The Influence of Corporate Culture Integration On Mergers and Acquisitions: An Exploratory Study

The Influence of Corporate Culture Integration on Mergers
and Acquisitions: An Exploratory Study
Student Exam Number:
Y7556709
Supervisor: Ian Money
18th September 2012
MSc in International Business and Strategic Management
The York Management School
University of York
The Influence of Corporate Culture Integration on Mergers and Acquisitions: An
Exploratory Study
ABSTRACT
The cultural fit is a potentially crucial factor in mergers and acquisitions, and the
cultural difference between acquirer and the acquired organization will impact on
the post-acquisition performance. However, the relationships between cultural
integration and post-acquisition performance have not been subject to rigorous
researches used relatively cases of mergers and acquisitions. Based on the case of
Frestech in mergers and acquisitions, this paper examines the influence of the
integration of corporate culture on employees and the acquired firm. In order to
highlight the importance of integration of corporate culture, the present study
assesses the relationship between corporate culture and post-acquisition
performance to analyze the effect of integration between merger partners. The
findings confirm that the relationships between the integration of corporate culture
and post-acquisition performance are behavioral correlates.
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LIST OF CONTENTS
CHAPTER 1: INTRODUCTION--------------------------------------------------------4
1.1 Statement of the Problem--------------------------------------------------------------------4
1.2 Structure of the Paper------------------------------------------------------------------------4
CHAPTE 2: LITERATURE REVIEW-------------------------------------------------6
2.1 Mergers and Acquisitions Overview-------------------------------------------------------6
2.2 Corporate Culture Overview--------------------------------------------------------------11
2.3 Conclusion of Literature Review---------------------------------------------------------15
CHAPTER 3: METHODOLOGY-----------------------------------------------------16
3.1 Introduction of Methodology-------------------------------------------------------------16
3.2 Research Questions and Objectives-----------------------------------------------------17
3.3 Research Strategy and Design-----------------------------------------------------------18
3.4 Methodologies and Methods-------------------------------------------------------------20
3.4.1 Mixed Methods-------------------------------------------------------------------------20
3.4.2 Data Collection Methods-------------------------------------------------------------20
3.4.3 Data Analysis methods----------------------------------------------------------------22
3.5 Reliability and Validity--------------------------------------------------------------------24
3.6 Ethical Issues------------------------------------------------------------------------------24
CHAPTER 4: ANALYSIS OF FINDINGS -----------------------------------------26
4.1 Background of Hong Leong Asia Ltd and Xinfei (Frestech) ------------------------26
4.2 Data Collection Results-------------------------------------------------------------------27
4.3 Frequency Analysis------------------------------------------------------------------------28
4.4 Non-parametric Tests---------------------------------------------------------------------31
4.5 Documents Analysis-----------------------------------------------------------------------33
4.6 Suggestions to Solve the Problem of Culture Compatibility-------------------------36
CHAPTER 5: CONCLUSION -------------------------------------------------------41
5.1 Limitations and Future Research--------------------------------------------------------41
5.2 Conclusion of This Paper-----------------------------------------------------------------41
CHAPTER 6: REFERENCE----------------------------------------------------------43
CHAPTER 7: APPENDICES---------------------------------------------------------50
Words: 11568
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ACKNOWLEDGEMENT
Firstly, I need to thank York Management School for supplying an opportunity to do

such meaningful work for me. During the master year, with the help of different
teachers, I learn quite a lot about management in University of York. In addition, the
rich literature materials of the library also help me make huge progress during this
year.
Then, I would like to sincerely thank my supervisor, Ian Money. He is a patient

person, and always giving some academic supports for me. His encouragement likes
sunshine to guide me to finish my work. Without his motivation and inspiration, I
could not complete my paper efficiently and successfully.
Finally, I am also grateful to my friends and classmates who often helped me solve
learning problems in this master year.
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CHAPTER 1: INTRODUCTION
Mergers and Acquisitions (M&A) have become an increasingly broad-based

phenomenon, and their numbers are growing throughout the world (Cartwright and
Cooper, 1993). Indeed, during the last decade, it has been the dominant mode of
internationalization. In order to achieve corporate diversity and growth, Mergers
and Acquisitions is an effective method that can be used by firms. The popularity of
Mergers and Acquisitions is probably reflected by the widespread belief among
mangers that M&As provide a fast and seemingly easier way to achieving growth
and diversification objectives. However, the effectiveness of this strategy depends
on extensive planning and careful implementation (Blake & Mouton, 1984).
1.1 Statement of the Problem

In some cases, M&As have not lived up to expectations. Cartwright and Cooper
(1993) note that at best, merely half of all mergers and acquisitions meet their initial
expectations, while failure rates are in the fifty to sixty percent range. While lack of
cultural fit has been frequently mentioned as a potential factor for M&As’ failures,
empirical studies that investigate the role of cultural fit in M&As remain a rarity
(Hambrick & Cannella, 1993).
1.2 Structure of the paper

In order to ensure the success of mergers and acquisitions, the impact of corporate
culture on the company and employees should be focused and analyzed. This paper
will concentrate on the influence of corporate culture integration on mergers and
acquisitions. The research question of this paper is how the corporate culture affects
on the company and employees in mergers and acquisitions and how to deal with
this problem when the corporate culture conflicts with each other. The present paper
seeks to fill some of the above gaps. Its contributions are twofold: (1) an exploration
of the possible role and the influence of corporate culture on both employees and
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the acquired firm; and (2) providing some reasonable suggestions for companies to
deal with the problem of integrating corporate culture in mergers and acquisitions.
To fulfill the aim of the paper, mergers and acquisitions and the corporate culture
should be analyzed firstly, and then the case of Xinfei (Frestech) will be discussed
in this paper. This paper is divided into three main parts. Firstly, the chapter will
focus on the literature review. In this chapter, the other people’s research and
historical surveys about corporate culture and mergers and acquisitions will be
reviewed. Secondly, the essay will describe the methodology that is used by the
researcher and why the researcher chose this method. In this paper, those advantages
and disadvantages of different methodologies will be compared. Moreover, the
researcher will say how to conduct the research and give some details about the
research. Finally, the paper will analyze Frestech’s strategies in mergers and
acquisitions and give a number of research findings that are discovered from
materials. In this chapter, as an important case, Frestech’s integrating strategies will
be focused by the researcher. In addition, some recommendations about integrating
corporate culture in mergers and acquisitions will be provided in this paper.
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CHAPTER 2: LITERATURE REVIEW
Mergers and Acquisitions (M&A) is a popular strategy that used by some

multinational companies to enter other markets and expand their business
(Cartwright and Cooper, 1993). In order to achieve internal synergy, Mergers and
Acquisitions is an effective method to integrate two business units in a combination.
However, cultural factor is also a crucial factor in M&As to account for productivity
losses, so cultural integration and cultural adaption should be focused by managers
in the development of their organization. In the part of literature review, the
literature about mergers and acquisitions and the literature about corporate culture
will be reviewed.
2.1 Mergers and Acquisitions Overview

