The Vital Role of Multicultural Awareness Skills in the Success of International Mergers and Acquisition - Coursework Example

College and logo Program The Vital Role of Multicultural Awareness Skills in the Success of International Mergers and Acquisition Academic Year – Semester Group Names and IDs with students’ signature Table of Contents Introduction ----------------------------------------------------------------------------------------------- 4 Body of the Report --------------------------------------------------------------------------------------- 4 1. The Different Definitions of Culture ---------------------------------------------------------- 4 1.1 Culture: shared patterns of behavior ----------------------------------------------------- 4 1.2 Culture: interpretations and perfectives ------------------------------------------------- 5 1.3 Culture: day to day living patterns ------------------------------------------------------- 5 1.4 Culture: collective programming of the mind ------------------------------------------ 5 1.4.1 Power Distance Index -------------------------------------------------------- 5 1.4.2 Individualism vs. Collectivism ---------------------------------------------- 6 1.4.3 Masculinity vs. Femininity -------------------------------------------------- 6 1.4.4 Uncertainty Avoidance Index ----------------------------------------------- 6 2. The Three (3) Cultural Models --------------------------------------------------------------- 6 2.1 Personal Culture ---------------------------------------------------------------------------- 7 2.2 National Culture ---------------------------------------------------------------------------- 7 2.3 Corporate Culture -------------------------------------------------------------------------- 7 3. International Mergers & Acquisition -------------------------------------------------------- 7 3.1 More definitions about International Mergers & Acquisitions ---------------------- 8 3.2 Forms of International Mergers & Acquisitions -------------------------------------- 8 3.2.1 Conglomerate Mergers ------------------------------------------------------ 8 3.2.2 Congeneric Mergers --------------------------------------------------------- 8 4. The Integration Approaches (Phases) ------------------------------------------------------- 9 4.1 Observation Phase ------------------------------------------------------------------------ 9 4.2 Planning Phase ---------------------------------------------------------------------------- 9 4.3 Execution Phase -------------------------------------------------------------------------- 10 4.4 Consolidation Phase ---------------------------------------------------------------------- 10 4.5 Maturity Phase ---------------------------------------------------------------------------- 10 5. Justification of the Consolidation Mechanisms Used by Firms ------------------------- 10 Conclusion --------------------------------------------------------------------------------------------- 11 Appendices --------------------------------------------------------------------------------------------- 12 References -------------------------------------------------------------------------------------------- 13 Introduction: This paper contains discussions about the various definitions of cultures. Our group tackles about the three (3) national culture frameworks that is a vital part of an organization or business entity. We also expound on International Mergers and Acquisition and its crucial phases to ensure the success and growth of business mergers. In business, one important factor to look into is the cultural background of the workforce. In both local and international business ventures, the top management of a business entity must develop multicultural skills in order to get into the shoes of all the individuals who play important job descriptions on a firm or organization. A united workforce is productive, multicultural awareness can better gauge the actions and decision making of a business entity. In today’s globalization, many international firms merged together, related or not in their business styles, to have more financial stability and market coverage. Let’s find out in our report what the clear connection of culture to business. Culture has various definitions. Different scholars have different descriptions about culture. One thing in common – they are acquired and shared explicit and implicit principles within a group of people. A group of people acts according to its shared guidelines. As we discussed with our group, we have expounded some of the definitions of culture below: 1. The Different Definitions of Culture 1.1 According the CARLA’s definition, culture is the shared patterns of behaviors that are learned through socializations. These shared patterns of behaviors will distinguish one group of people from another. This is evident – as we can see, a particular group has a common pattern among them. One good example is the culture of hospitality. According to Schulman and Winter, if you travel everywhere in the Middle East, you will be treated as a special guest. The hospitality is overwhelming. You will be served by their main courses. Moreover, different countries or regions have different ways of accommodating their guest. If you will visit in China, a “Tea Culture in Tibet” is a different behavior in treating guest. The performance of rituals makes it different than in the Middle East. 1.2 According to Banks, J.A., Banks, & McGee, culture is a symbolic and intangible aspect of human societies. Other people viewed culture as artifacts itself, but in this definition, it is how a group of people interprets the meaning of these artifacts. It is said that a group of people or an individual being may interpret the meanings of symbols differently. It is more about interpretations and perspectives! And this will make a person culturally distinct from one another. 