AM905001Cross-cultural ManagementAssessment 2 –Report ” cross-cultural mangement issue”_________________________________________________________________________________ Submitted to: Dr. Lewis Tennant Submittedby: Triney sunil Sadadekar StudentID: 1000044494Submissiondate: 15 December 2017 Executive Summary:Thecase involves the two leading companies Daimler-Benz and Chrysler which areactive globally in the auto industry. which is taken from the Financial Timesmedia. Whose objectives, targets and goals were almost similar.
So, theydecided to come together to achieve their objectives and strengthen their position,so they can be the top leaders in the global market by outraging theircompetitors and maintain a stability at the time of inflation and financialcrises. The merger of these companies took place in the year 1998. Daimler is aGerman manufacturer which focuses on the high-quality production of luxurycars. While the Chrysler Corporation, which focused on its creativity and newideas with innovations for the customers in the car market. (Stuttgart, 1999)further, the merger was reported as a failure due to the differences occurredin the business cultures which later lead to the failure and selling of theshares of Chrysler in the year 2007 where they paid $650 million to CerberusCapital Management to take Chrysler under its hands. (TIME, 2009) It was afailure due to the cultural issues occurred within the organization of Americanand German companies.
To avoid such cultural issues both the companiespracticed their style and culture which later became one of the importantissues for the failure of the business. The case further talks about the reasonsbehind failure in depth which was leadership, the board, the executive officerand the managers could not lead the new business formed. working style, of thewestern world and Europe, were far different from each other for example oneused to be more precise and detail where other was opposite many similar issuesraised. (TIME, 2010) communication gaps with no proper guidelines which couldhave resolved by appointing a team of professional who could not only monitoractivities closely but also give training to the employees. Proper managementand cultural integration are two important aspects which were missing in theDaimler-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: Theaims of this assignment are to study a cross-cultural management issue whichwas reported in Financial TIME which was conducted by the researcher within-depth analysis by studying the case which occurred in the media andsubmitted a case study on Daimler-Chrysler merger.
Where the positive aim ofthe companies, was called as a merger of equal to share their designs,technology, skill, knowledge, power and capture the world market. The researchis truly based on the literature review regarding the cultural differences,communication strategies, management decisions and plan. The paper giveslearning outcomes regarding the cultural importance which can be applied inpractical world in future especially in the country like New Zealand wherethere are so many multi-culture people from all over the globe reside. Background:Theissues are regarding the failure of the merger of two car manufacturingcompanies of Europe and America.
Who proposed to merge together to increase itsbusiness and power by eliminating its competitors with outstanding luxury carsand technology. The merger was initially a success, until its employees andhigher authorities didn’t want to work for the objectives of the newly formedmerger. Where Germans wanted to take over American company by applying theirstrategies and philosophy. Which did happen when their CEO’s were removed. Themerger didn’t work out as it was planned the cultural differences was one ofthe main issues which lead to the failure of this merger. Its employees were leftout of the job when Chrysler had a loss and year by year many employees had tolose their jobs. The customers had lost faith in the company as it was not ableto meet up with their demands and requirements.
For e.g., if Samsung companyfail to come up with better features in its mobile for the customers then thecustomers will start moving towards other option like iPhone or Mi. a similarsituation did happen in this case. Apart from that the stockholder also stopsinvesting in the company’s shares as they were going down.
Even the managersand chief authorities were backing up from their responsibilities. These werethe effect which happened to the stakeholders of DAIMLER-CHRYSLER. (TIME, 2009) Discussion: Informationabout the merger and the companies: Daimler-Benz is a Germany based company wellknown for its luxury cars and had a huge share in the European market, but thereach outside Europe was very low. It did work in the American market where ithad just 1% market share, this was because it always sets a high standard forits car, which kept them away from the U.
S market. (STEINBACH, 2012) On theother hand, Chrysler focused on the demands of the customers which made themsuccessful in the American market with their innovations. Chrysler had facedfinancial crises many times before merger, but they always managed to standagainst its competitors. It also earned the world’s profitable company in thecar industry. The Financial TIME’s (print media) says late 90’s was a hard timein the car market and to avoid going in debts once again they had to look forsome options to maintain the position in the rising market along with expandingits business in the U.
S. Which they found in Daimler who didn’t have as reachas Chrysler in the American market. The main motive behind the merger was thatthey both shared a common goal, and Chrysler was the best company for Daimlerto merge with as it had a high revenue, low-cost manufacturing and highdistribution reach in the U.S. market. The German bought the Chrysler for $36billion, which means technology and innovations coming together by becoming thethird largest automaker after GM, Toyota, and ford.
The merger involved overallgains of $5.7 billion in 1997-98. (TIME, 2010) But with this merger of Europeanand American companies several issues came in the picture such as paystructures, company cultures, style of working, where the common ground was toagree on things to achieve profit and have a “merger of equals” (Gibney, 2000)The Chrysler had a flat hierarchy organisation structure where everyone wastreated equally and not for its salary, while Daimler had the top to downmanagement. So, to overcome not only these issues but also the responsibilityand dividing of the work, separate committees and groups were appointed to keepa track on the tasks for the different levels of management for both thecompanies.