M&As have been around for a long time-indeed may be as old as the business.
Large waves of activity may be more recent in occurrence but still date back over
one hundred years (Angwin, 2007). In recent years, Mergers and acquisitions are
becoming a popular strategic option for companies (McEntire and Bentley, 1996).
The scale of M&A activity makes it hard to ignore and it also dominates the world
economic scene. Global M&A deals over the past ten years (1996-2005) have
totaled in excess of a staggering $23.4 trillion (Angwin and Vaara, 2005). Based on
Stanwick’s survey (2000), the annual price tag of mergers and acquisitions
consummated in the USA exceeds $1 trillion. Indeed, merger and acquisition is an
effective strategy for firms to achieve the goals including growth, diversification
and economies of scale (Buono, 1985). Nestlé, for instance, selected mergers and
acquisitions as their main strategy to enter emerging markets such as China and
India. In 2011, Nestlé merged Hsu Fu Chi, which is a famous candy factory in
China, to expand their market share in Chinese candy industry. In addition, as a
motivation for companies, mergers and acquisitions are also helpful for firms to
obtain a global presence (Marks and Mirvis, 1992).
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Mergers refer that the consolidation of two organizations into a single organization,
while acquisitions are commonly characterized as the purchase of one organization
from another where the buyer or acquirer maintains control (Borys and Jemison,
1989). Reasons for mergers and acquisitions include ensuring survival, free cash
flow, agency problems, market share, and the potential for above-normal profits.
Indeed, motivations for mergers and acquisitions involve in practical, psychological
or opportunist, and the stated goal of mergers and acquisitions is to achieve the
effect described “one plus one is more than two”. In the aggregate, changes in
ownership through M&A can affect national and regional economies, industry
structures, firms and their commercial linkages, owners, creditors, advisers,
management, employees and other stakeholders (Angwin, 2007). To the geographic
distribution of M&A, the cross-border deals are increasing rapidly. Cross-border
M&As in many countries is now encouraged as a way to stimulate and restructure
aspects of their economies (Crouch and Streeck, 1997). For firms, M&A are
frequently major strategic events, demonstrating tangible evidence of firm strategy
and vision. Both actively sought and unbidden, those activities can substantially
affect a firm’s future through revitalizing, reorienting and in some instances
completely transforming the business (Barney, 1991). Obviously, as the
transformational power of M&A makes them an attractive way for firms to expend
the market and improve their competitive advantages, this dynamic strategy is used
widely by firms.
As the 1960s new strands of research were adding breadth to the traditional focus on
the effects of M&A on competition, strategists began to investigate the implications
of M&A at the firm level rather than at the industry level (Andrews, 1971). Then,
the effects of M&A on performance are investigated by finance academics in 1970s,
and observers began to analyze the negative outcomes of M&A for employees and
managers (Magnet, 1984). Therefore, major research streams have improved so that
there are significant concentrations of scholarship with sources in strategy, finance
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and organizational behavior.
Potential merger or acquisition partners are typically identified pursuant to some

type of strategic fit. Strategic fit refers to the similarity between organizational
strategies that set the stage for potential strategic synergy (Schraeder and Self, 2003).
It can be concluded that strategic fit is an important factor in the financial success of
a merger or acquisition, but a number of researchers argues that there is not clear
evidence to support this opinion (Chatterje et al., 1992).
Although M&A is a very popular strategy for firms, research indicates that between
fifty to seventy percent of mergers and acquisitions fail to meet the anticipated
purpose (Carleton, 1997). The M&A process is near unique in strategic management
for the size and speed of the transformational change it can bring to organizations.
There is a wealth of evidence that much of this change is risky for employees,
buyers, and suppliers, and shareholders (Angwin, 2007). For instance, the
combination of American firms AOL and Time Warner is a failing merger, because
they fail to meet the intended objectives (Schraeder and Self, 2003). In my opinion,
for the merger of AOL and Time Warner, the company’s managerial culture is the
main reason that leads to the failure of this merger. The manager ran the big
operating units and there was not enough communication within those divisions, so
it created powerful fiefdoms where divisions do not cooperate with each other and
synergy was lost. Based on the Cartwright and Cooper’s opinion (1993), one in
every four American workers has been affected by mergers and acquisitions, so
challenges that occurred after M&A, such as integration challenges, task challenges,
demographic challenges and cultural challenges should be focused. In interviews
with over one hundred employees in a merger company, Sinetar (1981) found that
most of employees show strong negative reactions for the merger. In addition,
employees involved in a merger between two companies feared layoffs, loss of
control, possible relocation, losing their identity or work reputation, and their new
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responsibilities, while those employees also hoped for improving processes and
learning new skills (Marks and Mirvis, 1992). Therefore, leaders and managers
should make new thoughts to deal with the mergers and acquisitions. Then, an
important factor to create challenges in M&A is the compatibility of those two
separate business systems. Mirvis discovered that organizational members often
experience problems when they trying to adjust to new procedures and performance
standards (Mirvis, 1985). Clearly, those difficulties have a real impact on firm’s
performance. With the productivity losses and the influence of M&A on firm’s
human resources, the anticipated benefits associated with M&A are possibly
unrealized (Weber, 1996). In M&A strategy, geographic dispersion will lead to
communication and resource distribution challenges. Moreover, the acquirer must
contend with the local rules and regulations in mergers and acquisitions. However,
in my opinion, there are also some advantages in mergers and acquisitions. Mergers
represent a positive shifting of assets into their best use and provide the best
mechanism for ensuring that managers act in the shareholders’ interest. Moreover,
the successful merger will increase companies’ internal synergy and the optimize
allocation of resources. For employees that work in acquired companies, although it
is difficult to them to adapt to the new organizational climate, the acquirer also
makes a series of activities to help employees adapt to the new working
environment. Auerbach (1991) argues that most of employees worked in the
acquired company will be trained through the training made by the new
organization so that they can integrate into the new surrounding easily.
Similarly, there are other variables that emphasize the significance of the human
factor in merger success. For example, some cases displays that the loss of
autonomy of acquired managers will evokes tension and negative attitudes toward
the merger, and it will lead to integration problems and merger failure (Perry, 1986).
Other cases demonstrate that the necessary commitment will be reduced between
acquired managers and employees, as conflicts and communication problems
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impede the implementation of integration process in mergers and acquisitions

(Schweiger & DeNisi, 1991). However, there is not empirical research has
examined how, and to what extent, such human factors impact mergers and
acquisitions.
Based on Cartwright and Cooper’s (1993) opinion, the successful pre-merger

performance that is supported by a strong organizational culture can not ensure that
the acquirer’s corporate culture can easily be transferred to the acquired company.
They also argue that benefits anticipated from mergers and acquisitions are of then
unrealized, as the corporate culture is not compatible. In addition, other researchers
agree that cultures can change and evolve, but it is difficult. The corporate culture is
a make-or-break factor in M&A, and the foundation of an organization is difficult to
change (Fralicx and Bolster, 1997). Schein (1985) argues that a merger or
acquisition displays important aspects of culture differences that improve
measurement and operationalization during the integration process. Weber (1996)
also suggests that the magnitude of cultural differences can effectively impact a
successful integration in mergers and acquisitions.
Not only researchers are interested in organizational culture influence on M&As,

those investors and the market are also revealing an increased sensitivity to cultural
influence on M&A. Daimler-Benz and Chrysler, for instance, met warnings that
cultural differences could inhibit the success of the proposed union (Simonian,
1998). Furthermore, the legal system also pays attention to the impact of
organizational culture on mergers and acquisitions. Delaware Supreme Court Ruling
involved the proposed merger between Paramount Communications, Inc. and Time
Inc in 1989. The court concurred with Time’s contention that the merger would pose
some threats to the Time’s corporate culture, so Time’s argument that partnered with
Warner was supported by the court (Delaware Journal of Corporate Law, 1989).
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2.2 Corporate Culture Overview