1.3 Damen stated that culture is a pattern for living. This definition stretches more about the primary adaptive mechanism of mankind. Over time, a group of people has developed day to day living patterns. Moreover, people act according to these patterns socially. As we can see, it is evident that a group of people have different ways of social interactions. An article about Cultural Differences in Daily Social Interactions, explains that different cultures have different social interactions. For example, Chinese People would tell their fellows about the price when they shopped for products, to express that they are happy about the purchase made. But it is viewed differently by Westerners. Prices are private matters and talking about the prices of the shopped items is inappropriate. More so, in offering something, Western People would say “Yes” and it is meant that way. If they say “No” then that is the truth – they do not want to accept the offer. But Chinese People might say “No” to an offer, but it means something to them. “No” means “Yes” to some extent because initially declining the offer shows politeness. 1.4 Hofstede stated that culture is a collective programming of the mind. He introduced to us his 5 dimensions of culture, namely: Power Distance Index, Individualism versus Collectivism, Masculinity versus Femininity, Uncertainty Avoidance Index, and Long-Term Orientation. 1.4.1 Power Distance Index: It’s about inequality. Hofstede sees the status quo. People in the society have different levels of powers. If you look around you, inequality is observed everywhere. In the Philippines, a TV actor is served in a fast food chain that is about to be closed with a “Closed” sign in the counter. The crew was forced to entertain the actor because he is famous in their country, while other ordinary people who request dine out orders are declined. 1.4.2 Individualism versus Collectivism: You can observe individualism in the West. A young lady, whose age is 18, a fresh graduate in college, needs to find a job to live a life of her own. She saved like crazy to pay for her own apartment. Collectivism is often observed in the countries like The Philippines. Our group identifies this as a strong family ties culture of the Filipinos. Everyone is expected to look after one another. In contrast with the example above, a fresh graduate in college applies for a job because she needs to support her siblings who are still studying in college. 1.4.3 Masculinity versus Femininity: This is about the distributions of roles among men and women. As men are physically stronger, their masculine power helps them to be assigned by more serious roles than women in the society. However, as per observation, the notion about the superiority of men over women has changed as we can see that there are several females who are elected as leaders of the states or nations. 1.4.4 Uncertainty Avoidance Index: It is about the societies’ tolerance about uncertainty. For example, a community who wants to avoid uncertainty set strict rules with appropriate sanctions. For example, there are communities who have strict rules about reckless drinking like driving under the influence of liquor. In contrast, uncertainty accepting cultures set few rules and they are ready to accept different opinions. They are more tolerant to opinions, other than the ones they used to deal with. As we finished the discussion of the basic definition of cultures, it is time to tackle about how cultures affect the productivity of the workforce. The workplace is composed of different people, who are raised with different cultures. According to Hofstede, culture influences our views about leadership. To understand how culture affects the productivity of an organization and leadership, Gardenswartz, Rowe, Digh, and Bennett (2003) developed the three national cultural frameworks and how it affects both global and non-global organizations. 2. The Three (3) Culture Models namely: personal culture, national culture, and organization culture. 2.1 Personal Culture: People are unique. Each one of us has his own culture. It’s a combination of traits, skills and personality. Personal culture is shaped by the society. It is also influenced by the family. More so, education also shaped personal culture of each individual. 2.2 National Culture: It is more about the basic definition of culture in general. It is the combination of patterns, beliefs, interpretations of symbols that are shared in national level. However, as per observation, though a country has a shared culture, ethnical groups still have a wide range of interpretations about artifacts and how they should behave in the society. 2.3 Corporate Culture: It is composed of shared institutional beliefs as the guiding philosophy in an organization. It has similarity with national culture in the sense that individuals within the organization view culture differently. The top management has a different understanding about the corporate culture than the varying perspectives of the subordinates and the rank and file. Leaders of the organizations face this diversity as a challenge to their leadership. The top management must understand every level of understanding in order to ensure productivity of the entire workforce. They must understand how rank and file individuals understand business ethics in order to disseminate information properly. How to Be an Effective Leader of a Multi-Culture Organization? A leader should develop a multicultural awareness. This is a professional obligation. This is also an opportunity. To be an effective leader, developing a multicultural awareness is a valuable skill so that he can understand and get into the shoes of the people within the organization. In that way, he can disseminate information effectively. He knows what works and what not. Moreover, getting oneself started with cross cultural awareness will lead the business to the next level to insure success and continual growth. In today’s modern business strategy – International Mergers and Acquisitions is vital to ensure economic growth of businesses around the world. 