Strategic Failure at Daimler-Chrysler - Assignment Example

?STRATEGIC FAILURE AT DAIMLER-CHRYSLER By Introduction A strategy according to Ghani is a plan of action prepared in details And supposed to cover a long period of time. When the avilable materials are not enough to take care of all the required golas, then a startegy must be crafted to make sure the business continues in operation (Doole & Lowe, 2008, p. 23). A structurre involving a merger, acquisition or joint ventures is even more complicated and can cause failures at times. This case analyses the extent to which strategic failure in the marriage between Daimler-Chrysler contributed to the total failure of this merger. It also relates the same to the merger betweeen Renault and Nissans’s success. Analysing the Depth of Causes of Failure of Daimler-Chrysler Failure Depth of Strategic Misconception From the works of Blasko, Netter and Sinkey (2000), there were very many strategic plans that were set to make sure that the merger worked. The strategic issue was that the companies were to use their strengths to work together and create a formidable collection of products for the customers. Ju?rgen Schrempp had indicated that what was being created was the greatest and historic merger that would automatically change the face of the automotive industry (Bill & Stertz, 2001, p. 92). The strategies were aimed at the merger shaping the capacity of the industry. Looking at the factors that led to consolidation of the boards of the two companies into signing the ‘marriage’ agreement, there was a misconception that would haunt the outcomes later. The deep set strategic misconception that highly led to a negative was a misconception that the industry was to go through a transformative consolidation in which other companies would survive as smaller competitors in the market. This was proved wrong with the successful growth of mergers like Renault-Nissan. Secondly, there was the misconception that the two companies would complement each other’s strengths in the market in terms of quality production, type of product and market segmentation. However, it was found that they would not necessarily rule the market due to a miscalculation that was mistaken. Based on technical know-how and sharing, the two companies were to realise, as per the financial strategies a total of $1.4 billion in the first year of operations. These were far high misconceptions and, as far as the depth of their contribution to the failure is concerned, it was a deep set problem which saw a creation of strategies without considering the market economies and diseconomies. Depth of Mismanagement According to Krebbs (2007), the marriage between Daimler and Chrysler was doomed to fail right from the start because of three reasons. He alleges that much as the conditions were of the idea that they would share much of the resources, Chrysler was purchased, treated as such and the whole process was a scum. Therefore, the issue as to what extent management caused the failure of the union includes failure from the initial strategies. The union was based on ego and therefore the more the management profited from it, the better. This was not good for the company and other stakeholders. It wasn’t an issue of compatibility but personal satisfaction. Secondly, Krebbs still assert that there was no commitment in the marriage in which case the German side viewed it as very temporary (Krebbs, 2007, p. 3). This caused laxity in its contributions to the whole management process. The relationship is also said to lack vision for the future. After the merger, top management also merged and there were single positions created. In autumn of 2000, the CEO of DaimlerChrysler announced that he had initially wanted that Chrysler be a subsidiary to the union (Pooley, 2005, p. 29). This was a very strong indication that there was absolutely lack of will in the management of the two companies and therefore everybody affiliated to Chrysler became reluctant to continue service in the union. Therefore, the management had the deepest extent to the failure of the marriage in which case the laxity could not work in a competitive market with other well-endowed companies and mergers (Monczka, 2000, p. 09). Depth of Changes in the Business Environment As stated in the strategic misconceptions, there were very many prevailing market conditions which were not taken into account before actually creating operation logistics. Looking at the prospects of the merger, it can also be indicated that they were fairly good (Tom, David, & Tim, 2005, p. 428). However, there are some pot merger events that affected that market and forced the merger to be considered a fail. For instance, the anticipated stock market changes took a negative turn when Standard and Poor decided not to include these companies in the S&P500 index. The immediate effect was that Chrysler had suffered a negative reaction from the market to its shares. This effect as carried all the way to the merger as investors usually this index as the market indicator of the market performance (Wiltibank, Dew, Read, & Saraswarthy, 2006, p. 33). The merger had also sought partnership with other companies in the Asia market. There was lack of protocol and the immediate effect was that some top executives left the merger for other firms. Many other changes in the structure of the industry caused a very increased toll on the company. To this end, there was just a situation of bad luck and inconvenience to the management which made the company to fail (Finkelstein, 2002, p. 2). Lessons from Renault and Nissan There are lessons that can be learned from the Renault Nissan merger if any merger is to take place. First, there is supposed to be a longer period of consultation before the merger happens (Finkelstein, 2002, p. 33). The courtship here took nine months before any formalisation started. Bringing together their strengths allowed the two companies to address their weaknesses together. Secondly, this union indicates the choice of the right leader in the merger, one that is consistent with the strategic attitudes to advance the merger further as opposed to the personal interests as presented in the case of DaimlerChrysler (Hamlett, 2013, p. 20). Thirdly, with the right attitude towards the merger, there was seen a policy that worked to revive and revitalise Nissan section of the merger. The will as created was important in generating cohesive employee homogeneity and realise the goals as opposed to the other case in which Chrysler CEO was trying to divide the employees into supporting their side of the merger (David, 2001, p. 108). Conclusion Mergers are supposed to be based on a unified and long term strategic purpose (CRichard, 2000, p. 21). Regardless of the market diseconomy forces, the companies in the merger can still succeed if the management realises the need to accumulate value at the expense of personal gains (Doole & Lowe, 2008, p. 12). References Bill, V., & Stertz, B. (2001). Taken for a Ride: How Daimler-Benz Drove off with Chrysler. New York: Harper Collins. CRichard, O. (2000). Racial Diversity, Business Strategy, and Firm Performance: A Resource-Based View. Academy of Management Journal, 43, 164-177. David, W. (2001). Wheels on Fire: The Amazing Inside Story of the DaimlerChrysler Merger. London: Hodder & Stoughton. Doole, I., & Lowe, R. (2008). International Marketing Strategy: Analysis, Development and Implementation. New York: Cengage Learning EMEA. Finkelstein, S. (2002). The DaimlerChrysler Merger. London: Tuck School of Business. Ghani, N. (2012). Tesco Strategic Management. Kualar Lumpur: UTM-IBS. Hamlett, K. (2013, 2 2). What Are the Strategies Used in Production Planning & Scheduling? Retrieved 5 9, 2013, from Demand Media: http://smallbusiness.chron.com/strategies-used-production-planning-scheduling-1808.html Krebbs, M. (2007, 5 17). Daimler-Chrysler: Why the Marriage Failed. Retrieved 11 30, 2013, from AutoObserver: http://www.edmunds.com/autoobserver-archive/2007/05/daimler-chrysler-why-the-marriage-failed.html Monczka, R. M. (2000). New Product Development: Strategies for Supplier Integration. New York: ASQ Quality Press. Pooley, R. (2005). The Model Alliance Between Renault and Nissan. Human Resource Management International Digest;, 13(2), 29-32. Tom, D., David, M., & Tim, D. (2005). Renault-Nissan: a Marriage of Necessity? European Business Review, 17(5), 428-440. Wiltibank, R., Dew, N., Read, S., & Saraswarthy, S. D. (2006). STRATEGIC MANAGEMENT. Strategic Management Journal, 27, 981-998. Read More