Legal and Social Implications of Eden Group Joint Venture - Case Study Example

? Analysis of Legal & Social Implications of Eden Group Joint Venture By Introduction Privatization, mergers and acquisition are commercial terms used with respect to large companies. Privatization is used to refer to a process by which an organization transfers its ownership from the government to the local citizens. Government transfers majority share holding to the public in this process. This is advocated for especially when there is a problem of service delivery as a result of such factors like corruption, lack of competition, bureaucracy etc. it is a decision meant to foster efficiency. Merger occurs when two or more companies undertaking business activities of similar nature come together and combine their operational activities, management and every service delivery tasks (Dorrenbacher, & Geppert, 2011, p.56). This is usually aimed at improving service delivery and creating competitive advantage. By merging with other companies, resources become more available hence production capacity can go higher. Acquisition is yet another strategy which means a larger company purchasing another one, either fully or partially, as a way of increasing its investment. Joint venture is closely related to merger. However, in joint venture companies mobilize resources together to undertake a common venture. This strategy is regarded necessary if the companies are like minded and the nature of business venture will considerably involve large capital investment. For instance, we have the case of EBG which acquired Pancevo and other breweries in Moldova, Chisinau, and Ufa in 2003. We also learn that Pancevo underwent nationalization over the era of Tito, which transferred its ownership interest to a given family. Again, this organization which now operated like a company was privatized following poor operating conditions prior to 1991. All these strategies have legal, social and economic implications to the society and the state at large. In our case study, we undertake to look at the legal and social aspects that arise with respect to the above strategies, considering multinationals like Pancevo, Eden Group of Companies, EBG and others that operate in Asian market and other countries (Richmond, & Turton, 2000, p.25). Discussion Generally immaturity of the political body has led to stifling of the institutional pluralism development. While in the area of higher education, appointments of senior academic are still being conducted by the state, a picture similar to that arises in the agency of Serbian privatization where senior employees as well as their policies are seen as the subject of great transmutation. It is without doubt that the major reason behind widespread feeling of anxiety and fear has been the pauperization of the community of Serbia which is faced with a challenge of around 30% unemployment with average wages being marginally higher than subsistence levels. The interference of the system of social benefits that were well established by the administration of Tito, which meant non material and material needs were all granted by the government, has contributed to feelings of isolation and insecurity among the citizens. Living standards deteriorated immensely because under Milosevic business enterprises were maintained open, usually with passive workforces, meant to create means of supporting the regime and keeping social peace (Richmond, & Turton, 2000, pp.34-6). The significant challenge threatening the programs of workers in Serbia is the privatization enactments that were made in a series of laws from the start of 1980s. From 2001, radical ownership restructuring has taken place. This has shocked many nationalities especially the workforce, whose livelihood is pegged into those enterprises. These laws have seen into it that social and state owned business enterprises are transferred into the hands of private sector. These enterprises employed 150000 workers, and their social security future was now at risk. Such is the case with the employees of the Pancevo Bretionweries Company which forms part of these enterprises that were privatized (Dorrenbacher, & Geppert, 2011, p.86 Although privatization is meant for good course, it often comes with its pressing challenges and so it did in the case of Pancevo. Other than the brewering industry, other sectors that were heavily affected by the new laws included cement, steel works, petrol stations, and tobacco. In fact, plans for the privatization of the industry of oil and the related products are underway. With patterns and structures of ownership of enterprises becoming more diffuse and less central and interests of foreigners gaining a foothold in the economic matters of the state, workers in Serbia are for the first time under exposure to what is seen as ravaging modernization programmers of the capitalists which have by far caused adverse effects to their global counterparts (Frost, & Griffiths, 2002, p. 45). However, there have been multiple effects of what is termed as oppression perpetrated by the political regime and international isolation years which have established a competence climate at workplace level. In instances of privatization representatives of workers have been subjected to resignation from taking and administering rearguard actions, bargaining severance packages and tokens for those who have suffered only retrospectively, and this involves the Pancevo (Frost, & Griffiths, 2002, p.66) Breweries. It is asserted that the trade unionism of Serbia is one of the few special cases, being greatly disadvantaged by the governance stance of out rightly rejecting reforms that are market oriented in the late 1990s and 1980s, and the employment of nationalism as a tool of aggressively pacifying labor. While in Slovenia there was a political agenda broader enough to permit airing of labor voices and negotiating their demands in the enterprises, in Serbian it was a completely different thing with the so called anti- democratic trajectory being offered only one option of exit for laborers and collective identity being deconstruct red. Consequently, workers from Serbia remain marginali9zed and disorganized beyond the control power of the formal institutions there is. Mergers and acquisitions have major impact to the performance of human resource in any organization. With Eden acquiring major shares of the Pancevo, this meant that the company has now become global. Internalization of the human resource places some implications to the human resource management. During the past years, recognition and appreciation were the usefulness of human