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How important is the national culture of the participants, compared to other factors, in affecting the success or failure of a merger or acquisition?

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Introduction

Q: How important is the national culture of the participants, compared to other factors, in affecting the success or failure of a merger or acquisition? Introduction The key to the success of a Merger and Acquisition (M&A) is the national culture of the participants. Aguilera and Dencker (2004: 1360) stated that 'Firms that engage in cross-border Mergers and Acquisitions need to be aware of the possible consequences of national cultural differences.' 'People' is an issue that determines the success or failure in cooperation. 'Culture is the core value' (Cartwright, 1996: 6) and it is the presence of behavior among people. When Mergers and Acquisitions come to an international level, national culture of the participants become a major factor compare to all others. Cartwright stated that 'Many Organisations have also come to recognize that a compatible and successful organisational combination depends upon characteristics of the partner, which extend beyond the suitability of the strategic match. When Mergers and Acquisitions are performed at an international level, then the dynamics are complicated by differences in national cultures'. This assignment will discuss the measurement of success or failure of Mergers and Acquisitions and which factors affect the result and demonstrate the important role of national culture of participants in Mergers and Acquisitions with real stories. Success and Failure of Mergers and Acquisitions Due to the fact that Mergers and Acquisitions are economic activity, it seems clear that, the M&As' synergies are taken to mean financial synergy. It is expected that the combination of two entities will result in increased efficiency, economy of scale, widening of markets, greater purchasing power and increased profitability. For instance, in the 2011 interim management report of HG Capital Trust Plc, an investment trust listed on the London Stock Exchange, the management ...read more.

Middle

When culture comes to a business level, it can be considered to be national and organisational. National culture is a shared value that is deeply ingrained, while organisational culture stems more from practices than from individual values. National culture is shaped by tradition, and reflects economic and social history as well as climate and other demographic conditions. Different nations have different cultures. For example, in Japan, people keep separate their business and personal lives. So that it is considered taboo to talk about a colleague's family during working hours. On the other hand, discussion of these matters in the USA is often used as a means of 'breaking the ice' and establishing relationship (Cartwright, 1996: 59). National ideologies are reflected in the relationship between business and government, the orientation of the economy and financial institutions, and trade union influence. By understanding the cultural difference between Japan and USA, the following examples explain how national culture affects approaches to innovation and technological change. For instance, Cartwright quoted a survey of European, American, and Japanese firms which found that there are contrasting incremental or radical approaches to manufacturing. Different time orientations were also found to affect the priority given to product quality vs. delivery goals by Ferdows et al., (1985). Furthermore, Schneider (1989: 149) had shown some evidence that 'national culture could play an important role in strategy formulation and influences the nature of the relationship of an organisation with its environment as well as relationships among people within an organisation'. It also influences how much room for transformation that merging firms have (Aguilera and Dencker, 2004: 360). For example, in associative cultures, such as Japan, China, Greece and Spain, information processing is dependent on the context and it occurs amongst individuals who share a great deal of common information and common ways of thinking, this reflects an affective-intuitive approach. ...read more.

Conclusion

Bhagat, R.S., Kedia, B.L., Crawford, S.E. and Kaplan, M.R. (1990). Cross cultural issues in organizational psychology: Emergent trends and directions for research in the 1990s. In International Review of Industrial and Organizational Psychology: 1990 (C.L. Cooper and I.T. Robertson, eds), London: John Wiley & Sons. Cartwright, Susan (1996) Managing mergers, acquisitions, and strategic alliances integrating people and cultures. Oxford; Boston: Butterworth-Heinemann. Carpo, L. (1999) 'The Long Term Performance of Horizontal Acquisitions', Strategic Management Journal, 20: 987-1018. Faulkner, D., Pitkethly, R. and Child, J. (2002) 'International Mergers and Acquisitions in the UK 1985-94: A comparison of National HRM Practices', International Journal of Human Resource Management, 13: 106-22. Ferdows, K., J. G. Miller, J. G. March (1981) 'Evolving manufacturing strategies in Europe, Japan and North America'. Working Research Paper 85/07, INSEAD. Jean-Michel Caye and Dan Jansen, The Deal, 'Cross-border integration: the human factor'. Note: available on July 25, 2006. Jeeva Arulampalam, New Straits Times (Malaysia), 'Cultural differences a reason why M&As fail'. Note available on August 21, 2007. Kitching, J. (1967). Why do mergers miscarry. Harvard Business Review, November/December. Hickson, D. J., C. R. Hinings, C. J. McMillan, and J. P. Schwitter (1984) 'The Culture-free context of organization structure: a tri-national comparison'. Sociology 8: 59-80. HG Capital Trust Plc. - Half-yearly Report 2011 Hofstede, G. (1980). Cultures Consequences. Beverly Hills, California: Sage Publications. Milliken, F. J. (1987) 'Three types of perceived uncertainty about the environment: state, effect and response uncertainty'. Academy of Management Review 12/1 :133-143. Negandhi, A. R. (1993) 'Cross Cultural management research: trend and future'. Journal of International Business Studies 14: 17-28 Schneider, S. (1989) 'Strategy Formulation: The Impact of National Culture'. Organization Studies, 10: 149-68. Schein, E. H. (1985) 'Organisational culture and leadership.' San Francisco: Jossey Bass. Trompenaars, F. (1993). 'Riding the Waves of Culture: Understanding Cultural Diversity in Business'. London: Nicholas Brealey Publishing. ?? ?? ?? ?? 1 ...read more.

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