Prior to analyze the contribution of organizational culture to the success or failure of
mergers and acquisitions, it is meaningful to provide a brief theoretical foundation
for organizational culture. Culture is defined in many different ways, and most of
the definitions of culture focus on the beliefs that members of an organization share
(Nahavandi and Malekzadeh, 1988). Most of popular researchers have been focused
on the hypothesis of strong cultures, defined as a set of norms and values that are
shared and held throughout the organization (O’Reilly and Chatman, 1996). Buono
(1985) offer two distinct conceptualizations of organizational culture that are
subjective culture and objective culture. Characteristics of subjective culture include
shared values and beliefs among organizational members, while the characteristics
of objective culture involve artifacts in an organization such as office locations,
physical setting and office locations, physical setting and office decoration (Schein,
1985). The subjective culture encompasses such things as corporate heroes who
personify the culture’s values and make tangible role models for others (Deal and
Kennedy, 1982). In addition, it also includes managerial culture, the leadership
styles and orientations, mental frameworks, and ways to solve problems that are
affected by the organization value (Peters, 1980). Although both of them play a
crucial role for a full understanding of an organization, subjective culture can supply
a more distinctive basis for the interpretation of differences among organizational
members in different groups. The objective culture possibly contains similarities
across companies, but subjective culture is unique to a particular organization
(Buono, Bowditch and Lewis, 1985). The researcher also found that something that
is a part of the objective culture can begin to take on a “life” of its own.
For subjective organizational culture and organizational climate, there are also some
differences between them. Climate refers to a “measure of whether people’s
expectations about what it should be like to work in an organization are being met”
(Schwartz and Davis, 1981, p.33). Subjective organizational culture is pay attention
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to the nature of beliefs and expectations about organizational life, while the
organizational climate is just an indicator of what extent that these employee
expectations are being fulfilled. It is possible that different organizational cultures
produce similar climate profiles. For example, one organization holds a relatively
autocratic managerial culture, while another organization is more democratic in
nature. The response to the question “my manager involves me in decisions which
affect me whenever appropriate” can be similar in the two firms (Buono, Bowditch
and Lewis, 1985). Therefore, if two organizations are congruent with the nature of
employee expectations about organizational life, organizational climate will be
similar.
Although the term often is used as if organizations have a monolithic culture, most
firms have more than one set of beliefs influencing the behavior of employees
(Sathe, 1985). Those subcultures within one firm will be divided into three parts that
are occupational, functional, product or geographical lines (Sathe, 1985). Indeed,
although a firm hold a dominant corporate culture, many subcultures may interact
with each other. Therefore, in order to understand the culture of any company,
researchers should identify the various subcultures and gain insight into the
influence of them on the firm.
A lot of researchers has analyzed about the importance of organizational culture and
its potential influence on organizational behavior and performance. Most influential
researches have been written in the early 1980s by Tom Peters and Bob Waterman,
and by Goldsmith and Clutterbuck which link financial performance to the strength
and coherence of an organization’s culture (Cartwright and Cooper, 1993).
Characteristically, symbols, values, ideologies, and assumptions which fashion
individual and business behavior are concerned by organizational culture
(Cartwright and Cooper, 1993). Indeed, corporate culture is used to bind individuals
and creates organizational cohesiveness. Compared with societal culture, both of
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them are maintaining order and regularity in the lives of their members. To analyze
and understand the subtleties of organizational culture, the restrictive focus that
differences between organizational cultures exist primarily across industries rather
than between organizations within the sane industry should be examined (Buono,
Bowditch and Lewis, 1985). In the research of Deal and Kennedy (1982), they
formulate four general corporate culture types which range from the “macho”
culture to the “process” culture characterized by low risks, slow feedback and
focusing on process. Clearly, the broader social and business environment focused
by Deal and Kennedy is an important factor to impact on the development of
corporate culture. Nevertheless, although those global differences do exist and are
useful for empirical research, the present study argues that cultural differences
between organizations in the same industry are also an essential factor that should
be focused by researchers. In terms of mergers and acquisition, compared with
inter-industry differences, it might be easier to deal with intra-industry differences
over the long term, but divergent cultures between organizations in the same
industry can still present many difficulties (Buono, Bowditch and Lewis, 1985).
Corporate culture has been used as an independent variable to explain differences in

managerial styles and organizational practices, and it also has been used as an
internal factor focusing on the cultural elements within organizations (Bhagat and
McQuaid, 1982). Corporate culture is also an important factor that is used to explain
the success of some organizations. Based on some researchers’ opinion, the fit
between culture and strategy is an essential element in organizational effectiveness
(Ackerman, 1984). In the study of mergers and acquisitions, culture is also a
variable assumed to influence the implementation of strategic decisions (Davis,
1984).
Interest in the concept of organizational culture has exploded in the past two
decades. While some researchers argue that measuring organizational cultures and
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their effects on organizations is highly problematic, a large number of research

starts from the assumption that culture is a measurable characteristic of
organizations (O’Reilly and Chatman, 1996). One of the key consequences of a
strong corporate culture is that it increases behavioral consistency across individuals
in a firm.
At the beginning, cultures are an integral part of an organization. Some researchers

argue that culture is to an organization what personality is to an individual
(Cartwright and Cooper, 1993). Therefore, some researchers suggest that corporate
cultures serve as forces that draw organizational members together, creating a sense
of cohesion. Furthermore, organizational culture is a product of successfully
adapting to the environment (Gordon, 1991). Gordon (1991) also argues that a
change in the environment, such as the new learning, is necessary for the changing
of corporate culture.
In 1990s, increasing number of researchers has found that management of the

human factor in mergers and acquisitions is an important source of success
(Lubatkin and Lane, 1996). These researchers offer valuable insights seem to be
scattered around, waiting for integration in an agreed-upon body of knowledge. In a
process of integration, one of the first questions that should be faced is how the part
that culture plays in success or failure of organizational melting processes can be
conceived of (Bijlsma-Frankema, 2001). Culture plays a major part in the way
employees react to the new structure of their work environment, ranging from quick
adaptation and commitment to the new expectations, to resistance, withdrawal and
other forms of unproductive behavior (Bijlsma-Frankema, 1997). As the cultural
adaptations possibly lag behind structural changes, there is a high chance that the
change of firm will bring about frictions between cultures and employees in the
organization.
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2.3 Conclusion of Literature Review

In summary, corporate culture composed of objective and subjective dimension
tends to be unique to an organization, and it is also a powerful determinant of
individual and group behavior (Buono, Bowditch and Lewis, 1985). Clearly,
organizational culture impact on all aspects of organizational life including the way
in which employees interact with each other and perform their work, the firm’s
policies and the types of decisions made in the company. The potency of corporate
culture will be seen during mergers and acquisitions when two different cultures are
integrated into become one (Cartwright and Cooper, 1993). As the organizational
members are embedded in their own culture, it is difficult to realize fully its
influence on their behavior. When the cultural collision occurs during a merger, the
shock for those organizational members can disrupt the newly formed company.
However, there are also some strategies can be used in mergers and acquisitions to
achieve the success of merging two corporate cultures. The newly-merged
organization should anticipate a long period of acculturation. Therefore, to achieve a
success in mergers and acquisitions, how to integrate two corporate cultures should
be focused by the manager.
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CHAPTER 3: METHODOLOGY
3.1 Introduction of Methodology

A multimethod approach is used to collect data about the two pre-merger companies,
the merger process itself and the post-merger experience. Hong Leong Group and
the company of Frestech are the acquirer and the acquired company respectively.
Information about the organizational cultures of the merger partners is mainly
gathered through their annual report and their homepage. The pre-merger data on
organizational climate are collected from secondary sources, while the post-merger
data on organizational culture are gathered through a survey questionnaire that is
made by the researcher. On the one hand, the secondhand data including their
annual report, copies of the house organ and the information in their homepage will
be used to analyze the corporate culture of those two companies respectively. On the
other hand, in order to collect data about the impact of mergers and acquisitions on
the acquired company, the questionnaire will be made to interview some employees.
The questionnaire focuses on the feeling of employees on the “new” corporate
culture and various facets of organizational life including compensation,
organizational commitment, interpersonal relations, managerial behaviors, and job
satisfaction. In the data collecting process of organizational culture in the company
of Frestech, a standardized questionnaire will be provided for its employees to
complete. The employees are selected randomly and basic information will be asked
firstly. In order to acquire data about the job satisfaction and the acceptance of a
particular organization’s culture, the question such as employees are working in a
friendly environment will be used as an indicator in the questionnaire. In addition,
the data on the “new” organizational culture are obtained in newly formed
institutions, so it will also be focused by the researcher. For the sampling strategy,
the questionnaire will be completed by a random sample of organizational members
including employees, lower managers, middle managers and senior managers, and
the sample will involve 100 members. In order to get accurate data, both male
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employees and female employees are selected to complete the questionnaire.

