CASE STUDY :
CROSS CULTURAL ISSUES RELATING TO THE DAIMLER CHRYSLER MERGE
As my part of assignment 2, relating cross-cultural issues to the Daimler Chrysler merge case study about inquiries with respect to the merger between Daimler-Benz and The Chrysler corporation. Identify responsible for making organisation wide decision and establishing the plans and goals that effect the entire organisation. In this report we will talking about to understand the cooperative energies between at least two organizations and why The Daimler Chrysler merger neglected to understand the collaboration that were normal form. Obviously, merger of Daimler-Benz and Chrysler was the biggest cross-border industrial merger ever. There are worse cross-cultural mismatches, but there are also better one.
In this case, Daimler-Chrysler has a key challenge under phrase smooth integration. It meets the demands of nearly all segments of the car market, and sales could be expected to increase exponentially. Then, another vital part of mergers and acquisitions is the distinguishing proof of multifaceted issues between two organisations from various social foundations. For these societies to compromise will require some serious energy and the acknowledgement by the two side of new methodologies.
This case gives an overview of the merger between Daimler Benz of Germany and Chrysler corp. of the us. the case focuses on the various problems faced by the merged entity. It also explores the reasons for DCX’s failure to realize the synergies identified prior to the merger. It examines the different culture and management styles of the companies that were primarily responsible for this failure. American company Chrysler corporation due to differences in the organizational cultures involved or due to a so-called ‘clash of culture’. Daimler-Benz and Chrysler wanted to strengthen their position during economically difficult times for the car industry by juggling the crisis together and they hoped to be able to combine their strengths.
Therefore, the two companies decided to fuse in 1998. But not even ten years later Daimler-Benz once again sold all its shares of the Chrysler division. Instead of gaining competitive advantage over their competitors, the merger rushed the two car producers ever deeper into the crisis and did not provide the companies with the necessary tools to overcome the recession. The presented case study deals with the failed merger of the German company Daimler Benz with the U.S. American company Chrysler corporation due to differences in the organizational cultures involved or due to a so-called ‘clash of culture’.
ANALYSIS (CRITICAL ISSUES)
Based on the case study, there were few problems or issues to be highlighted. First of all, a potential issue that should not have ignored was the strong cultures and language barriers between U.S and Germany. America business practices are very informal and In Germany they employ a rigid hierarchical structure. The perceived benefits were also never realized due to a lack of coordination, and inability to manage across the two cultures with a central authority. Both the organisations had a different way operating from various perspective. As per the case, a detailed analysis of these strikingly different styles was not studied beforehand. Both the groups, Daimler and Chrysler were asked to maintain their own cultural identity. This was incorrect, a merger is about coming together of best talents of the two organisations under a common leadership which aims to have a common vision, shared culture and best practices.
Communication was erratic and imposing. Employee communication strategy was not in place. People were not given time to absorb the fast-paced changing environment. No Chrysler presence in the board of management. It is the leadership of the two organisations coming together, that communicates, resonates a cohesive vision. By having a German dominated board of management the dcx failed to have a collaborative approach to induce an environment, which is conducive to change.
The merger of the two companies was supposed to serve a shared goal and both parties involved in the deal hoped for gaining competitive advantages thanks to newly created synergy effects. Therefore, at first sight the merger was considered a ‘merger of equals’, but soon it became obvious that this was not really the case, just like in many other preceding cases.
It appeared to be the problem, that Chrysler was neither acquired by Daimler Benz, nor was it guaranteed equal status to its German partner. Due to the emerging problems the German management took over the whole company’s management. Mergers and acquisitions take place to realise the synergies between the two or more companies involved. After the merger in 1998, Daimler Chrysler have been through integration problems especially due to the differences of culture between Americans and Germans.
The integration of the two organizational cultures, of the German car manufacturer Daimler Benz and the American carmaker the Chrysler corporation failed due to a culture clash. Despite all efforts to harmonize the two corporate cultures and to lay the foundation for a shared organizational culture, Daimler Chrysler’s management did not succeed. The two organizational cultures were too different to be integrated successfully.
Among Chrysler’s values you find efficiency, empowerment of the employees and equal rights among all staff; Daimler Benz’ culture is more based on authority, bureaucracy and centralized decision making. Another aspect is that the American managers received very generous pay packages that were disapproved of by their German counterparts. This amounted to problems, particularly when an American manager was transferred to Germany, for example, and gained twice as much as his new supervisor.
Furthermore, the German and Americans employees resulted to be very different in their working methods. Another important difference is reflected in the organizational structures of the two parties. Due to the numerous differences in the organizational cultures, the integration process at Daimler Chrysler failed. Management did not succeed in bringing in line the two cultures and it failed in laying the foundation for a shared corporate culture that reflected aspects of both cultures
First of all, according to the problems and issues highlighted previously, there are few ways on how they could solve those issues. Those solutions and suggestions can be applied with Cross Cultural Management topics as well. The main reason that their merger was not successful was that the German way of business and the American ways differ profoundly. Both companies should have been analysed to examine their strengths and weaknesses, in regards to their practice. A merger is the process of two or more entities combining into one for the hope of increasing market share. This process can be achieved by a company merging with or acquiring their competitors. A change cycle especially in merger and acquisitions has three important periods’ awareness, acceptance and adoption. In order to achieve all three levels seamlessly investment of time and effort plays highest importance.
If both parties had put all cards on the table from day one on, if they had combined their strengths to pursue a shared goal, if they had paid more attention to the cultural discrepancies and therefore managed the post-merger-integration process successfully, they would have had great chances to generate vital synergy effects and become a leading figure in the world’s car industry.
