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Daimler-Chrysler merger, a cultural mismatch

Daimler-Chrysler merger, a cultural mismatch

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Published by Amit Ranjan
Daimler-Chrysler failed to integrate the two companies due to the cultural mismatch between the two companies.
Daimler-Chrysler failed to integrate the two companies due to the cultural mismatch between the two companies.

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Published by: Amit Ranjan on Dec 07, 2012
Copyright:Attribution Non-commercial

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09/10/2013

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Page
 
Contents
1
 
Introduction
2
1.1
 
 Merger 
1.2
 
 Importance of post-merger Organizational Change
 
1.3 Reasons for failure of organizational changes.
2
Daimler
 – 
Chrysler Merger: a Cultural Mismatch
 
2.1 Q1
2.2 Q2
2.3 Recommendations and action plan 4
3
Renault Enters India with a Joint Venture
 
5
3.1 Q3
3.2 Q4
3.3 Recommendations and action plan
REFERENCES
 
7
 
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1. Introduction
1.1 Merger
A merger is the combination of operations of two companies. Merger generally happen with theacquiring company giving its stocks to the shareholders of the target company in an exchange for theshares of the target company.It could also be done with partial cash and partial stocks or complete cash.Mergers are as important in the growth of a company as organic growth. Mergers can happen toconsolidate a market by the combination of more than one firms in the same industry. A companycan look to expand in new geographies or acquire competencies of another company such as its
distribution channel. Mergers create shareholder‟s value for the acquiring companies by creating cost
and revenue synergies.
1.2 Importance of post-merger Organizational Change
A merger is said to be successful if the expected synergies are realized after the merger. For theexpected synergies to be realized, integration of the two companies is essential. One of the mostimportant aspect of post-merger integration is the integration of the cultures of the two companies.Cultural integration means addressing the differences in basic management styles and values. Thepotential causes of differences could be addressed in a way that it becomes a positive experience forthe acquired co
mpany. It will depict the acquiring firm‟s respect for the employees of the acquired
company and convey a message that they are interested in running the two businesses together.Restructuring is essential to realize the cost synergies. Organizational change is also needed forimproving the efficiency of the acquired company and to match cultures of the two organization.
1.3 Reasons for failure of organizational changes.
The decisions about management structure, roles and responsibilities, hierarchical relationships,layoffs and restructuring should be made as fast as possible after the merger. Slow changes lead todiscontent and uncertainty. This has severe effects on the expected synergy and value is not realizedfrom the acquisition. For ex. GE has learned that doing restructuring fast makes the integrationprocess smooth and easy. Just after the mergers, the acquired company expects changes and layoffs.They readily accept the decisions immediately after the merger. It removes uncertainty andambiguity at the start. So that the employees could focus on growth and performance.
 
Many organizations fail to implement changes after merger. Some of the reasons are:
 
Delay in Organizational changes
:
The acquiring company may think that early layoffswould portray
them as “bad guys”. So, they intend to postpone the layoffs till the right time
comes. They also worry that
it would send bad signals and would tarnish the company‟s
image. This delay adds to uncertainty and anxiety of the employees. Insecurity leads tofrustration and motivation level of the whole organization would go down leading moreopposition to changes in future.
 
 
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Restructure with respect and dignity
:
The acquiring company should understand thestress and emotions after being laid off. The employees should be let go with dignity andrespect. Also, employees could be conveyed that they would be laid off in near future withoutgiving exact date. So that they would start looking for new jobs. This uplifts the motivationlevel of rest of the employees.
 
 
Lack of information:
Seamless information exchange through forums and at all levelsremoves ambiguity and insecurity.
 
 
Cultural issues are not dealt with:
 
Cultural differences between the organizations makerestructuring difficult as it leads to ambiguity regarding the intentions. A policy decisioncould have an unexpected response from the newly acquired company simply because theymisinterpreted the decisions. If the merging companies are of different nationalities then itbecomes more challenging because of communication gap arising out of language barrier.
 
2. Daimler
 – 
Chrysler Merger: a Cultural
Mismatch
 
2.1
Mergers and acquisitions take place to realize the synergies between the two or morecompanies involved. Using Cultural theories, explain why do you think the Daimler-Chrysler merger failed to realize the synergies that were expected from it?
 
Ans. Daimler-Chrysler had planned for synergies by reaching to global automotive market throughgeographical reach and product segment coverage. But these synergies were not realized.Daimler-Chrysler failed to integrate the two organizations after the merger. Thus, expectedsynergies could not be realized. This failure could be attributed to the difference in corporatecultures.
 
The management style:
 
German and American styles of management were totallydifferent. They had different decision making process. One followed methodical processwhereas other valued creativity.
Similarly, Demler-
Benz had bureaucratic culture whereasChrysler has an egalitarian culture. To avoid the clash of culture it was decided to let the twocompanies continue with their existing management styles. But when Chrysler performedbadly in 2000, its senior managers were replaced. The German style of management werebeing imposed on Chrysler. This drove the morale of employees down.
 
Difference in nationalities:
This lead to language barrier between the organizations.Though, they tried to bridge this gap, there post-merger integration efforts were not fruitful asit was authoritarian in nature.
 
 
Delay in Restructuring and layoffs:
DCX fired two presidents of Chrysler after 2000.Further, three CEOs were fired. But these changes took place after 6 months to 12 months.According to GE, one of the most successful acquirers, once a company has decided torestructure, it should be done as fast as possible. Also, the employees, if laid-off should betreated with respect and dignity. A slow restructuring as followed by DCX hampered

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