Overall, both firsthand data and secondhand data will be collected by the researcher
throughout the study period. Although the limitation in the data collection might
lead to the information distortion, combined with survey questionnaires and other
secondhand data, those materials will provide a clear picture of integration of
corporate cultures and organizational climate profiles of the acquired company.
3.2 Research Questions and Objectives

Research questions or hypotheses are an extremely important part for a research
project. In this paper, as the integration of corporate culture is an important factor to
measure the success of a merger, the integration of corporate culture in mergers and
acquisitions will be focused by the researcher. There are two main research
questions in this essay. The first question is that how the corporate culture impacts
on the acquired company and employees. The second question is that how to deal
with the culture compatibility in mergers and acquisitions. Two important foci of
those research questions are corporate culture and mergers and acquisitions. For the
first question, it involves the following specific objectives. Firstly, the researcher
wants to know the influence of corporate culture on employees, managerial
behaviors and the firm’s developing strategies (Figure 1). Secondly, the paper will
determine the employees’ feedback about the change on corporate culture after
mergers and acquisitions. It involves employees’ evaluation of the company’s value
and rules, employees’ job satisfaction and their attitude on the organizational
climate. Thirdly, strategies that used by acquirer to change or keep the acquired
firm’s organizational culture will be collected and analyzed. For example, what
publicity strategies are utilized by the company to spread their “new” corporate
culture? On the other hand, for the second question, it includes the following
specific objectives. The first goal is to find reasons that lead to failure or success of
merging two organizational cultures. The second purpose is to provide acquirer with
some suggestions to solve the problem of culture compatibility. It contains the mode
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of acculturation, such as integration, assimilation and separation, and measures to

successfully merger corporate cultures, such as understanding the role of culture and
using communication.
Figure 1 The Influence of Corporate Culture
Managerial
behaviors
Working
environment
Corporate Employees
culture
Development
strategies
Company’s
values
3.3 Research Strategy and Design

For the research strategy, quantitative research method and qualitative research
method are main strategies used in research. The quantitative research can be
construed as a research strategy that emphasizes quantification in the collection and
analysis of data, while the qualitative research can be defined as a research strategy
that usually emphasizes words rather than quantification in the collection and
analysis of data (Bryman and Bell, 2011). For the advantage of qualitative research,
the researcher will gain more detailed and rich data from documents and other
literatures. However, the researcher’s subjective view will enter the research, as the
researcher interprets the research according to their own view (Bryman, 2006). For
the quantitative research, the researcher is more objective about the findings of the
research, but the disadvantage is that a large sample of the population must be
studied. In the paper, both quantitative and qualitative research method will be used
to analyze data. On the one hand, a questionnaire will be made and completed by
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employees, and then analyzed by the researcher using quantitative research method.
On the other hand, some documents, such as annual reports, copies of their own
newspapers and other literatures, will be analyzed by the researcher using
qualitative research method.
A research design provides a framework for the collection and analysis of data. To
discuss the research designs, five different types will be examined that are
experimental design, cross-sectional or social survey design, longitudinal design,
case study design, and comparative design (Bryman and Bell, 2011). With the
problems of achieving the requisite level of control when dealing with
organizational behavior, true experimental design is rare in business and
management research. The cross-sectional design is often called a social survey
design, and it entails the collection of data on more than one case. For the
longitudinal design, it represents a distinct form of research design that is typically
used to map change in business and management research (Pettigrew, 1990). The
basic case study design entails the detailed and intensive analysis of a single case.
As Stake (1995) observes, case study research is concerned with the complexity and
particular nature or the case in question. This case study approach is very popular
and widely used in business research. A case can be a single organization, single
location, a person or a single event. The comparative design means that the study
uses more or less identical methods of two or more contrasting cases (Bryman and
Bell, 2011). The advantage of case study design is that the researcher can analyze
the findings from the case study in depth and provide an in-depth elucidation of it.
In this paper, case study design will be used. The company of Frestech is the main
case that will be analyzed in the research, and all the important features about the
corporate culture will be focused.
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3.4 Methodologies and Methods

3.4.1 Mixed Methods
In this paper, mixed methods that include both qualitative method and quantitative
method will be utilized to analyze the data. Mixed methods research has become an
increasingly used and accepted approach to conducting business research. Bryman
(2009) argues that articles based on mixed methods research in period 1994-2003
had a threefold increase. The mixed methods research occurs when the researcher
cannot rely on either a quantitative or a qualitative method alone. It can provide a
better understanding of a question than if just one method had been used. Indeed,
the qualitative methods may be used to provide important information that
supplements the findings from a larger quantitative study. This paper wants to
analyze questions about the integration of corporate culture in mergers and
acquisitions, and questionnaire and documents are main materials to collect data, so
both quantitative and qualitative method should be used to analyze data. Therefore,
the mixed method is suitable to the essay.
3.4.2 Data Collection Methods

Questionnaire and Sampling
The self-completion questionnaire is sometimes referred to as a self-administered
questionnaire, and respondents answer questions by completing the questionnaire
themselves (Bryman and Bell, 2011). As a data collection method, the
self-completion questionnaire can come in several forms, and probably the most
popular one is the mail or postal questionnaire. Compared with structured interview,
self-completion questionnaires have fewer open questions and are shorter than
structured interview to reduce the risk of “respondent fatigue”. For advantages of
self-completion questionnaire, it is cheaper and quicker than structured interview to
administer. For example, if the sample is geographically widely dispersed, the
self-completion questionnaire will save money and time than other methods (Cooper,
1995). As the researcher wants to collect data about employees’ attitude to the
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“new” corporate culture, so the self-completion questionnaire is appropriate for the

research. In addition, the self-completion questionnaire is convenience for
respondents, because they can complete a questionnaire when they want and at the
speed that they want to go. However, the disadvantage of self-completion
questionnaire can not be overlooked. The problem of low response rates of
questionnaires should be focused when the researcher designs questionnaire.
Dillman (1983) argues that the questionnaire should be as short as possible in order
for it to be less likely to deter prospective respondents from answering. In my
questionnaire, in order to increase the response rate, only fifteen closed questions
are designed for respondents, so it is easily for them to answer it. Moreover, the
layout of the questionnaire should be easy on the eye. The different fonts and the
table are used in the questionnaire to enhance the appearance. For the response, the
Likert scale that scoring of items is used in the questionnaire. In every question,
there are five options from strongly agree to strongly disagree to select. Furthermore,
the aim of this questionnaire is also written at the front of questions so that
responders can understand it clearly.
The sampling is also an important factor in the research. There are two types of
sample that are probability sample and non-probability sample. In this paper, the
simple random sample will be used to select employees to complete the
questionnaire. The simple random sample is the most basic form of probability
sample (Bryman and Bell, 2011). With random sampling, each unit of the
population has an equal probability of inclusion in the sample. For the sample size,
the questionnaire will send to one hundred employees including lower manager,
middle manager and senior manager to complete. For the time of collect finished
questionnaires, the researcher will collect those finished questionnaires in a month.
In addition, the problem of non-response also should be borne in mind. As thirty to
forty completed questionnaires are necessary for analyzing, the questionnaire will
send to one hundred employees.
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Documents
The term “documents” covers a very wide range of different sources, such as letters,
memos, diaries, autobiographies, internal reports, newspapers, magazines, and
photographs (Bryman and Bell, 2011). For the organizational documents, some of
these documents are in the public domain, such as annual reports, mission
statements, reports to shareholders, transcripts of chief executives’ speeches,
advertisements, and public-relations material on the web, while other documents are
not in the public domain, such as company news letters, organizational charts,
company regulations and so on. Both of those two kinds of organizational
documents can provide the researcher with valuable background information about
the company (Copper, 1995). In case study research, documents can be used to build
up a description of the organization and its history. They can also be useful in
building up a “timeline” to display the organizational change, because documents
can offer at least insights into past managerial decisions and actions. However, with
the difficulty of gaining access to some organizations, some researchers have to rely
on public-domain documents. In this paper, Materials about their merger and their
corporate culture will be focused and collected. Some public-domain documents
will be analyzed to build up a description of Frestech and understand the corporate
culture of Frestech.
3.4.3 Data Analysis methods

