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AM905001 not lead the new business formed. working

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AM905001
Cross-cultural Management

Assessment 2 –
Report ” cross-cultural mangement issue”

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Submitted to: Dr. Lewis Tennant

 

Submitted
by: Triney sunil Sadadekar

Student
ID: 1000044494

Submission
date: 15 December 2017

 

 

Executive Summary:

The
case involves the two leading companies Daimler-Benz and Chrysler which are active
globally in the auto industry. which is taken from the Financial Times media.
Whose objectives, targets and goals were almost similar. So, they decided to
come together to achieve their objectives and strengthen their position, so
they can be the top leaders in the global market by outraging their competitors
and maintain a stability at the time of inflation and financial crises. The
merger of these companies took place in the year 1998. Daimler is a German
manufacturer which focuses on the high-quality production of luxury cars. While
the Chrysler Corporation, which focused on its creativity and new ideas with
innovations for the customers in the car market. (Stuttgart, 1999) further, the
merger was reported as a failure due to the differences occurred in the
business cultures which later lead to the failure and selling of the shares of
Chrysler in the year 2007 where they paid $650 million to Cerberus Capital
Management to take Chrysler under its hands. (TIME, 2009) It was a failure due
to the cultural issues occurred within the organization of American and German
companies. To avoid such cultural issues both the companies practiced their
style and culture which later became one of the important issues for the
failure of the business. The case further talks about the reasons behind
failure in depth which was leadership, the board, the executive officer and the
managers could not lead the new business formed. working style, of the western
world and Europe, were far different from each other for example one used to be
more precise and detail where other was opposite many similar issues raised.
(TIME, 2010) communication gaps with no proper guidelines which could have
resolved by appointing a team of professional who could not only monitor
activities closely but also give training to the employees. Proper management
and cultural integration are two important aspects which were missing in the
Daimler-Chrysler merger which are been recommended. The overall merger included
$36 billion. (Gibney, 2000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents
Introduction & Aims: 4
Discussion: 5
Analysis: 7
Recommendations: 9
Conclusion: 10
References. 11
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction & Aims:

 

The
aims of this assignment are to study a cross-cultural management issue which
was reported in Financial TIME which was conducted by the researcher with
in-depth analysis by studying the case which occurred in the media and
submitted a case study on Daimler-Chrysler merger. Where the positive aim of
the companies, was called as a merger of equal to share their designs,
technology, skill, knowledge, power and capture the world market. The research
is truly based on the literature review regarding the cultural differences,
communication strategies, management decisions and plan. The paper gives
learning outcomes regarding the cultural importance which can be applied in
practical world in future especially in the country like New Zealand where
there are so many multi-culture people from all over the globe reside.

Background:

The
issues are regarding the failure of the merger of two car manufacturing
companies of Europe and America. Who proposed to merge together to increase its
business and power by eliminating its competitors with outstanding luxury cars
and technology. The merger was initially a success, until its employees and
higher authorities didn’t want to work for the objectives of the newly formed
merger. Where Germans wanted to take over American company by applying their
strategies and philosophy. Which did happen when their CEO’s were removed. The
merger didn’t work out as it was planned the cultural differences was one of
the main issues which lead to the failure of this merger. Its employees were
left out of the job when Chrysler had a loss and year by year many employees
had to lose their jobs. The customers had lost faith in the company as it was
not able to meet up with their demands and requirements. For eg, if Samsung
company fail to come up with better features in its mobile for the customers
then the customers will start moving towards other option like iPhone or Mi. a
similar situation did happen in this case. Apart from that the stockholder also
stops investing in the company’s shares as they were going down. Even the
managers and chief authorities were backing up from their responsibilities.
These were the effect which happened to the stakeholders of DAIMLER-CHRYSLER.
(TIME, 2009)

 

 

 

 

 

 

Discussion:

Information
about the merger and the companies:

