CMMK 365 L1 Mendoza Graciel PPT DaimlerChrysler

DaimlerChrysler: Intercultural Clash Can Lead to a Failed Merger: 

DaimlerChrysler: Intercultural Clash Can Lead to a Failed Merger Graciel Mendoza Saint Louis University

Introduction: 

Introduction Case Study of the merger between Daimler-Benz and Chrysler Brief overview of each company involved Highlight intercultural issues that led to failure of the merger Gain insight in order to avoid this problem in the future

Introduction: 

Introduction Mergers primarily focus on finances, market share, and business sustainability Cultural integration is often an afterthought Daimler-Benz and Chrysler attempted to create an automotive superpower The failure of the merger mostly resulted from intercultural clash Culture permeates everything in the business environment and culture clash if left unaddressed, will derail success in any business merger.

Overview: 

Overview Daimler-Benz German automotive manufacturer Founded in 1926 Also produced combustion engines, military tech and equipment, & commercial trucks Focus on luxury car market provided notable source of stability Development of diesel engines provided another source of strength

Chrysler: 

Chrysler American automotive manufacturer Founded in 1925 Acquired Dodge corporation in 1928 Focused on keeping low parts inventory to cut overhead Manufactured military equipment through World War II Series of highs and lows until it produces the first minivan and acquired the iconic Jeep brand in the purchase of AMC By the 1990’s they achieved a high 16.7% market share

DaimlerChrysler: 

DaimlerChrysler May of1998 Both companies decided to merge Formed DaimlerChrysler AG Seen as a partnership of equals with each seen as leaders in their markets Combined revenues of $130 billion Merger failed in 2007

How does the study of culture relate to the merger?: 

How does the study of culture relate to the merger? Clear communication across cultures is vital to a global company Companies often overlook cultural integration when considering a merger Culture clash can lead to communication breakdown This was a major factor in the failure of Daimler Chrysler

Intercultural Issues: 

Intercultural Issues Due diligence in cultural research including follow through for any merger Most business research financial viability but should perform a cultural “audit” Business culture has structure, politics, & emotions Developed in response to past success and outside threats Daimler-Benz and Chrysler made this mistake Ultimately the company assumed a German identity ruining the morale of the American workforce Training The company did provide intercultural training It was based on cultural stereotype Failed to explore meanings behind behavior patterns Training was not ongoing and never reviewed for effectiveness

Intercultural Issues: 

Intercultural Issues Communication Style/Business Etiquette Germans- formality, proper titles, formal communication, rigid agendas, decisions came from the top and never altered once set Americans- Casual attire, informal communication with superiors, open format meetings, decisions by consensus, decisions always open for review Example- Germans surprised that Americans constantly revisited issues they thought were resolved. Americans saw Germans as stoic and inflexible. Lack of understanding = Impasse Work habits Germans- Hierarchical structure, formal attire, decisions making from leadership. Also habitually smoked, and consumed alcohol at lunch. Working late hours were the norm Americans- Cross functional teams, casual dress, initiative and independent decision making encouraged. Smoking and alcohol consumption banned at work. Working late hours unheard of.

Intercultural Issues: 

Intercultural Issues Compensation Provided a major friction point CEO of Chrysler compensated at 5x the level of counterpart German executives compensated at ½ the rate of the Americans Business travel even had opposite approaches. Daimler employees flew first class to keep with Mercedes luxury image. Only executives flew first class on the American side. Financial Reporting Fundamentally different approaches Germans- Focus on yearly returns with special attention on 4 th quarter, German law only requires bi-annual reporting Americans- Focus on quarterly system to maximize efficiency. American law requires quarterly reporting. Reports released by Daimler in the morning German time meaning Americans received these in the middle of the night. Interpreted as evidence of intentional exclusion of Americans.

Intercultural Issues: 

Intercultural Issues Intercultural clash kept the company from becoming an automotive superpower After a year the company stopped trying to integrate management styles and operated as separate entities Neither culture understood the other

Conclusion: 

Conclusion If they tried to understand deeper meanings they would have seen…. Germans follow strict agendas due to uncertainty avoidance This is also why they stay the course with decisions Americans are less formal due to low power distance Independent problem solving comes from American individuality Low uncertainty avoidance makes them risk takers Just because the cultures are similar does not mean they are the same Fundamental differences must be accounted for

Conclusion: 

Conclusion An experiment found that incorrect interpretations of meaning behind partners acts directly contribute to partnership failure Failure to address these issues has a 70% fail rate If a merger does continue one culture dominates the other as in the case of DaimlerChrysler

Solution: 

Solution Cultural due diligence Culture provides understanding of a businesses' success Reconcile intercultural issues early Monitor on an ongoing basis Always consider intercultural integration in a partnership