Quantitative Data Analysis
The basic technique for analyzing quantitative data is SPSS (Statistic Package for
Social Science). Using this software, some necessary calculations, such as
frequency tables and diagrams, can easily be carried out. For the types of variable,
there are four kinds of variable that are interval variables, ordinal variables, nominal
variables and dichotomous variables (Bryman and Bell, 2011). Moreover, for the
variable analysis, univariate analysis, bivariate analysis and multivariate analysis are
main methods to analyze variables. In univariate analysis, frequency tables and
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diagrams are the most common approaches to describe the trend of variables. To
examine relationships between variables, methods such as Person’s r, Spearman’s
rho, and Phi coefficient are useful in the research (Peter and Donnelly, 2007). In this
paper, the researcher will use SPSS to analyze those completed questionnaires. At
the beginning, in order to understand employees’ attitude to the “new” corporate
culture, the frequency tables and diagrams such as bar charts will be utilized to
show the answer’s distribution. Then, bivariate analysis will be used to analyze the
relationships between the position and their attitude for “new” corporate culture.
Using this method, the researcher can understand the different attitudes between
employees and managers for the integration of corporate culture. In addition, it can
also measure that whether the corporate culture marriage is success or not.
Therefore, it is a useful method to evaluate the influence of “new” corporate culture
on employees after mergers and acquisitions.
Qualitative Data Analysis

The general strategies of qualitative data analysis are analytic induction and
grounded theory. ‘Analytic induction is an approach to the analysis of data in which
the researcher seeks universal explanation of phenomena by pursuing the collection
of data until no cases that are inconsistent with a hypothetical explanation of a
phenomenon are found (Bryman and Bell, 2011, p. 575). For the grounded theory, it
has been defined as ‘theory that was derived from data, systematically gathered and
analyzed through the research process (Bryman and Bell, 2011, p. 576). In recent
years, grounded theory has become by far the most widely used framework for
analyzing qualitative data. In this paper, some materials such as annual reports,
mission statements, and reports to shareholders will be analyzed to understand the
acquired company’s new corporate culture and strategies to integrate their
organizational cultures. From those materials, how those two corporate cultures are
integrated will be displayed so that the researcher can evaluate their strategies.
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3.5 Reliability and Validity

Although the reliability and validity looks like synonyms, they have totally different
meanings in the business research. In quantitative research, reliability focuses on
issues of consistency of measures, while the issue of measurement validity has to do
with whether or not a measure of a concept really measures that concept (Copper,
1995). When considering whether a measure is reliable, factors including stability,
internal reliability and inter-observer consistency should be focused. To test the
internal reliability, most researchers use Cronbach’s alpha which is essentially to
calculate the average of all possible split-half reliability coefficients (Bryman and
Bell, 2011). In SPSS, which is a kind of computer software, the Cronbach’s alpha
can be calculated and the computed alpha coefficient will vary between zero and
one. In this paper, in order to keep the reliability of quantitative data, questionnaires’
reliability will be analyzed by SPSS.
3.6 Ethical Issue

In business and management research, the ethical issue also an important factor to
influence the research. To discuss about ethical principles in business research, there
are four main areas involving harm to participants, lack of informed consent,
invasion of privacy, and deception should be considered (Diener and Crandall,
1978). For the area of harm to participants, it entails a number of facets such as
physical harm, stress, and harm to career prospects or future employment. In this
paper, the questionnaire is harmless for employees, because those questionnaires are
only be used to collect their attitudes for the corporate culture. In addition, in order
to protect employees, the questionnaire is anonymous. For the second area of lack
of informed consent, it is also considered by the researcher. At the beginning of the
questionnaire, the aim and other information about the questionnaire are written so
that participants can understand it clearly. For the third area of privacy, the research
does not invade participants’ privacy definitely. In the questionnaire, in order to
protect participants, only gender and position are asked, and there are not other
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questions about participants’ privacy. Deception occurs when researchers represent

their research as something other than what it is. In this research, the researcher just
tells the real aim and other information about the questionnaire and the research to
participants, so there is not deception in it.
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CHAPTER 4: ANALYSIS OF FINDINGS
4.1 Background of Hong Leong Asia Ltd and Xinfei (Frestech)

The history of Hong Leong Asia Ltd can date back to 1941, which set up a trading
business in building materials and rubber estate supplies (Hong Leong Asia, 2012).
As the building materials arm of the Hong Leong Group, Hong Leong Asia (HLA)
had evolved strategically in its business scope to become one of the largest
integrated building materials suppliers in Singapore (Hong Leong Asia, 2011). From
being Singapore’s leading integrated building materials supplier to one of the
regions major manufacturing and distribution players, HLA’s success relates to its
diversification strategy that enters into the manufacturing and distribution industries
in China and Southeast Asia. In 2002, HLA transformed their main manufacturing
and distribution company to China. Using strategy of mergers and acquisitions, it
acquired three famous manufacturing companies specializing in the producing of
home appliances including refrigerators, freezers and air-conditioners. HLA
increased its controlling interest from fifty-one percent to ninety percent in the
Xinfei (Frestech) company, which is China’s second largest refrigerator and freezer
maker (Hong Leong Asia, 2005). Under the stewardship of HLA, Xinfei increased
annual production capacity from 300,000 units to 7 million units. Since 1990s,
Xinfei has become one of the 500 biggest industrial enterprises in China and one of
the 10 strongest enterprises in the home appliances industry. The board and senior
management of HLA are committed to conducting business with integrity and
consistent with high standards of business ethics. In addition, the company made
some internal principles, such as honesty, integrity, and responsibility, to provide a
communicable and understandable framework for staff. For the mission of HLA, it
strives on strengthening its business, such as manufacturing and distribution
activities, in Chinese market, and ensures a premier position in China (Hong Leong
Asia, 2012). For the mission of Xinfei, before mergers and acquisitions, it paid
attention to the products’ quality. Now, their mission is to create a high quality
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assurance for their products and become a leader of world-class company in

refrigeration (Xinfei, 2012). In the past twenty years, Xinfei always pursues product
quality as one of their core business value. From development of new products to
after-sales service, they always focus on quality management. The main value of
Xinfei is honesty, responsibility, innovation, customer orientation and coordination.
4.2 Data Collection Results

In the process of data collection, forty-three completed questionnaires are gathered.
It means that the valid response rate is forty-three percent. In the sample, fourteen of
them are female respondents that occupy thirty-two percent and twenty-nine of them
are male respondents that occupy sixty-seven percent. For the position of different
respondents, twenty-six respondents are employees (occupy sixty percent) and
fourteen respondents are lower managers (occupy thirty-two percent), while just
three middle managers completed the questionnaire (occupy seven percent). For the
work seniority of respondents, there are thirty-three workers who work at Frestech
more than five years that hold seventy-six percent, and seven workers are employed
by Frestech two to five years. Moreover, only three workers work at Frestech less
than two years that occupy seven percent. Then, the reliability of those
questionnaires should be analyzed in SPSS. Using the Cronbach’s alpha in SPSS,
the internal reliability will be calculated. If the alpha coefficient is more than 0.9, it
means that those questionnaires are reliable (Copper, 1995). In this questionnaire,
there are eighteen items should be analyzed by Cronbach’s alpha to prove the
reliability of those data. In the output of SPSS (Appendix I), it displays that the
Cronbach’s alpha is 0.916, which is more than 0.9, and the number of items is 18, so
it proves that reliability of those items is high and it can be used to analyze the
corporate culture.
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4.3 Frequency Analysis