Organizational culture would be one of the big issues which mightraise as a problem which is why they decided to keep the existing culture toreduce the clashes. Where both the countries had the different style of workingbehavior. Where Germans believed in lengthy and precise detailed reports andmeetings while the Americans were the opposite of it. Same was the situationwhen it came about the quality and stuff as Chrysler focused on innovativeideas which had to include trial and error methods, while Daimler was moreoverprecise and detailed plan for the end products. Where the end conclusion isthat the Germans believe that Americans are disorderly and confused peoplewhile the Americans considered that the Germans are militarists because oftheir too sharp behavior. Because of which Chrysler executives were not happyas even a shape of the template also did matter to the Daimler executives sowas vice versa. Apart from the culture and working style, there was one moreissue rising in the company that was salary structure.
(Stuttgart, 1999) As theAmericans got a higher package compared to the Germans it raised a problem andspecially when an American executive gets transferred to Germany and had toreport to the manager whose salary was half the American employee which wouldjust lead to loosing of valuable employees and to overcome with these issuesthey came up with a base salary just as NZ where there are hourly payments. Butwith a high incentive based on the performance. The merger took almost 12months after which the Chrysler was given the responsibility of mass productionof cars and trucks. While the luxury Mercedes cars were with the Daimler groupas they decided to keep the same culture. After 2 years of merger two of itsAmerican president where been fired and was taken over by Zetsche from DaimlerBecause of the low performance.
Along with the American president, many of thehigher executives left who had to be replaced by other German officials leadingto chaos among the Chrysler employees. Might be because of the fear that theculture in the organization would change. (Stuttgart, 1999) (Gibney, 2000).
These things lead to failure of the companies coming together affecting theexternal and internal stakeholders. In this merger the employees were not beeninformed they were not happy because of the sudden change of the CEO’s therewas no flow of information and guidance from higher executives to them whichalso worried them regarding the job. The customers and clients of the companywould lose faith and trust in the brand if their needs and demands are notbeing fulfilled. The loss of the company will automatically reduce its stockprice and there won’t be any investors investing in the company which will leadto shutting down of the company. These are the issues directly affecting thestakeholders of the Daimler & Chrysler group. As the loss of Chrysler wasgetting higher by the end of every quarter Daimler had to pay Cerberus CapitalManagement $650 million in the year 2007 to take over the responsibilities ofChrysler. (TIME, 2009) which is a part of Fiat at present.
(the economist,2000) Analysis: Theoverall merger took almost 12 months to complete which was a small periodframe. More time frame should have given to understand the cultures across theborders. When cross-border mergers take place, it is very crucial to consider manyfactors for the completion of the merger. As stated by Mark Jamrozinski (2014)themergers should not be in under pressure which can mess up things it should bein a proper supervision with some strategies which include handling of thehuman resource, market analysis where it would be conducting and productdevelopment (Jamrozinski, 2014). Looking at the case there was no propermanagement of the human resources that are CEO’s, managers, employees andhigher officials.
There was always a fear in the employee’s mind of losing thejob, even the CEO’s were not doing their duties in a proper manner leading tothe loss and fired of themselves. The Germans were not clear with the market ascritical analysis of the American market was not done. the cross-border mergerleads to the new market, new demands, new culture as well as the differentmarket; and top of which the American presidents and higher authorities werereplaced by the Germans who didn’t have an idea about the U.S market.
this isexactly what went wrong which lead to the German style of working in theAmerican market frustrating the employees and leading to the pressure. Theproducts were also kept the same, making of the luxury Benz model was conductedby the Germans and the trucks and other cars were given to the Americans. FurtherZhang Rong (ZHANG, 2010)gives importance to the cultural integration in the cross-border merger.
Asstated by Zhang there is always different business culture across the bordersand the working style always differ. The views of the key management team ofboth the companies are different which should be narrow down to a single pointwhere the end goals are meeting for the success. Otherwise, it will only leadto clashes, misunderstanding, and failure of goals. A proper team should beset-up to inform about the cultural integration and it’s important as theselead to the success or the failure of a company. Further Zhang states thatthese team should concentrate on philosophy and current marketing strategiesalong with its position.
As every company has its philosophy and work accordingto it which makes it difficult to remove it on the spot. So, it is Important tohave the little bit like the old one just to avoid a drastic change so that thenew 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 toavoid culture clashes which were the biggest mistake leading to the failure. Additionto Zhang, Dale Stafford and Laura Miles did a Bain survey on the integration ofcultures after a merger and says that the common reason of the failure is thefundamental style of working which irritates the employees leading todepression and unproductivity. Where no know how to solve it.
This theory isquite 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. Bykeeping a track on sales, market, accounts and have a close view of the targetsat a giving time by measuring the success and failure. For which a professionalneed 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 wherevalues, beliefs, and behaviour are shared. A blueprint can be made; criticaldecisions should be taken within a group for reducing mistakes. Then identifythe differences which shall occur by doing surveys, heat maps, interviews.
Knowthe 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 arelooking for and then change the plan by keeping a track on it.
