Vivendi Revitalizing A French Conglomerate A Case Solution

1. Did Vivendi have a successful corporate strategy under CEO Guy Dejouany? Why was his strategy successful or not successful?

Dejouany utilized his personal contacts as a prime determinant of his investment decisions and this attribute is rather clear from his investments in Real Estate and Telecommunication industries. In the early 1980’s, Djouany met Christian Pellerin who was rather convincing with respect to extremely high profit potential in the real estate industry development especially targeting new areas of high worth, which included La Defense in Paris. Similarly, on an exclusive basis, a few highly talented groups of engineers were hired away from France Telecom. Djouany analyzed their acute sense of knowledge and the depth of profitability indicated by the rather extensively deregulated European telecommunication market and thereafter assigned a huge budget to the team indicating the need to initiate a telecommunication business.

Vivendi had no specific corporate strategy with respect to decision making or future investment strategies as has been clarified through the above investment venture examples. Furthermore, it must be brought to notice that Reward system at Vivendi, as in most of the French economy, were predominantly based on salary rather than performance bonus. Similarly, stock options were absent for the most part except for a handful managers and corporate executives. The CFO under Djourany expressed his opinion in terms of his satisfaction with the entrepreneurial spirit brought in through the diversification opportunities, but he believed that the process lacked an appropriate asset allocation.

In essence, the time period of 1980’s was the one which fostered growth and the French economy was highly acceptable to new business venture ideas. Therefore, many of Djourany’s decisions turned out to be fruitful due to the time period that he selected to undergo such transitions.

His strategy led him to make certain very good decisions and certain very bad ones. However, it must be noted that when Guy Djourany took control of Vivendi, it was primarily a water utility company with some activities in waste treatment and sanitation. As the time period progressed he utilized cash flows from the core business to diversify activities into a rage of ventures. Hence, by 1995, the time period of transition of ownership, the revenues were eleven times from what they were in the 1970s level and subsequently as it has been stated before, Vivendi had diversified into real estate, healthcare, and telecommunications.

Cross-shareholding was another methodology of diversification that Djourany utilized bringing the invested assets up to 11 billion Ffr. that generated only 3.4 per cent during the 1990’s period.

As tensions accrued during 1990’s whereby large expenditures in the diversification process led to high levels of debt accrued in the financial statements creating a question mark with respect to its future turnover. The real estate market took a rather crucial turn of events leading to excessive degeneration of profits, and the subsequent scandal in the water business threatened the economic stability of the firm.

Now, his strategy was successful without a doubt because of what he had created during his era of ownership. However, the management strategy lacked substance because as times worsened, the cracks that had been veiled due to the growth period in France were now in the open and starting to widen and shake the foundation as France faced economic challenges. Thus, the timing of transfer of ownership led him to leave on a high note with respect to the profitability of Vivendi.