Attempts were being made from both the sides to understand the cultural difference in both the countries’ way of operating. there were examples in the case like Germans trying to dress casual at work, Americans given making attempts to speak less slang, German workers celebrating in American style etc, however these attempts were not substantial enough to bring the two sides together. For understanding any culture, it is important to understand the history behind it. Culture as an inference of history is an important aspect for its correct understanding. When you are aware of the background behind a culture you embrace it with respect rather than being comparative from your own culture. Change can never be understood in isolation. One of the most cherished virtues of an organisation is the trust of the employees in the organisation, its values, principals and most important fairness. Successful mergers always ensure retention of key talent of the organisations. Successful adaptations never happen out of enforcement. unless a common goal is arrived, each stakeholder will have a different goal to achieve and the system succumbs to “bounded rationality”.
It will be correct to assume that when dcx was formed both the organisations wanted to succeed and enhance their market capitalisation. Definitely in order to avert the aftermath there are certain remedial actions which could have been taken proactively resulting into the desired goals. For assessing the top talent and leadership of dcx together; skill assessment for the companies could have been done to gauge the leadership competencies. Job analysis could have been done to avert the undesired compensation restricting. Definitely more time should have been given to complete the merger.
The leadership communication should have been encouraging, aligned and reinforcing the responsibility of each member in the two organisations making it a collective win. This is one of the leverage points in the entire case. Communication as a leverage point could have been injected at any stage of the entire failing process so that the alignment and integration could have incepted, perhaps that as the main factor was missing. the joint project teams should be diverse and cross cultural so as to bring all prospective on the table. Daimler-Benz could have bought small stake in Chrysler and slowly increase the stake post business going well.
Two cultures must be brought together and blended to create a collaborative, high-performance new company. Before a successful integration can begin, proper planning for that success needs to take place. unfortunately, many integration initiatives fail from the start because the integration begins before any thought is given to the course that the integration will take. Planning for integration revolves around vision and communication. For all of these reasons, a clear vision and consistent communication are vital.
Those solutions given can be applied with Cross Cultural Management topics such as Diversity and Organisational Culture from Chapter 4, Cross Cultural Communication from Chapter 8, Cross Cultural Issues in Merger and Acquisition from Chapter 9 and Managing Cross Cultural Teams from Chapter 13.
SUGGESTIONS / RECOMMENDATIONS
The corporate culture at Daimler AG can be analysed from the 3-Dimension viz Company’s attitude towards sustainability (environment). Activities to foster Art ; Culture in the organization ; society and commitment of Daimler towards legal compliance. Based on Daimler Chrysler, there are few suggestions or recommendations for the priorities for organisations and diverse workplaces.
When an organization tries to expand its operation geographically to more than one country, it tends to become a multicultural organization. The biggest challenge to be faced by the organizations then will be blending employees from different cultural backgrounds. When employees from two or more cultures interact with each other on a regular basis, it results into multiculturalism.
The employees entering to another nation needs to adjust their leadership styles, communication patterns and various other practices to fit with the styles of the host nation. Sometimes the employees from the parent country nationals from the nation in which the home office is located and sometimes they belong to a third country. Both of these categories of employees are called expatriates, as they belong to other countries. What the organization wants is the fusion of cultures of these employees so that greater productivity is ensured.
However, while the international workforce that’s arisen in these organizations is great for connecting with a wider range of customers, managing these employees from completely different backgrounds and cultures is by no means easy. It takes a strong effort to run a smooth operation with thousands of miles of separation.
A diverse workforce presents challenges in terms of region, customs and communication. In these situations, it is important to not just accept differences, but fully embrace them across your entire business. It can be an extremely humbling experience to open your operations to differing cultures and lifestyles. Embracing those differences and leveraging a shared vision is crucial in making your business successful.
Both those companies need to map out a sense of what those differences mean in terms of how people conduct themselves in the workplace and what their sensitivities and motivations may be so you can create an environment that enables all people to contribute and be effective. Promoting diversity in the workplace requires efforts by everyone. Developing and implementing a diversity training program throughout your company is a great step.
While cultural training and the celebration of festivals can help build awareness in the workplace, for companies to be truly committed to cultural diversity, they must put effective measurement tools in place. There needs to be a greater understanding and monitoring of the experience of culturally and linguistically diverse people in the workplace, how they are tracking in terms of career progression and what the leadership suite of a company looks like. This means companies can be held to account. They also need to have discussions about mentorships and networks.
In a nutshell, conclusion based on the DaimlerChrysler case study is that from a strategic point of view, this merger did make sense but the problems that doomed the merger to failure were the opposing and contrary corporate cultures and organizational models, that presented insurmountable obstacles. Within the merger, Daimler-Benz tried to administer the Chrysler division as if it was a German company.
This approach was foredoomed to fail right from day one on. It is important to consider in which areas it will come to cultural discrepancies and how they will influence day-today work. Moreover, is it crucial to identify and to define precisely common goals and to elaborate certain norms and regulations for business processes. Furthermore, a good and far-reaching communication strategy is indispensable.
To conclude the presented article, it must be summed up that the merger of Daimler-Benz and the Chrysler corporation was not foredoomed to failure right from the beginning, but rather occurred due to cultural differences and wrong management decisions. If both parties had put all cards on the table from day one on, if they had combined their strengths to pursue a shared goal, if they had paid more attention to the cultural discrepancies and therefore managed the post-merger-integration process successfully, they would have had great chances to generate vital synergy effects and become a leading figure in the world’s car industry. In this case the two once successful companies did not succeed in joining their strengths and complementing each other’s weaknesses to overcome a crisis together.