3. International Mergers and Acquisition: What it is? In order to understand this business term, let our group define the key words: Mergers and Acquisition. Mergers, according to the Merriam-Webster, any method of absorption or combination of one or more companies or organizations. Likewise, Merriam-Webster also defines acquisition as acquiring possessions. For example, Company XZY has acquired Company ABC. According to Brigham and Gapenski, merger implies a combination of two or more formerly independent business units into one organization with a common management and ownership. Basically, big companies are acquiring small entities for a strategic plan to widen the business coverage in terms of markets and the like. Below are a few more definitions of International Mergers and Acquisitions. 3.1 According to an article by EconomyWatch.com, these mergers and acquisitions is taking place beyond the boundaries of a particular country. For example, several companies in United States of America are merging and acquiring business entities in the Middle East. 3.2 Internal Mergers and Acquisition, according to the same article, has different forms: accretive mergers, dilutive mergers, reverse mergers, congeneric mergers, and conglomerate mergers, horizontal and vertical members. Below, we will explain a few of these forms. 3.2.1 Conglomerate Mergers: This sounds exciting – this is a combination of two entities that are completely unrelated to each other. According to Peavler on About.com Business Finance, this is a merger of two business firms that engaged in unrelated business activities. For example, Company ABC is manufacturing leather shoes, while company XYZ is manufacturing plastic bags. They are two completely different entities, but they decided to merge together. What is the reason behind this merger? Peavler stated in her article that even though merging firms did not make the reason public, this is more about market power, and to diversify their product lines. The financial markets and the economy have ups and downs, any unprepared business firms may fall down on this instability, so diversifying their product lines would make them less vulnerable to these changes. 3.2.2 Congeneric Mergers: According to the article of Gilani on eHow, this is a merger of unrelated or somewhat related firms. This may sound the same with Conglomerate mergers; however the former is a merger of completely unrelated business firms. In the example given by Gilani, an airline company merged with a tourism industry. Gurusamy stated that this allows the merged companies financial scale. Our group has discussed the benefits of congeneric merger, and one of our own examples is the merging of a coffee manufacturing company to a packing industry. They are not competitors of their own products, but they are somewhat similar in a way that the former needs the latter for packing purposes, and vice versa. This will just give the two the powers to do business beyond the horizon. International Mergers and Acquisition will not end there. As the group further digs more information about this complex business practice, we will discuss the different approaches or mechanisms during the entire process integration of business mergers and acquisition, and how top management considers the cultures of the merging firms or organizations. Risberg has cited several integration approaches by several authors, and this report, we will cover a few of them. It is said that before and during the mergers, there are processes that need to be considered because the success of a new and complex business venture will depend on these mechanisms. 4. According to Risberg, these processes are often discussed in terms of different phases. However, there are various approaches or phases are earlier mentioned. According a source cited by Risberg, in order to create a successful acquisition, these phases should be considered. This will greatly affect the outcome of business mergers. As discussed in the same article by Risberg, one research written by Lohrum identified 5 integration phases. They are Observation Phase, Planning Phase, Execution Phase, Consolidation Phase and Maturity Phase. 4.1 Observation Phase: Two business firms will observe each other. Managers play a vital role in this state. The situation of both firms is considered. In simple understanding, it is when the potential business partners observed each other, looking whether the proposed merger is possible or not. The our group discussed, it like a more physical observation. 4.2 Planning Phase: This is about formal and structural changes. This is more about writing plans, preparation of legal documents and the like. According to the source cited, the cultural aspect of the acquiring firm is neglected at this stage. 