The first question is about the change of working environment after mergers and
acquisitions. As the working environment is an important part of corporate culture,
it also displays the change of corporate culture. Based on answers of respondents,
seventy-nine percent of respondents agree that the working environment has a
remarkable change after mergers and acquisitions, so the new corporate culture will
fight and integrate with the old culture, and employees must adapt to the new
corporate culture (Appendix II). The second question is that it is easy or not to adapt
to the new working environment, which is relate to the question one. The mode of
this question is “mostly agree” and respondents who select “agree” are more than
those respondents who select “disagree” (Appendix II). It indicates that employees
can easily integrate with the new corporate culture and keep their productivity.
Frankema (1991) argues that the aversive relation between different corporate
cultures will lead to the productivity losses. After mergers and acquisitions, most of
employees in Frestech consider that the new corporate culture is easy to adapt to, so
there is not a remarkable aversive relation between them and the productivity losses
will be reduced. The third question is that whether employees are working hard in
new environment or not, which displays the influence of new corporate culture on
employees. Most of respondents agree that they can work hard in new environment
and only seven respondents select “disagree” or “strongly disagree”, so it also
certifies that the integration of corporate cultures has not a remarkable negative
impact on their working enthusiasm (Appendix III). Through analyzing those three
questions, it is clear that the employee resistance in the organizational integration
process has not a noteworthy influence on the productivity. Indeed, those three
questions indicate that the employee resistance including antagonism,
condescending attitudes and tension is solved in the process of integrating
organizational culture. The fourth question is that whether company’s decisions can
be sent quickly to employees and the fifth question is that whether employees can
implement managers’ decisions heartedly or not. Respondents who agree with
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question four occupy more than eighty percent, while respondents who agree with
question five occupy eighty-six percent (Appendix IV). In the process of
organizational integration, the company can achieve operational synergy in
administration and production, so the strategy of human resource management in
Frestech is successful. The question six is about the company’s managerial
environment. Fifteen respondents mostly agree that they work in a friendly
managerial environment, while ten of them that occupy twenty-three percent
disagree with it (Appendix V). It means that the new managerial culture is difficult
to adapt for employees and this problem possibly leads to some negative reactions
on the company’s operational synergy. For the negative reactions, research from a
psychological perspective has identified such problems as “we versus they”
antagonism, which is a kind of “merger syndrome” (Astrachan, 1990). The seventh
question is about the cooperation in different departments, and more than sixty
percent respondents mostly agree that different departments can cooperate with each
other. After mergers and acquisitions, the new corporate culture improves the
connection of different departments, so the company can easily achieve the
objective that increases the internal synergy and optimizes allocation of resources.
In question eight, the issue of Frestech’s performance management is asked. Nearly
fifty percent employees strongly agree that the company focuses on employees’
performance assessment, while there are thirty percent respondents disagree with it
(Appendix VI). Moreover, Frestech will give rewards to those employees who have
good performance. As a part of the corporate culture, the performance management
will influence the employees’ productivity directly. After mergers and acquisitions,
Frestech focuses on it and it has positive reaction on keeping the employees’
productivity. The question nine pays attention to the improving of employees.
Thirty-six respondents agree that their working skills are improved in Frestech
(occupy eighty-three percent). One of reason that increases employee resistance in
organizational integration is that employees consider that they will lose their
acquired benefits in the old company. In Frestech, employees improved their skills
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rather than lose working opportunities, so employee resistance can be reduced in the
integration of corporate culture. The issue of new managerial behavior is discussed
in the question ten. Nearly fifty percent respondents just mostly agree that the new
managerial behavior is good to improve the cohesion of the company, while
twenty-eight percent of them disagree or strongly disagree with this issue
(Appendix VII). It indicates that, after mergers and acquisitions, the new managerial
behavior is not totally adapted and it has not a remarkable improvement on the
company’s cohesion, so it might be a resistance for the internal synergy realization
and post-acquisition performance. In the question eleven, the company’s consistent
value is asked. Eighty-six percent of respondents consider that the company has a
consistent value and employee can accept it (Appendix VII). Clearly, corporate
value is an important part of corporate culture. Frestech has a consistent value and
employees identify the corporate value, so, on some level, it is an acceptation for the
corporate culture. The question twelve is that managers made some activities so that
employees can easily understand the corporate culture. The mode of this question is
those respondents who select “mostly agree” and it occupies more than fifty percent
and eleven employees agree or strongly agree with it, while there are nine
respondents choose “disagree” or “strongly disagree”. It displays that, after mergers
and acquisitions, Frestech made a series of activities to highlight their new
corporate culture so that employees can understand and adapt to the integration of
corporate cultures. However, based on the result of questionnaires, those activities is
not enough, so Frestech also need to organize more activities to publicize their new
corporate culture. The question thirteen is that whether most of employees can
accept the company’s decisions and strategies or not. Fourteen respondents and
twelve respondents select “mostly agree” and “agree” respectively (occupy sixty
percent), although twelve employees disagree with it. Moreover, the question fifteen
asked that whether both managers and employees can work for a same goal to
achieve the company’s success. More than sixty percent respondents choose “agree”
or “strongly agree”, while twelve respondents disagree with it (Appendix VII).
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Those two questions indicate that Frestech coordinate the company’s development
strategy with employees’ person goals, and then the sense of identity for the
company will be increased and the employees’ resistance will be reduced.
Employees’ innovation is involved in question fourteen. More than eighty percent
respondents consider that employees are encouraged by the firm to innovate. After
mergers and acquisitions, as the new corporate culture encourage employees to
innovate, it is not only helpful for Frestech to develop their innovation capability
but also helpful for employees to increase their working morale. From the result of
those questionnaires, it indicates that employees can mostly accept the new
corporate culture and the employees’ resistance is not remarkable in Frestech, so it
is good for the company to realize internal synergy.
4.4 Non-parametric Tests

Hypothesis: Employees’ attitudes for the new corporate culture do not relate to
employees’ position (Appendix VIII).
To analyze the relation between the variable of position and employees’ attitudes,
the frequencies and ratios is a measure that can be used. In addition, we also need to
investigate the significance of the supposition by using the Pearson’s Chi-square. If
we want to see whether there’s a relationship between two categorical variables, the
Pearson’s Chi-square test should be used (Bryman, 2008). The crosstabulation table
produced by SPSS contains a lot of cases that falls into each combination of
categories. In the software of SPSS, if the significance value, which is the p-value,
is less than 0.05, we will accept the hypothesis that those two variables are related.
In the result of Chi-Square tests, the significance value is 0.875, which is more than
0.05, so respondents’ answers about the question one do not relate to their positions.
Therefore, both employees and managers consider that there is a remarkable change
about the working environment of Xinfei. Moreover, comparing respondents’
answers about question two and their position, the significance value of Chi-Square
tests is 0.815, which is more than 0.05, so those two variables do not relate with
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each other. It means that both employees and managers support that the new
working environment is easily to adapt to. As the significance value of Chi-Square
tests for question three is 0.88, which is more than 0.05, so there is not a remarkable
relation between employees’ positions and their answers for question three. Both
lower or middle managers and employees agree consistently that employees are
working hard in the new working environment, so all of them can accept the new
corporate culture and employees’ resistance is controlled and reduced. For
Chi-Square tests of the question four, the significance value (0.786) is also more
than 0.05, so those variables have not a remarkable relation. Respondents agree that
company’s decisions can be sent quickly to employees, so the information transfer
between managers and employees free-flowing. In addition, this change provides
mangers and employees with an effective way to communicate with each other, so it
is helpful for the firm to realize internal synergy. On the one hand, based on the
result of Chi-Square tests about the question five and the position, they have not a
significant relation, so both managers and employees consider that employees can
implement managers’ decisions heartedly. On the other hand, as the result of
Chi-Square tests about the question six and the position indicates that they also have
not a significant relation, both managers and employees support that employees are
working in a friendly managerial environment. With the influence of coordination,
which is a part of new corporate culture, the managerial behavior is changing to a
more friendly style and it is accepted by employees. Clearly, it is an effective way to
reduce employees’ fear for the new managerial behavior and increase their internal
cohesion. For the relation between question seven and position, the result of
Chi-Square test shows that they have not a remarkable relation. The good
cooperation ability among different departments is also supported by both lower or
middle managers and employees. Therefore, after mergers and acquisitions, Xinfei
achieves both vertical cooperation and horizontal cooperation, so it is good for the
company to integrate internal resources. Based on the results of Chi-Square tests for
question eleven and position, the significance value is less than 0.05, so there is not
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relation between those two variables. Both managers and employees agree that the
company has a consistent value and employees can accept it. As the new corporate
value of Xinfei is accepted by employees and managers, the corporate culture
integration strategy is successful. Based on the results of Chi-Square test, there is
not a remarkable relation between respondents’ attitudes for question fourteen and
their positions. Both managers and employees hold a point that employees are
encouraged to innovate. As a part of the main value, Xinfei focuses on innovation
and share this value to employees to increase their innovation ability. All of results
indicate that the position do not relate to respondents’ answers. Both managers and
employees can mostly accept the new corporate culture including managerial
behavior, working environment and company’s rules. Therefore, employees’
feedbacks display that the new corporate culture has positive influence on
employees and the integration of corporate culture is success.
4.5 Documents Analysis

