the activities were not coordinated and little time was spent on understanding how businesses reinforced each other.

Messier’s vision was to create a media group and a content group which gets the best usage of direct customer relationships on a global basis. Messier also envisioned that the merger with Havas and the $34 Billion acquisition of Seagram would allow the company to accelerate the delivery of all sorts of media and information to wireless telephones. Yet, the assets that the company controlled were not aligned to realize its strategy. They operated well on their own but showed little

evidence of performing well as tightly integrated force.