4.3 Execution Phase: This is a complex stage. Papers and legalities are easier to prepare, isn’t it? The hardest part is the integration of people within the organization, both for the acquiring firm and the acquired firm. As discussed in the first part of this paper, people within the organization have different level of understanding because of their grown up cultures. This culture affects how each one of them understands certain situations in the workplace. And though they are integrated with the corporate culture that aimed to bind them together, however, employees have different understanding about the business approaches and decisions based on their job descriptions. Top management may see such a decision as a big opportunity, however, the rank and file, who are important parts of the workplace, may see this as more about hassles, labor or work on their parts and the like. 4.4 Consolidation Phase: This is the stage where the real sociocultural integration is started. All hierarchal levels of both firms will establish contacts with one another. Multicultural awareness plays a vital part of this stage, isn’t it? As we discussed this topic in the second part of this paper, the workplace is somewhat a combination of personal, national and corporate cultures. For example, Mr. Z, the manager, has his own understanding based on his doctoral education about the merger of Company ABC and Company XZY. He has learned a lot with his economic education for several years. But the country he lives in has also a different or varying understanding about the said merger; it says it may entail danger for the local acquired entities. Moreover, the corporate culture that binds them in the organization sees the greatest opportunity for this move. As the manager and decision maker, Mr. Z would find this hard. It is also hard for him to disseminate the information to the entire workplace. But the key to a successful consolidation phase is multicultural awareness. Here, an effective strategic plan is important for the message to be clearly understood by all members of the organizations from the highest to the lowest level. 4.5 Maturity Phase: After the corporate culture is blended and integrated successfully by both firms, this phase will ideally start. 5. The justification of the integration mechanisms chosen by national partners may vary. There are various factors to consider, and it would be a lot of labor for both firms. Likewise, their value orientation or the financial aspect of the integration is one of the most crucial parts of business mergers. That is why advisory firms exist. According to the research paper written by Hoang and Kamolrat, various firms that plan to venture out M&A projects (Mergers and Acquisitions) acquire the help from external parties. These external parties are specialist who has greater understanding about mergers and acquisitions. According to Investopedia ULC, an advisor is defined as the person or company responsible for making investments on behalf. An advisor will also give advice to investors. M&A advisory firms will provide in-depth analyses about the business firm that is plan to be acquired by another firm according to Graham and Hamilton as cited by the above mentioned researched paper. As stated by Hunter and Walker, M&A advisory firms play an increasingly vital role of the success of business mergers and acquisitions. Conclusion: In this entire literature, our group discussed about cultures, the different national cultures and frameworks, the international mergers and acquisition and the valuation of the chosen mechanism to ensure the success of the M&A projects. We when we talk about business, one of the crucial factors for success are the entire workforce, both managers and rank and file individuals. These are people working together to achieve the goal of the company. Nevertheless, without acquiring the multicultural awareness skills, most businesses may fail to disseminate business proposals and messages effectively, internally and externally. Moreover, in the fast-forward globalization today, business ventures go for international mergers and acquisition for various reasons, one of them are to diversify their business lines and to grow their financial scale and market coverage. In the end, every culture and every individual play the key roles in the entire process. Business mergers may succeed or fail based on how firms understand how it works from the core – and often times, when top management can get into the shows all people involved in the business operation – this is when a productive venture starts to flourish. Appendices: Figure 1: Culture is programming of the mind by Hofstede Figure 2: Gardenswartz, Rowe, Digh, and Bennett (2003) developed the three national cultural frameworks: Work Cited: “What is Culture?” CARLA. Regents of the University of Minnesota, n.d. Web. 22 Apr. 2014. “The Extra Mile.” Markkula Center for Applied Ethics. Santa Clara University. The Jesuit University of Silicon Valley, n.d. Web. 22 Apr. 2014. “Tea Culture in Tibet.” China Attractions. ChinaTourGuide.com, n.d. Web. 22 Apr. 2014. “Cultural Differences in Daily Social Interactions.” Cross-Cultural Communication. ChinaTeachingNet.com, n.d. Web. 22 Apr. 2014. "Dimesnions of Culture: Geert Hofstede." Leadership Dimensions: Culture and Leadership. Tallinn University, 2009. Web. 22 Apr. 2014. Pedersen, P. (1997b). Culture-centered counseling interventions (pp. 25–26).Thousand Oaks, CA: Sage. PDF File. “Merger” Merriam-Webster. Merriam-Webster, Incorporated, n.d. Web. 22 Apr. 2014. “Acquisitions.” Merriam-Webster. Merriam-Webster, Incorporated, n.d. Web. 22 Apr. 2014. Peavler, Rosemary. "Conglomerate and Cogeneric Mergers." About.com Business Finance. About.com, n.d. Web. 22 Apr. 2014. Gilani, Natasha. "Types of Business Mergers." eHow. Demand Media, Inc., n.d. Web. 22 Apr. 2014. Markgraf, Bert. "Integration Mechanism in a Matrix Organizational Design." Chron. Hearst Newspapers, LLC, n.d. Web. 22 Apr. 2014. Risberg, Anette. "The Merger and Acquisition Process." JIBS Literature Review (2003). PDF File. Read More