Daimler-Benz is a Germany based company well
known for its luxury cars and had a huge share in the European market, but the
reach outside Europe was very low. It did work in the American market where it
had just 1% market share, this was because it always sets a high standard for
its car, which kept them away from the U.S market. (STEINBACH, 2012) On the
other hand, Chrysler focused on the demands of the customers which made them
successful in the American market with their innovations. Chrysler had faced
financial crises many times before merger, but they always managed to stand
against its competitors. It also earned the world’s profitable company in the
car industry. The Financial TIME’s (print media) says late 90’s was a hard time
in the car market and to avoid going in debts once again they had to look for
some options to maintain the position in the rising market along with expanding
its business in the U.S. Which they found in Daimler who didn’t have as reach
as Chrysler in the American market. The main motive behind the merger was that
they both shared a common goal, and Chrysler was the best company for Daimler
to merge with as it had a high revenue, low-cost manufacturing and high
distribution reach in the U.S. market. The German bought the Chrysler for $36
billion, which means technology and innovations coming together by becoming the
third largest automaker after GM, Toyota, and ford. The merger involved overall
gains of $5.7 billion in 1997-98. (TIME, 2010) But with this merger of European
and American companies several issues came in the picture such as pay structures,
company cultures, style of working, where the common ground was to agree on
things to achieve profit and have a “merger of equals” (Gibney, 2000) The
Chrysler had a flat hierarchy organisation structure where everyone was treated
equally and not for its salary, while Daimler had the top to down management.
So, to overcome not only these issues but also the responsibility and dividing
of the work, separate committees and groups were appointed to keep a track on
the tasks for the different levels of management for both the companies.
Organizational culture would be one of the big issues which might raise as a
problem which is why they decided to keep the existing culture to reduce the
clashes. Where both the countries had the different style of working behavior.
Where Germans believed in lengthy and precise detailed reports and meetings
while the Americans were the opposite of it. Same was the situation when it
came about the quality and stuff as Chrysler focused on innovative ideas which
had to include trial and error methods, while Daimler was moreover precise and
detailed plan for the end products. Where the end conclusion is that the
Germans believe that Americans are disorderly and confused people while the
Americans considered that the Germans are militarists because of their too
sharp behavior. Because of which Chrysler executives were not happy as even a
shape of the template also did matter to the Daimler executives so was vice
versa. Apart from the culture and working style, there was one more issue
rising in the company that was salary structure. (Stuttgart, 1999) As the
Americans got a higher package compared to the Germans it raised a problem and
specially when an American executive gets transferred to Germany and had to
report to the manager whose salary was half the American employee which would
just lead to loosing of valuable employees and to overcome with these issues
they came up with a base salary just as NZ where there are hourly payments. But
with a high incentive based on the performance. The merger took almost 12
months after which the Chrysler was given the responsibility of mass production
of cars and trucks. While the luxury Mercedes cars were with the Daimler group
as they decided to keep the same culture. After 2 years of merger two of its
American president where been fired and was taken over by Zetsche from Daimler
Because of the low performance. Along with the American president, many of the
higher executives left who had to be replaced by other German officials leading
to chaos among the Chrysler employees. Might be because of the fear that the
culture in the organization would change. (Stuttgart, 1999) (Gibney, 2000).
These things lead to failure of the companies coming together affecting the
external and internal stakeholders. In this merger the employees were not been
informed they were not happy because of the sudden change of the CEO’s there
was no flow of information and guidance from higher executives to them which
also worried them regarding the job. The customers and clients of the company
would lose faith and trust in the brand if their needs and demands are not
being fulfilled. The loss of the company will automatically reduce its stock
price and there won’t be any investors investing in the company which will lead
to shutting down of the company. These are the issues directly affecting the
stakeholders of the Daimler & Chrysler group. As the loss of Chrysler was
getting higher by the end of every quarter Daimler had to pay Cerberus Capital
Management $650 million in the year 2007 to take over the responsibilities of
Chrysler. (TIME, 2009) which is a part of Fiat at present. (the economist,
2000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Analysis:

 

The
overall merger took almost 12 months to complete which was a small period
frame. More time frame should have given to understand the cultures across the
borders. When cross-border mergers take place, it is very crucial to consider
many factors for the completion of the merger. As stated by Mark Jamrozinski
the mergers should not be in under pressure which can mess up things it should
be in a proper supervision with some strategies which include handling of the
human resource, market analysis where it would be conducting and product
development (Jamrozinski, 2014). Looking at the case there was no proper
management of the human resources that are CEO’s, managers, employees and
higher officials. There was always a fear in the employee’s mind of losing the
job, even the CEO’s were not doing their duties in a proper manner leading to
the loss and fired of themselves. The Germans were not clear with the market as
critical analysis of the American market was not done. the cross-border merger
leads to the new market, new demands, new culture as well as the different
market; and top of which the American presidents and higher authorities were
replaced by the Germans who didn’t have an idea about the U.S market. this is
exactly what went wrong which lead to the German style of working in the
American market frustrating the employees and leading to the pressure. The
products were also kept the same, making of the luxury Benz model was conducted
by the Germans and the trucks and other cars were given to the Americans.