resource in the success of any business enterprise. Employees form an integral part of the assets of organization and are therefore termed as valued assets. Merger, acquisition, privatization and nationalization of business enterprises have implications on the human resource and hence attainment of the goals of the business enterprise (Richmond, & Turton, 2000, p.68). Deployment of these valued assets in a strategic and smart manner will lead to immeasurable benefits not only to the corporate, but also dividends to the nation. In the processes that involve change of business ownership such as merger, acquisitions, joint venture and privatization, it is considered healthy to involve the human capital in decisions and policy making as means of accommodating them. In the case study, we are told that Pancove had a strategy of optimal production and less costs through ensuring minimal labor workforce. This often places social- economic challenges to the labor market as well as legal field which come in due to the urge by the unions to bring together their voices for the good of all through lobbying and bargaining power establishment (Richmond, & Turton, 2000, pp.72). In the case of Pancevo case study has revealed that there were such employees’ challenges due to the desire by the management to operate with as few laborers as possible, and also little package in terms of remuneration. Concerns and numerous questions are often asked whenever matters of merger are raised to employees. One big concern that comes out strongly is the issue of job security. Merger enables a company enjoy substantially wider capital base and hence ease chances of going international, like the case of Pancevo. This results to an issue of importing expatriates which often result to negative implications to the existing employees especially if the country does not have stable enactments towards regulation of the same. After the merger, we have seen that although majority workers in the managerial level were Serbians, the general manger was a Belgian. At times the neighboring community may have problems accepting the business fully. Legal implications almost arise with trade unions trying to push for better terms of the workers. In the case of Pancevo Breweries, socialism used to push the enterprise to conform to the standards for the betterment of the well fare of the employees (Dorrenbacher, & Geppert, 2011, p.98). We are told that previously the employees would enjoy better terms which included full assurance of job security and social benefits that were generous enough to boost the morale of staff such as welfare facilities and sports. Business operations in the Brewery industry faced numerous circumstances in the early 1990s. Soon after the passage of the first law regarding privatization in Yugoslavia, a big number of successful companies underwent privatization. The first privatization wave was done under conditions that were specific and this gave families of the ruling elite a chance to own large businesses at relatively favorable conditions. There too existed a kind of privatization which allowed distribution of majority of shares to the employees under conditions that were extremely favorable. This transformed the legal status of the entity into what is known as shareholder’s company. This privatization was unknowingly having many legal implications. M.I., who at present was the Legal Issues Department Director as well as one of the top management members of the brewery, confirmed that majority of the new owners of such shares new very little about implications of the deal ((Frost, & Griffiths, 2002, pp.69-70). This, they termed as just “continuation of self management”. M.I explained the legal reasoning behind the said privatization as was caused by the pressing need for capital. He explains that they had tried to resolve it by getting some mortgages from banks which did not render a long term solution to the matter. After a short while, the companies were threatening to go collapse while at the same time beer companies were approaching them offering to do business with them. As a strategy to do away with the offer, the state chose to undertake the new mode of privatization. With the privatization of Pancevo, many changes were made regarding welfare of staff. Construction of premises for employees was made among other amenities to create a better working environment. All these reorganizations meant that new rules and policies regarding the conduct of employees were to be instilled in the places of work, new procedures and standards set in the work organization. All these things were basically aimed at bringing normalization in the working place. However, the workers had mixed reactions regarding these structural changes with those who had exited feeling kind of jealous while the remaining ones could see the changes. Of those that stayed, some were unable to cope with the changes while some others were not. All these are some of the things we expect a company changes ownership. Initially it was the former socialist spirit that had made the understanding that all things belong to everybody and thence there was no sense of control and responsibility attached. However, the new era had ushered a new environment that required employees to take care of their working premise ((Frost, & Griffiths, 2002, p.82). Another aspect that comes out so clearly is the fact that the new restructuring led to totally new procedures. However, it’s good to note that some of these rules existed before but were not accorded any respect, and now it was time to start respecting them. For example, rules restricting behaviors like drinking and smoking in the work place. Working hours were also adjusted and this made majority of employees to leave the company voluntarily. Conclusion Changes at times are good but often they come with a price. In many cases, the price is painful to pay especially if negatively imparts the society. In this essay, we have seen a number of implications that often arise whenever changes occur in ownership of businesses, with a case study of some Serbian multinationals like the Eden Brewery. It has been noted that such changes often affect employees to a large extent since rules change. References Dorrenbacher, C., & Geppert, M. (2011). Politics and power in the multinational corporation: the role of institutions, interests and identities. Cambridge, Cambridge University Press. Frost, L., & Griffiths, A. (2002). Plants of Eden.Penzance, Alison Hodge. Richmond, L., & Turton, A. (2000). The Brewing industry: a guide to historical records. Manchester, Manchester University Press. Read More