First of all, the culture of the organisation must be resumed by the representation if the Beliefs and Values of the company. Beliefs are “issues which people in the organisation can talk about” and Values represent” missions and objectives of the company”. The paradigm is the “taken for granted assumptions” as the core of an organisation (Johnson. G, eds. 2002, p 229).
The Cultural Web of Daimler Chrysler
The key issue here was the definition of the alliance between the two companies. As it was presented as a “Merger of Equal”, Managers followed this way of work. But as we will see later in the report, it turned into a take-over of Chrysler by Daimler-Benz. It was a mistake to call it a Merger of Equal as many people in Germany and in US have been confused. This problem will have consequences on the US part of the company as Americans did not expect to be acquired by Germans and especially because you do not work the same way or the power of decision making is not the same when you merge than when you are acquired. Germans should have said it at the beginning of the processus to avoid such problems.
Then, we have the Rituals and Routines part: Rituals are things like training program, assessment, promotion and Routines are the « way we do things » (Lynch.R, 2003, p259). R&R used during the integration process were mainly the speed in the integration process and the creation of an Integration Council. This Council was on charge to organise the merger « quickly » as when two companies come together, people expect changes and it is better to move fast than to move slowly but it is a dangerous way to do. However, this Council was the real power base of DaimlerChrysler. Routines are also hard to change as they are part of the corporate culture and DaimlerChrysler had to face to many differences in the way they work, in their decision making process and in the way they communicate. Those differences created tensions. For instance, final approval by top management is very important in the German decision making process but Americans encourage own initiative and do not always wait for executive level approval. Then Germans are used to work late hours but Americans do not stay long as a routine. To solve this clash of culture, managers decided to pick up a spot in the middle. That was not an efficient solution as mentalities are hard to change and as German Culture was dominance, it allowed it to become more dominant.
The Control System are the “measurements and reward systems that emphasis what is important to monitor in the organisation” (Lynch.R, 2003, p259). As soon as Chrysler’s problems have had repercussions on DaimlerChrysler, they decided to set up two turnaround plan. But the main key issue here was the differences in compensations. First Eaton was much more rewarded than Schrempp and Americans earned two, three, and sometimes four times more than their German counterpart.
It was not possible to decrease Chrysler salaries as managers would have resigned and such differences were unacceptable for Germans. They also decided to set up a compensation scheme based on low basic salaries and high performance dependent bonuses. It was efficient as bonuses depend on performance because people would feel more motivated by work this way.
In the Organisational System part, which is “likely to reflect power structures and defines the level of hierarchy and the type of structure used” (Lynch.R, 2003, p259), one of the key issues was the choice of the AG structure which is the German way to do. In terms of good development of DaimlerChrysler, it was not efficient as it shows that the Germans want to dominate the merge. We have also to note that as a consequences Daimler executives became more numerous than Chrysler executives in the Management Board (7 Chrysler and 9 Daimler at first and 4 Chrysler and 8 Daimler at the end) (Herbert.P, 2003, DaimlerChrysler Case Study).
Another key issue concerned also the differences in the organisation structure. First Daimler was managed as a conglomerate with 21 separate businesses whereas Chrysler was run as a highly centralised car manufacturer. Chrysler had also a cross functional structure where the Germans kept responsibility clearly separate. Managers did not decide what to do with that they spot in the middle which had not been efficient as German structure were going to be dominant and Americans had to adapt. It is important to underline the fact that as soon as Germans dominance became clear, many designers, production people and executive left the company for competitors. They loose good employees.
Functional integration and branding policies were also core issues because in terms of brands they decided to keep each other brand unique: teams do not have to mix but the company wants to make cost synergies by jointly purchasing components and by benchmarking and mutual learning. It was a good strategy because the brands do not have the same targets. However we have to note that at the beginning Chrysler hoped that linking itself to this luxury brand will boot its image where Germans do not want to associate Chrysler image with Mercedes. The process of mutual learning is really effective because companies save a lot on costs and they also gained on time by using each other’s strengths.
The Power Structure in the case of DaimlerChrysler was a heavy power structure which was not easy to manage (18 members and 2 co-chairmen just after the merger). It was hard for only 2 persons to get along. When it became obvious that Eaton made wrong management decision, some tensions came between Germans and Americans. That is why they decided to reduce the Management Board to 12 members. Right after, Eaton fired the change agent: Stallkamp and Eaton resigned. It was not a good decision as Stallkamp was the one who had always tried to balance the interests and culture of the two firms. Even if it was a good decision to reduce the Management Board, the resignation of Eaton gave to the Germans more power.
The key issue in the Symbol part is in term of branding policy. Brands are very different and Daimler decided to keep each identity separated. They also decided to create a Brand Bible to make it clear. It shows that Daimler consider the alliance an acquisition and not a Merger of Equal anymore.