Further
Zhang Rong gives importance to the cultural integration in the cross-border
merger. As stated by Zhang there is always different business culture across
the borders and the working style always differ. The views of the key
management team of both the companies are different which should be narrow down
to a single point where the end goals are meeting for the success. Otherwise,
it will only lead to clashes, misunderstanding, and failure of goals. A proper
team should be set-up to inform about the cultural integration and it’s
important as these lead to the success or the failure of a company. Further
Zhang states that these team should concentrate on philosophy and current
marketing strategies along with its position. As every company has its
philosophy and work according to it which makes it difficult to remove it on
the spot. So, it is Important to have the little bit like the old one just to
avoid a drastic change so that the new business strategy after the merger meets
its missions and goal. (ZHANG, 2010) but in the case, the culture of both the
companies where kept the same to avoid culture clashes which were the biggest
mistake leading to the failure.

Addition
to Zhang, Dale Stafford and Laura Miles did a Bain survey on the integration of
cultures after a merger and says that the common reason of the failure is the
fundamental style of working which irritates the employees leading to
depression and unproductivity. Where no know how to solve it. This theory is
quite similar as stated by Zhang about the work philosophy of the companies.
Dale and Laura give a solution to it by applying a similar CRM method. By
keeping a track on sales, market, accounts and have a close view of the targets
at a giving time by measuring the success and failure. For which a professional
need to be appointed and not its own employees to cut down the cost. (Miles,
2013) it is also recommended to keep an agenda for cultural integration where
values, beliefs, and behaviour are shared. A blueprint can be made; critical
decisions should be taken within a group for reducing mistakes. Then identify
the differences which shall occur by doing surveys, heat maps, interviews. Know
the behaviour the style of attitude and the way people talk (slang language).
Important notes should be written it down instead of saying it face to face.
After which the companies should identify the common culture what they are
looking for and then change the plan by keeping a track on it. Which Daimler
and Chrysler failed to conduct.

In
the book culture and demography in organizations by Richard Harrison, Glenn R.
Carroll says a harsh truth that the employees who are not ready to mould
according to the requirement of the new environment should be fired because
this will hinder the managers and the companies for smooth flow said by
professor Laurence W. (LaPlante, 2006).

Carroll
suggests that the cultural integration should be analyzed by considering the
demographics of the Daimler and Chrysler that is the population. A model
regarding which is given by him that gives importance to the growth rate,
recruiting employees for certain areas, the environment in which the employees
will be working and the unfriendliness among themselves. (demographic
organizational behaviour, 2009)

Further,
Helios tells that communication is one of the important parts in the merger as
two different cultures of countries are coming together so to avoid the
problems. Where he says that the reason for the new business should be clear to
its stakeholders which should be done through mediums like emails, letters,
brochures etc. as the merger might create chaos. The company should also see
that the employees take this news in a positive manner where they don’t stress
and leave the job in fear. There should be a continuous flow of information
through videos and audio calls, meetings, website etc. (helio, 2013) wherein
this case merger of Daimler-Chrysler the communication through the employees
and higher authorities was not clear. One of the main reason were language
barriers, the way of living life, beliefs and behaviours were different.

The
companies should conduct inductions and training for the employees to understand
the new objectives, strategies, working style, culture etc so they are clear
about their responsibility in the new business. Training helps to know about
the current situation of the employees it also helps them learn and get
feedback. (Cole-Ingait, 2014) these training help the employees as well as
company to grow in the future and cuts down the chances of loss.

 

 

 

 

 

 

Recommendations:

 

The
merger committee should have removed the issues which were occurring in the
cultural integration such as clearing the new strategies which would be applied
to the company. To avoid the clashes the two companies were told to follow the
same culture what they were following which is wrong as the main motive should
be clear behind the merger. And keeping the same culture will be a hinder to
the other culture group which did happen in this case.  There should be one separate new merged
culture instead of having two different along with the new one. The best
working strategies of both the companies should be applied. The issues faced
while applying new strategies should be discussed in the groups and should
remove solutions for it which not only create a happening environment even the
employees will get to know each other.

 

the
solution regarding the pay structure was a right step as it kept low base
salary and higher incentives which will not create differences among employees
and managers.

 

Cross-cultural
communication and training should be conducted for the merger. To learn about
the market and style of working. it also gives a clear picture regarding the
responsibilities of the employees and helps to understand a culture.

The
higher authorities of both the companies should have clear the goals to its
employees. While supporting them with the new culture instead of looking behind
its own benefits and leaving the company.

The
different pay structure was because of the location as things are much more
expensive in the U.S then Europe and that’s why the pay was high. This reason
should have explained to the employees and managers in the proper manner.

