The Cultural Influences on the Daimler-Chrysler Merger - Essay Example

Business Case Study- The Cultural Influences on the Daimler-Chrysler Merger Introduction In 1998, there was a merger between the German car-maker, Daimler Benz, and the American Chrysler. Both corporations were hoping to create a multi-billion automobile manufacturer that would completely dominate the global vehicle market. The main reason for the merger was to gain a larger percentage of consumers in the market by increasing their product range. The ensuing Daimler-Chrysler Corporation would comprise of approximately 441,000 workers, $130 billion worth of annual revenues, and $92 billion worth of market capitalisation. It was presumed that the merger would result in saving about $1.4 billion during the year after the merger due to the prospect of combining operations such as purchasing and distribution. The Culture Clash In any merger, there are issues that have to be considered in order to determine if the merger will be successful. The most understated but possibly one of the most important of these factors is the difference in national cultures of both parties. One of the biggest challenges for the Daimler-Chrysler merger would be the distinctions between the German and American work cultures. While both America and Germany rank quite high in terms of the masculinity level of cultural goals in the workplace, they have intrinsic factors in which both nations greatly differ. According to the Dutch sociologist, Geert Hofstede, characteristics that mark cultures as being more male-oriented include ambition, competitiveness, assertiveness and the push for financial success (Abdou and Kliche 2004). Moreover, in the German culture, there tends to be a strong undercurrent of female identified traits such as emphasis on the importance of maintaining good relationships even while committing to being the best worker one can be. The masculine traits embraced in the American work culture also encourages a greater level of individuality that is lacking in German society which is more supportive of collectivity and creating good relations with co-workers and neighbors. How having Different Work Culture Ethics affected the Daimler-Chrysler Merger The differences in work culture, which did not seem as such big problems prior to the merger, quickly emerged to be the greatest challenge for Daimler-Chrysler. The main divisions that would have been affected by the merger would be those personnel policy, finance, joint production, and marketing. The Germans and Americans had different views about how to go about engaging in decision-making (Camera and Renjen 2004). The executives at Daimler were accustomed to a bureaucratic structure in which decisions could only be made after a painstaking analysis of the facts that would be spread across a series of meetings. The American Chrysler’s executives were more accustomed to making decisions quickly without notes having to be taken. Daimler and Chrysler were also accustomed to catering for different segments of the population (Shimizu, Hitt, Vaidyanath, and Pisano 2004). Whereas Daimler, which created the Mercedes Benz, would not spare any funds to create the most luxurious cars, Chrysler was accustomed to catering for the market that preferred cheaper but efficient car models (Leung, Bhagat, Buchan, Erez, and Gibson 2005). German executives at Daimler were also used to working in the midst of luxurious surroundings, whether they be corporate jets or five star hotels. Chrysler’s directors were accustomed to functioning in less luxurious surroundings. Daimler Chrysler even wished to produce a coin bearing the new corporate logo which would be given to the business’s employees. Chrysler disagreed with this idea because its executives felt that it amounted to the wastage of money. From the beginning, Daimler Benz and Chrysler were reluctant about merging operations such as their different marketing divisions as they felt that this would negatively affect their separate brands. Even their public relations departments had different views on how to conduct themselves in terms of presentation. For instance, according to Hinner (2009) there were different cultural norms governing both companies. In Chrysler, the workers were not allowed to partake in smoking or alcohol during working hours. The executives at Daimler found this extremely constricting and flouted this rule often. The use of humour during meetings also was discouraged in Chrysler, but encouraged by Daimler. Chrysler’s workers operated in a community that greatly encouraged family values and were not prepared to forgo family time for the interests of the company. This would affect their views when the CEO of Daimler divorced his spouse after 35 years of marriage. In addition, executives from both corporations had different types of formality that they both were not accustomed to. For instance, Daimler had presumed that it would find the Americans less formal than the Germans in terms of work habits. Moreover, Daimler’s executives would be surprised to find that Chrysler had a very hierarchical structure in which workers of different stations dined together. In addition, the Daimler workers were quite irritated by the American habit of referring to adults by their first names. In Daimler, the Germans were accustomed to the more formal habit of using family names and titles when referring to others. Even though Chrysler had a very masculine culture that encouraged ambitiousness and competitiveness, it would be proven that it was no match for the more aggressive Daimler which soon filled a number of committees with its own executives. Daimler Benz was well known for its innovative and popular models in the global vehicle industry while Chrysler was recognized as a corporation that had only just began to succeed after a series of spectacular failures. This added to its repeated giving in to Daimler Benz’s suggestions. In the course of time, Chrysler’s executives, including its CEO Eaton would begin to lose their influence. The German managers grew more assertive in meetings and this slowly affected their representation in the merger’s board of operations. There was subsequently a lot of dissatisfaction among the officials and workers at Chrysler. Many of them would leave as they began to feel that Daimler was taking over Chrysler and not choosing to merge with it. Just 2 years later, there were merely 128,000 workers affiliated to Chrysler remaining in its US branches (Vlasic and Stertz 2009). Conclusion Just 15 months after the supposed ‘merger of equals’, Daimler‐Chrysler registered $30 billion less than its previous combined sum in market values. The cultural differences that were evident would prove insurmountable. Chrysler, at the time of its merge with Daimler Benz, encouraged adaptability, creativity, and decentralised decision‐making. Daimler‐Benz, on the other hand, supported traits such as centralised decision‐making and detailed planning. In addition to such disparities, the management teams of both corporations were wary of realising real changes through working together due to the suspicion that their individual marketability would be adversely affected. In 2007, less than a decade after the announcement of the merger, Daimler‐Benz sold its less influential partner, Chrysler, to Cerberus Capital Management, which was a private equity establishment. References Abdou, K. & Kliche, S. (2004) ‘The strategic alliances between the American and German companies’, European Business Review, vol. 16, no. 1, pp. 8-27. Camera, de D. & Renjen, P. (2004) ‘The secrets of successful mergers: dispatches from the front lines’, Journal of Business Strategy, vol. 25, no. 3 Hinner, M.B. (2009) ‘Culture’s influence on business as illustrated by German business culture’, China Media Research, vol. 5, no. 2, pp. 45-54. Leung, K., Bhagat, R.S., Buchan, N.R., Erez, M. & Gibson, C.B. (2005) Culture and international business: recent advances and their implications for future research, Journal of International Business Studies, vol. 36, pp. 357-78. Shimizu, K., Hitt, M.A., Vaidyanath, D. & Pisano, V. (2004) ‘Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future’, Journal of International Management, vol. 10, no. 3, pp. 307-353. Vlasic, B. & Stertz, B. (2009) Taken for a ride: cars, crisis, and a company once called, HarperCollins, New York. Read More