Case Study on Nol
Introduction
In November 1997, the acquisition of APL by NOL was successful. As compared to the larger US based APL; NOL was a small Singapore firm. Through this acquisition, it appeared that NOL was ready to become an industry leader in the shipping industry. Thus this acquisition is a strategy through which NOL buys a controlling, 100 per cent, interest in APL with the intent of making the acquired firm a subsidiary business within its portfolio. Thus APL became a wholly owned subsidiary of Singapore based NOL, a global transportation and logistics company engaged in shipping and related businesses.
Below is the study of the problems and strategies that NOL faced or is facing during the acquisition and integration of APL.
Issues/Challenges facing NOL/APL
1) Agency Relationships
There were separate management structures maintained in the group with the CEO of NOL in Singapore and CEO in the United States reporting to the group CEO. This separation between owners and manager creates an agency relationship. This exist when one or more persons (the principal or principals) hire another person or persons) as decision making specialist to perform a service. In the modern corporation, managers must understand the links between these relationship and the firms effectiveness. The agency relationship between managers and their employees is important as this is related directly to how the firm’s strategies are implemented.
This separation between ownership and managerial control in this instance can be problematic as the principal and the agents have different interests and goals. In a large publicly traded corporation such as NOL/APL, shareholders (principals) lack direct control when the CEOs (agents) make decisions that result in the pursuit of goals that conflict with those of the principals. Thus the separation of ownership and control allows divergent interests (between principals and agents) to surface, which can lead to managerial opportunism.
In November 1997, the acquisition of APL by NOL was successful. As compared to the larger US based APL; NOL was a small Singapore firm. Through this acquisition, it appeared that NOL was ready to become an industry leader in the shipping industry. Thus this acquisition is a strategy through which NOL buys a controlling, 100 per cent, interest in APL with the intent of making the acquired firm a subsidiary business within its portfolio. Thus APL became a wholly owned subsidiary of Singapore based NOL, a global transportation and logistics company engaged in shipping and related businesses.
Below is the study of the problems and strategies that NOL faced or is facing during the acquisition and integration of APL.
Issues/Challenges facing NOL/APL
1) Agency Relationships
There were separate management structures maintained in the group with the CEO of NOL in Singapore and CEO in the United States reporting to the group CEO. This separation between owners and manager creates an agency relationship. This exist when one or more persons (the principal or principals) hire another person or persons) as decision making specialist to perform a service. In the modern corporation, managers must understand the links between these relationship and the firms effectiveness. The agency relationship between managers and their employees is important as this is related directly to how the firm’s strategies are implemented.
This separation between ownership and managerial control in this instance can be problematic as the principal and the agents have different interests and goals. In a large publicly traded corporation such as NOL/APL, shareholders (principals) lack direct control when the CEOs (agents) make decisions that result in the pursuit of goals that conflict with those of the principals. Thus the separation of ownership and control allows divergent interests (between principals and agents) to surface, which can lead to managerial opportunism.