Which Daimlerand Chrysler failed to conduct.Inthe book culture and demography in organizations by Richard Harrison, Glenn R.Carroll says a harsh truth that the employees who are not ready to mouldaccording to the requirement of the new environment should be fired becausethis will hinder the managers and the companies for smooth flow said byprofessor Laurence W. (LaPlante, 2006). Carrollsuggests that the cultural integration should be analyzed by considering thedemographics of the Daimler and Chrysler that is the population. A modelregarding which is given by him that gives importance to the growth rate,recruiting employees for certain areas, the environment in which the employeeswill be working and the unfriendliness among themselves.
(demographicorganizational behaviour, 2009)Further,Helios tells that communication is one of the important parts in the merger astwo different cultures of countries are coming together so to avoid theproblems. Where he says that the reason for the new business should be clear toits stakeholders which should be done through mediums like emails, letters,brochures etc. as the merger might create chaos. The company should also seethat the employees take this news in a positive manner where they don’t stressand leave the job in fear. There should be a continuous flow of informationthrough videos and audio calls, meetings, website etc. (helio, 2013) whereinthis case merger of Daimler-Chrysler the communication through the employeesand higher authorities was not clear. One of the main reason were languagebarriers, the way of living life, beliefs and behaviours were different. Thecompanies should conduct inductions and training for the employees tounderstand the new objectives, strategies, working style, culture etc so theyare clear about their responsibility in the new business.
Training helps toknow about the current situation of the employees it also helps them learn andget feedback. (Cole-Ingait, 2014) these training help the employees as well ascompany to grow in the future and cuts down the chances of loss. Recommendations: Themerger committee should have removed the issues which were occurring in thecultural integration such as clearing the new strategies which would be appliedto the company. To avoid the clashes the two companies were told to follow thesame culture what they were following which is wrong as the main motive shouldbe clear behind the merger. And keeping the same culture will be a hinder tothe other culture group which did happen in this case. There should be one separate new mergedculture instead of having two different along with the new one. The bestworking strategies of both the companies should be applied.
The issues facedwhile applying new strategies should be discussed in the groups and shouldremove solutions for it which not only create a happening environment even theemployees will get to know each other. thesolution regarding the pay structure was a right step as it kept low basesalary and higher incentives which will not create differences among employeesand managers. Cross-culturalcommunication and training should be conducted for the merger. To learn aboutthe market and style of working. it also gives a clear picture regarding theresponsibilities of the employees and helps to understand a culture. Thehigher authorities of both the companies should have clear the goals to itsemployees. While supporting them with the new culture instead of looking behindits own benefits and leaving the company.Thedifferent pay structure was because of the location as things are much more expensivein the U.
S then Europe and that’s why the pay was high. This reason should haveexplained to the employees and managers in the proper manner.Thecommunication strategy could be much more planned and developed with agreementsof everyone’s.
the new team formed should have given the freedom, time toexplore themselves, and help by top-level managers regarding new approaches.Thereshould have been a roadmap like a blueprint which the employees could follow asa guideline. Which includes professional staff to consult, leaders for the newteam, 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 sothat the new business does not make the employees lose their skills andtalents.
Instead of saving $1.4 billion the companyshould have set internal goals for synergies. Not aiming for higher benefitsbut investing where it is requiring. The technology of both the companies wasdifferent so the product launching also differs. Where there was nocoordination that was because two separate companies and not one company. Conclusion:The merger concludes that of Daimler-Chrysler wasknow to be an equal right of merger where everything had to be shared for thesuccess of the new company formed. but it didn’t work out in that mannerbecause of the cultural variances in the organization.
both the car productionscould not focus on one’s strength to overcome other gaps. Rather, Germancompany Daimler-Benz tried to win over the Chrysler part of a role by applyingGerman policies in America. In which the Daimler president lost as they had anabsence of data and information which would require understanding the U.Smarket and business culture of the American corporation. As stated by (Miles,2013) one company instantly trying to swap other always lead to some issuessame was the scenario in the case. Both the company’s employees and higherofficials co-operated together, nor did they were amenable to go with the newvariations for the merger they always wanted to be in their pleasure zones.when (demographic organizational behaviour, 2009) book says u need to take someharsh decision to save the losses.
To avoid failure, the organization shouldhave planned in the pre-merger period where the case took 12 months which couldhave been less or sufficient to understand the culture integration the dailytasks, the common issues which could occur, a professional team could have beenappointed for few years till the company’s role were smooth. The solutionregarding language barriers, leadership, working style should have beenapplied. 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 fromthe business. The merger was one of the best settlement as the technology andinnovation were mutually involved for $36 billion, but was a failure because ofthe differences in cultures and the mismanagement of the higher authoritieswhich were mostly self-interested. If the things were pre-planned and worked ina proper manner it would have been one of the successful mergers as thestrengths and the reach of the customer of these companies was the best.
Afterstudying these case, one should say that understanding culture is crucial formerging of the companies this case will also give guidance to the organizationswho are looking forward with such strategies. References Cole-Ingait, P. (2014). CHRON. Retrieved from http://smallbusiness.
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