Analyzing the company’s annual report, the researcher will know strategies that
used by HLA to integrate corporate cultures. Based on the CEO’s statement (2006),
after mergers and acquisitions, Xinfei’s new corporate culture will be built mainly
by their old corporate culture. It means that the acculturation is triggered by the
mode of integration. In mergers and acquisitions, the characteristics of the acquired
and the acquiring companies determine which mode of acculturation will be used.
Integration is utilized when the acquired company wants to preserve their own
corporate culture and want to remain autonomous and independent (Nahavandi and
Malekzadeh, 1988). This mode will leads to structural assimilation of two cultures,
but little cultureal and behavioral assimilation (Appendix IX). There are two reasons
to influence on the acquiring company to select the integration mode. On the one
hand, as HLA and Xinfei belong to different industry, it is difficult for HLA to
understand all of industry dynamics, so changing the whole Xinfei’s corporate
culture is dangerous for the acquiring company. In addition, Xinfei is a famous
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company in China and its brand image is accepted by customers, so the acquiring
company needs not to change the whole corporate culture. On the other hand, in the
case of the acquirer, their development strategies and corporate culture will
determine the preferred mode of acculturation. If the acquirer’s value is
multicultural and the diversification strategy is its main development strategy, the
integration mode will be triggered (Berry, 1980). HLA is a company that uses the
method of M&A to achieve their diversification strategy, so the integration mode is
suitable for the firm to expand in Chinese market. After mergers and acquisitions,
Xinfei develops their main corporate value from only pay attention to products’
quality to honesty, responsibility, innovation, customer orientation and coordination.
It means that the products’ quality becomes a part of new corporate culture
belonging to “responsibility”. Moreover, development strategies that are made by
HLA for Xinfei also display this corporate culture. Based on the annual report of
HLA in 2005, the Xinfei companies received the Free Export Inspection License.
On the one hand, it will increase the reputation of the company. On the other hand,
it indicates that Xinfei, as a producer of household applications, manufactures high
quality products. As a company that has good reputation in China, using this
strategy is helpful for Xinfei to keep their brand image. However, after mergers and
acquisitions, HLA also brings some new concepts to Xinfei. Now, innovation is an
important part for Xinfei’s new corporate culture. The innovation ability includes
the company’s R&D (research and development) ability and the employees’
innovating ability. When the HLA acquired Xinfei, they also brought enough funds
and some talents to increase Xinfei’s R&D ability. Based on the CEO’s statement
(2006), the employees’ innovation ability must be trained by the company. In Xinfei,
some rewards are provided to encourage employees to innovate, so this new
corporate culture is acceptable for employees. Furthermore, after mergers and
acquisitions, the managerial behavior of Xinfei also has some changes. In their new
corporate culture, coordination is an important factor (Xinfei, 2012). As Xinfei is
acquired by a foreign company, the different managerial style should be integrated.
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In their new managerial concepts, the company pays attention to the teamwork, so
the cooperation between different departments and the cooperation between
mangers and employees will be focused. Based on the CEO’s statement in annual
report (2006), in order to easily corporate with employees, a friendly and
democratic managerial environment is built by Xinfei. As employees worried about
the new leadership team after mergers and acquisitions, the executive officers,
therefore, faced the job of creating leadership credibility to their employees, so a
friendly and democratic environment is necessary for managers to cooperate with
employees. Moreover, “we” and “they” are ethnocentric categories that lead to the
merger’s failure, so the friendly and democratic environment is also helpful to
reduce employees’ resistance and accept the new managerial culture. Employees
want to know about their organization’s long-term plans because strategic level
decisions affect the operational level (McEntire and Bentley, 1996). In the new
corporate culture of Xinfei, the company wants to share the business direction with
their employees, as HLA had assumed that strategic issues interest employees.
Xinfei discloses information about organizational plans through spokespersons,
meetings and the annual report. Based on the CEO’s statement in HLA’s annual
report of 2006, Xinfei will put in place new sales programs, cost saving measures
and improved research and development programs to develop new products to keep
the continued growth over the next few years. This is the reason that employees and
the company are working for a same goal to achieve the success of the company.
After mergers and acquisitions, in order to share the new corporate culture with
employees, Xinfei made their internal newspapers. The internal newspaper includes
their development perspectives, development strategies, important events, corporate
values and some achievements. Clearly, the internal newspaper is an effective
medium to share the company’s information with employees, although the
information is transferred unilaterally. Through this medium, employees can
understand the company more deeply than before. In conclusion, the company made
different strategies to integrate those two different corporate cultures and those
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strategies are helpful for the company to share its new value. From feedbacks of
employees, we can know that those strategies are effective to reduce the employees’
resistance and the most of employees can accept the new corporate culture, so the
integration of corporate cultures is success.
4.6 Suggestions to Solve the Problem of Culture Compatibility

Cultural Evaluation
For top management, when considering a merger or acquisition, it is the
responsibility to perform both a financial due diligence and a cultural due diligence
(Jaeger, 1983). Clearly, significant differences in companies’ values or management
styles will severely limit successful integration, so the first job for top management
is to evaluate the cultures of the two companies. For example, differences of two
companies’ development strategies and vision should be evaluated. The acquiring
company should know that how will they integrate the strategy and vision of the
two companies. In addition, the new company’s structure including reporting levels,
policies and procedures should be considered by top management. To successfully
merge firms’ cultures, top management must understand the significant difference of
each company’s culture, such as type of management decision making methods and
reporting methods, so that the company can make a plan to merge the two cultures
into an integrated new culture. Before the acquisition, HLA was a shareholder of
Xinfei, so they had opportunities to understand the company’s development
strategies and corporate perspectives. After the acquisition, the top management
used the integration mode to merge those two corporate cultures. They retained
Xinfei’s main corporate values and add some new values such as customer
orientation and coordination. For their development strategies, as HLA know that
Xinfei has abilities to compete with their competitors in oversea markets, the top
management makes the plan to enter the oversea market to expand their market
share. Therefore, if the top management wants to integrate two corporate cultures
successfully, they should evaluate those two corporate cultures firstly.
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Understanding the Role of Culture