Conclusion
To conclude, we can say that the merger between Daimler-Benz and Chrysler was not a “marriage in heaven” as it has been said but companies have been through many difficulties to work together especially because of their business differences. Several years after the merger, we can say that majority of solutions were not effective and have to be solved in a better way as they contributes to separate the two companies. The integration must continue as the process to form a “Welt AG” is not complete. This merger is still controvert as today Schrempp is accused of cheating on the real nature of the merger to avoid to pay a higher price to work with Chrysler. Daimler Chrysler also acquired 34% of Mitsubishi in order to conquer the Asian Market. But we can wonder how can Shrempp get along with three companies when he was not able to deal with two.
Question 2 Harjot Deooray 2217461
Many a cross culture merger has failed because proper attention was not given to the differences in cultures between the two companies. What issues should be addressed to make cross culture merger a success?
This section of the report will be aimed at looking into cross-culture mergers, specifically at what’s important to make such merger successful. A merger is a combination of two into one larger company. A merger can resemble a but result in a new company name (often combining the names of the original companies) and in new .
The merger of Daimler-Chrysler is known as a cross-culture merger, which means that the joining of two different ways of corporate cultures were put together to form one successful unit. In a merger, ‘culture’ is more than making the people from both partners work together smoothly. The development of a new, shared culture is a critical factor for a successful merger.
Daimler-Chrysler was formed in 1998 by the of (the manufacturer of ) (Germany) and the (USA). The transaction was announced on , and took place on . The company produces cars and trucks under the , , , , , and , among others. The Chrysler Group (Chrysler, Jeep and Dodge) also provides its customers with parts and accessories marketed under the Mopar brand name. Despite the merger resulting in the company ranking third in the world in terms of revenues, market capitalisation, and earnings, and fifth in the number of units (passenger cars and commercial vehicles combined) sold, there were several problems that needed to be looked at before it could have been called a complete success.
Culture can be explained as being Assumptions, Beliefs, Values, Norms and Styles that a certain section of people have. Each culture varies, and each section has their own beliefs and assumptions.
Corporate Culture is embedded deeply in the organization and in the behavior of the people there. It is not necessarily equal to the image the company gives itself in brochures and on the website. Therefore, it is difficult to determine an organization’s culture from the outside. Especially in pre-merger negotiations – when time and confidentiality are critical factors while trust still needs to be established – it can be a challenging task to find out if the cultures of the potential partners fit together. The concept of corporate culture is best described by the sentence “The way we do things around here.” There is no one right culture for an organization. There are only cultures that fit more or less to the particular situation of the organization.
It is a problem in many mergers that the more powerful partner imposes his culture on the less powerful one. However, it needs to be given a closer evaluation to determine what culture would be best together. A perfect integration (which is rarely achieved in practice) would develop a new culture form both former cultures of the.
The problem in mergers that people from different organizations and cultures are expected to work together, to discuss, and to solve complex strategic and operative tasks. It is very difficult to impose a new culture that does not have the acceptance of the people.
Cultural analysis should have been the top priority in the Daimler-Chrysler merger. It is the tool for identification and overcoming of cultural differences between partners in mergers. A detailed analysis would have shown the differences and common grounds between the people of both the organizations, it would then allow improving interaction and communication.
Another important step is the establishment of a new cultural basis on which the new culture can develop. The name of the new organization may take a key role in this process. The new name is a symbol for the changes that come along with the merger, and it indicates how much both old companies contribute to the new one.
Examples for changes in company names in mergers
Moreover, it is necessary to harmonize and to communicate all other elements that influence culture, e.g. reward systems, systems for performance measurement. Organizations that want to integrate both old cultures have to take care that no partner gets advantages or disadvantages, In order to avoid the ‘us vs. them’ way of thinking.
Other approaches to avoid cultural problems:
· Newsletters and hotlines
· Realistic predictions of development, milestones and outcomes of the merger
· Workshops
· Surveys, questionnaires and feedback analysis
· Integration teams
· Building of new teams
· Mutual evaluation in and between mixed teams
The Daimler-Chrysler merger should have prepared for the joining of two different cultures in greater depth. They should have firstly developed a strategy for cultural integration already in pre-merger phase. They should have decided if they wanted to go on with one of the existing cultures or if they preferred an integration culture.
Analyze and describe the existing cultures. Differences and common elements of both cultures show up only in direct comparison. Thus, they could have also identified cultural barriers, differences in communication and other potential problems.
Decided which role the new culture should play in the merged organization. Determine, why they decided for that particular culture and what they wanted to achieve with it.
Establish ‘bridges’ between both companies. In order to achieve mutual understanding, there is nothing better than cooperation.
Establish a basis and mechanisms for the new culture. This includes a supporting system of rewards and sanctions.
Strategically the merger proved successful for the companies, but the lack of preparation and difference in management practices resulted in the merger not ending smoothly.