The
communication strategy could be much more planned and developed with agreements
of everyone’s. the new team formed should have given the freedom, time to
explore themselves, and help by top-level managers regarding new approaches.

There
should have been a roadmap like a blueprint which the employees could follow as
a guideline. Which includes professional staff to consult, leaders for the new
team, checkpoints at various stages to have a close look at the tasks given.
Reward system to staff for doing good in the new culture and taking steps so
that the new business does not make the employees lose their skills and
talents.

 Instead of saving $1.4 billion the company
should have set internal goals for synergies. Not aiming for higher benefits but
investing where it is requiring. The technology of both the companies was
different so the product launching also differs. Where there was no
coordination that was because two separate companies and not one company.

 

 

 

Conclusion:

The merger concludes that of Daimler-Chrysler was
know to be an equal right of merger where everything had to be shared for the
success of the new company formed. but it didn’t work out in that manner
because of the cultural variances in the organization. both the car productions
could not focus on one’s strength to overcome other gaps. Rather, German
company Daimler-Benz tried to win over the Chrysler part of a role by applying
German policies in America. In which the Daimler president lost as they had an absence
of data and information which would require understanding the U.S market and
business culture of the American corporation. As stated by (Miles, 2013) one
company instantly trying to swap other always lead to some issues same was the
scenario in the case. Both the company’s employees and higher officials
co-operated together, nor did they were amenable to go with the new variations
for the merger they always wanted to be in their pleasure zones. when
(demographic organizational behaviour, 2009) book says u need to take some
harsh decision to save the losses. To avoid failure, the organization should
have planned in the pre-merger period where the case took 12 months which could
have been less or sufficient to understand the culture integration the daily
tasks, the common issues which could occur, a professional team could have been
appointed for few years till the company’s role were smooth. The solution
regarding language barriers, leadership, working style should have been
applied. The roadmap should have been given to achieve the common goals of the
company. The organization always failed to take advantage of the synergy
strategy from the business. The merger was one of the best settlement as the
technology and innovation were mutually involved for $36 billion, but was a
failure because of the differences in cultures and the mismanagement of the
higher authorities which were mostly self-interested. If the things were
pre-planned and worked in a proper manner it would have been one of the
successful mergers as the strengths and the reach of the customer of these
companies was the best. After studying these case, one should say that
understanding culture is crucial for merging of the companies this case will
also give guidance to the organizations who are looking forward with such
strategies.

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Cole-Ingait, P. (2014). CHRON. Retrieved from
http://smallbusiness.chron.com/overcome-corporate-cultural-issues-mergers-acquisitions-76645.html
demographic organizational behaviour. (2009). In G.
R. Richard Harrison, Culture and Demography in Organizations.
standford: Princeton University Press.
Gibney, F. (2000, DECEMBER 03). TIME.
Retrieved from http://content.time.com/time/magazine/article/0,9171,90528,00.html?iid=sr-link1
helio. (2013, july). human capital impact forum.
Retrieved from

M&A: How to Avoid Employee Communication Problems


Jamrozinski, M. (2014). deloitte. Retrieved
from
https://www2.deloitte.com/ca/en/pages/mergers-and-acquisitions/articles/planning-successful-cross-border-mergers-and-acquisitions.html
LaPlante, A. (2006, october 1). standford
business . Retrieved from https://www.gsb.stanford.edu/insights/glenn-carroll-how-do-you-successfully-merge-two-corporate-cultures
Miles, D. s. (2013, december 11). Bain &
company. Retrieved from
http://www.bain.com/publications/articles/integrating-cultures-after-a-merger.aspx
STEINBACH, L. (2012). Enotes. Retrieved from
https://www.enotes.com/homework-help/what-history-daimler-benz-ag-468920
Stuttgart, F. G. (1999, MAY 24). TIME.
Retrieved from
http://content.time.com/time/magazine/article/0,9171,991030,00.html?iid=sr-link2
the economist . (2000, july 27). Retrieved from http://www.economist.com/node/341352
TIME. (2009, april 30). TIME. Retrieved from
http://content.time.com/time/specials/packages/printout/0,29239,1894731_1894734_1894722,00.html?iid=sr-link2
TIME.
(2010). Retrieved from top 10 chrysler moments:
http://content.time.com/time/specials/2007/printout/0,29239,1686204_1686305_1692093,00.html?iid=sr-link6
ZHANG, R. (2010). UNIVERSITY OF TWENTE STUDENT
THESES. Retrieved from http://essay.utwente.nl/60399/
 

 

 

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