Mergers and acquisitions can take place for a variety of reasons: a company may seek to eliminate competition by purchasing a competitor; investors may want to sell the assets of the acquired company; a merger may give both companies access to technology and entry into other markets they would not otherwise gain. In the case of CDnow and N2K, the merger is an attempt to bring together two Internet competitors for the purpose of strengthening the position of both in the Internet marketplace. When mergers between similar companies take place, there are often redundancies in the resulting workforce. These redundancies can result in a workforce reduction (layoff), which can have significant ramifications for employees who are laid off, those who remain, and the company as a whole. This research examines the merger activity at CDnow and considers the labor relations actions that the resulting company should take to maximize its performance.
Founded in 1994, CDnow is an online "store" which sells compact discs (CDs) and related products. Sales are made entirely through the Internet, with no physical store locations to support the sales effort. The company does not maintain any inventory, but uses a third party (Valley Media) for order fulfillment. This structure means that the company is able to operate 24 hours a day, seven days a week, and that customers are able to shop from their home or office using their computer. Credit cards are required to complete transactions.
In addition to offering CDs on the Web site, CDnow also offers samples of music, music reviews, editorials and product notes which can help consumers make their music choices. The retailer is also able to maintain a much larger catalog of titles than traditional retailers with physical locations; in late 1998, more than 390,000 CDs and related merchandise items were available, a much higher number than is available at even "mega" stores.
CDnow has activel...