Question 3 Silvesta Ese-Imajemite 2311778
Very often companies involved in merger claim it to be a merger of two equals, but this is not always the case. “The Daimler-Chrysler deal was never expected to be a merger of equals”. Comment
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 merger is an approach for companies who have a building objective. By two companies joining forces, many advantages can be gained. Such advantages include mass marketing, larger sources of finance, and the gaining of marketing and R&D synergies. Mergers are not without their risks, especially when it involves parties from different cultures. This process has become quite common over the years. Differences in culture, language, and business practices can prove a liability.
In most cases, mergers are claimed to be a partnership of two equal businesses but this may not always be the cases. Some companies may acquire companies that are under-performing in a mutual market.
Companies may indulge in such a process to increase customer share or to avoid costly marketing battles.
An example of this may be the merger between JD Sports and First sport who were in the sports retail market. In 2002 JD Sports acquired First sport and converted 200 former first sport stores into JD Sports store. Figures at the time showed that First sport had been underachieving for several years before the merger took place.
In 2003 Barclays bank completed the acquisition of Banco Zaragoza no, one of Spain’s private sector banking group, which was founded in 1910. One could say that both companies were leading in their respective markets but the merger could never have been seen as a partnership between to equals because globally Barclays were statistically a much bigger company.
The year 1998 saw the merger of two of the worlds leading car manufacturers, Daimler – Benz and The Chrysler Corporation. Daimler- Benz is a German brand and was formed in 1926 when Motoren Gesellschaft merged with Benz. Daimler- Benz then created the brand name Mercedes which product line consists of automobiles, buses, coaches, and trucks. However, the company experienced success after World War II when they decided to focus on the automotive market. During the company’s history up until their merger with Chrysler, they have acquired a number of companies such as Dornier and Messerschmitt-Bolkow-Blohm.
Besides its native Germany, Mercedes-Benz’s are also manufactured in 13 different countries, including Thailand, Argentina, UK, and China. Mercedes-Benz quality is known and synonymous with efficiency and excellence to vehicle drivers and buyers around the world.
The Chrysler Corporation was founded by Walter P. Chrysler on June 6, 1925. However, the company only began to achieve success in the 1950 following the death of Walter P. Chrysler. The company rejuvenated itself with a new president and newly freed divisions. The company sought about expanding globally. Chrysler petitioned to the United States government for a $1 billion loan to prevent the company going bankrupt. The 1980’s brought success to the company as they merged with Mitsubishi to strengthen its hold on small to medium sized cars. The company then acquired AMC in 1987 mostly for its Jeep brand.
The late 1980’s and early 1990’s saw Chrysler implement their moves into international markets, showing specific interests in Latin America and Asian/ Pacific regions. Chrysler’s performance during the early 1990’s was quite poor as the company weathered the economic downturn. The company’s selling emphasis was based in the right-hand drive market which included countries such as Japan and Austria.
The middle 1990’s saw Chrysler gain numerous triumphs with the introduction of its jeep models. It would seem that the company was on the up after experiencing a bad period.
Once the merger had been in motion, Jurgen Scrempp, Daimler Chrysler ceo, had an interview with the Financial times stating that the DCX deal was never really intended to be a merger of equals and claimed that Daimler- Benz acquired Chrysler. At the time this statement caused uproar and analysts though that such a statement wouldn’t help matters, especially as Chrysler had performed badly in 2000.
Daimler-Benz’s Mercedes Benz brand had received critical acclaim for a number of decades up until the merger with Chrysler took place. Looking at both of the company’s successes over the years, it would be fair to suggest that Mercedes Benz was the bigger brand according to global sales revenues, Product range, Mercedes had much more manufacturing plants globally compared to that of Chrysler. However, Chrysler was up and company and they may have believed that on present form they were as big as Mercedes.
The issue of control was another important aspect of the merger. Initially when the companies had come together, Jurgen Schrempp (CEO of Daimler- Benz) and Robert Eaton (CEO of Chrysler) both led the entity as co- CEO’s. This would suggest that the merger was indeed a partnership. It is important to notice that when Chrysler under- performed in 2000, their president, James P Holden, was replaced with Dieter Zetsche from Germany. A few senior Chrysler executives had already left by this point and it was becoming apparent that more German executives were joining Chrysler in senior positions.
Not all mergers are the combination of two equal companies. The bigger company of the entities involved may see their role as acquiring the small entity. Likewise, the smaller company may see the merging process as a way of gaining company growth by tying themselves to a bigger company. One company may always be bigger than the other. In regards the case between Daimler Chrysler, Daimler may have seen the vision of acquiring Chrysler for the motive of further market growth and profit as Chrysler was beginning to show potential growth.
Recommendation:
The Daimler-Chrysler merger should have begun with a strategy, to decide if they wanted to combine the two different cultures, or start off with one brand new one. To do this they should have analyzed the existing cultures, to establish the similarities and the differences. The two different practices could have worked in certain aspects of the company, if the merger was thought out thoroughly then they could have stuck with certain ways. Any gaps that were noticeable should have been filled so that no hostility was left between the two.
BIBLIOGRAPHY
- Case study: Daimler Chrysler 2001, Case code BST R009
- Business week 2000