Based on Bijlsma-Frankema’s point (2001), the corporate culture evolves from the
founders’ and top-level managers’ beliefs and vision. The establishment of these
values and beliefs are critical for the success of the company. Through there beliefs
and values, employees can see the company’s purpose. As employees are committed
to the company’s belief and value system, they will develop a resistance to changing
the culture. When a merger or acquisition takes place, the belief and value structures
established by the old companies will be in danger. Then, employees will be swept
into a chaotic situation, as they do not know whether the new company will change
the beliefs and values or not. Moreover, the merging of different cultures also
creates uncertainty, as the company uses organizational culture as a power to
stimulate employees. Therefore, one big reason that leads to the failure of mergers
and acquisitions is that the top management does not know the role of culture. The
top management needs to be responsible for auditing the role of the acquired
company. To audit the role of corporate cultures, methods including personal
visiting, employee interviews and employee surveys can be used. Furthermore,
information from the company’s mission statements, annual reports and other
internal or external materials are also important to understand the role of corporate
culture. Before the acquisition, as the company focused on employees’ welfare, this
corporate culture is an important factor to encourage their employees to work. After
the acquisitions, based on the new corporate value, the top management not only
increased the employees’ welfare but also paid attention to the improving of
employees’ skills, so this new culture will stimulate employees to work for the new
company.
Building Effective Communication Channel

To merge cultures, top management must develop and effectively present the
merged company’s future vision. The new vision of the company is the framework
that shows employees changes and remains after mergers and acquisitions. However,
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how to communicate with employees and share the vision to them is one of
important aspect for mergers and acquisitions that most likely to be forgotten.
Lubatkin (2001) stated that communication likes the adhesive that connects the
whole merging process together, so implementing the company’s strategies depends
on successful communication with employees and managers. There is no doubt that
the successful communication is a critical factor in a successful merger. For
example, an effective communication is important for reducing employee resistance
and gaining employee acceptance. Therefore, in order to achieve the success of a
merger or acquisition, the company should ensure that the information is sent to
their employees in a clear and precise manner. To communicate with employees
effectively, top management must focus on four different variables that are audience,
the timing of the information, the medium used to transfer the information and the
content of the message (Figure 2). For their audience, managers need to customize
the information so that employees can receive it easily. For instance, information
should be adapted to the needs of both external users, such as stockholders and
customers, and internal users including managers and non-management employees.
In addition, top management should present information in a timely manner so that
users can acquire information accurate and timely. Then, a proper medium should be
selected by top management to present messages. Methods that can be used to share
information include group meetings, phone conversations, E-mails, annual reports
and newspapers. An effective online method is that the company establishes an
intranet website for employees to present information. For the company of Xinfei,
they established their internal newspapers to present their development strategies,
development perspectives, new corporate values and important events. For the
content of messages, employees focus on the information about changes of newly
formed company, so top management needs to address those critical areas. For
example, the new company’s commitment to their employees should be presented.
Moreover, questions such as “how will this company change effect employees” also
should be stated.
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Figure 2 Four Variables in Communication
The timing
Audience
of the
information
Communication
The content of
The medium
the message
Managing the Transition Process

After mergers and acquisitions, top-level managers need to develop a strategic plan
to manage the transition process. The transition process is crucial to control the
value of a merger, so the acquired company must pay attention to it (Faulkner,
Teerikangas and Joseph, 2012). Firstly, a senior manager should be selected to be
the transition leader. The responsibility of the transition leader is to ensure the
successful transition of the integrating process, so the transition leader needs to
identify potential problems including personal and political problems in the
transition process. In addition, the transition team including employees of both
acquiring and acquired companies must be created. The transition team will help
employees to interact and become familiar with each other. In order to secure the
benefit of the company’s different functional areas and specify the impact of
transition on different functional areas, those functional areas should be represented
on the transition team. When HLA acquired Xinfei, top managers were very aware
of the impact of integrating cultures, so they created a transition team to manage the
transition process. As the team included employees from those two companies, their
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decisions would secure both of the merging companies’ benefits. In the annual
report of 2006, the CEO of HLA stated that the transition team spent time assessing
the implications of the integration for everyone concerned to keep the success of the
merger. For the transition team, the first thing is to reduce the level of employees’
uncertainty. After mergers and acquisitions, the thought that leaves the company
will be emerged among employees, as they do not know the new corporate culture
will match their beliefs or not. Therefore, a critical role of the transition team is to
retain the key employees. In order to retain key employees effectively, the top
management should identify key employees firstly. Then, financial and nonfinancial
incentives should be made and implemented to retain the key employees.
Throughout the transition process, those potential culture issues or problems also
must be considered by the transition leader.
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CHAPTER 5: CONCLUSION
5.1 Limitations and Future Research

For this research, there are two limitations in the paper. Firstly, only forty-three
completed questionnaires are gathered by the researcher, so the sample might be not
enough to stand for all of employees. Indeed, it is possible that some employees
hold another point that is not involving in those collected questionnaires for the new
corporate culture, so it will lead to the deviation of the result. Secondly, although the
researcher analyzed the company’s materials, such as their annual report,
information in their homepage and other internal materials, other important
materials including the record of top management meetings are also necessary for
analyzing strategies that used to integrate their corporate cultures. If the researcher
can get more internal materials and analyze those materials, the integration process
will be understood more deep and this paper will be more convictive. Therefore,
those two factors are limitations of this paper.
For the future research, with the methodological and theoretical developments,
some new interesting researches and practical issues will be analyzed. In the future
research, other organizational elements and systems, such as structure and control
systems, will be researched. For instance, how the company’s structure influences
the integration of corporate cultures can be analyzed. In addition, the impact of
corporate culture change on their financial performance is also interesting. Clearly,
explaining the above issues and their determinant factors may help to plan and
manage the acculturation process in mergers and acquisitions.
5.2 Conclusion of This Paper

In recent years, mergers and acquisitions have become a popular strategy for
companies to achieve corporate diversity and growth. However, in order to keep the
success of a merger or acquisition, the corporate culture integration also must be
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focused by the acquired company, so this paper wants to research the influence of
new corporate culture on employees and strategies that can be used by acquired
company to integrate corporate cultures. This article examined post-acquisition
success from an organizational culture perspective. After analyzing the case of
Xinfei, which is acquired by Hong Leong Asia (HLA), the HLA’s strategies that are
used to merge the corporate culture of Xinfei are understood. In addition,
employees’ attitudes about the new corporate culture are collected and analyzed to
evaluate the effect of those strategies. Based on previous analysis, HLA, which is
the acquired company, used the mode of “integration” to merge those two corporate
cultures. It means that the main value of Xinfei is also retained and some new
values are added into their corporate culture. Moreover, after mergers and
acquisitions, Xinfei built their internal newspaper to present their new corporate
culture, development perspectives and development strategies. In order to analyze
employees’ attitudes for changes of the company, a questionnaire is made by the
researcher to collect employees’ feedback. In the questionnaire, changes about
working environment, managerial behaviors and policies are asked. Through
analyzing those questionnaires, employees’ attitudes about the new corporate
culture are understood. Most of employees accept the new corporate culture
including the new working environment, new managerial behaviors and policies, so
strategies that used by HLA is effective to integrate those two corporate culture.
Based on strategies of HLA, some suggestions are provided by the researcher to
solve the problem of culture compatibility. To deal with the problem of culture
compatibility, the core is to understand differences between those two corporate
cultures and find a suitable mode to merge them, because using an adaptive mode
will reduce employees’ resistance and increase their internal synergy.
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CHAPTER 7: APPENDICES
Appendix I The Reliability of Questionnaires
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Appendix II Frequency Distributions for Question One and

Two
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Appendix III Frequency Distribution for Question Three
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Appendix IV Frequency Distributions for Question Four

and Five
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Appendix V Frequency Distribution of Question Six
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Appendix VI Frequency Distribution Table of Question

Eight
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Appendix VII Frequency Distribution Tables for Different

Questions
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Appendix VIII Crosstabulation Tables for Different

Questions
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Appendix IX Acquired firm’s modes of acculturation
Source: Acculturation in Mergers and Acquisitions
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The Influence of Corporate Culture Integration On Mergers and Acquisitions: An Exploratory Study

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The Influence of Corporate Culture Integration on Mergers

and Acquisitions: An Exploratory Study

Student Exam Number:

Supervisor: Ian Money

18th September 2012

MSc in International Business and Strategic Management

The York Management School

Exam Number: Y7556709 1 18/09/12

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Firstly, I need to thank York Management School for supplying an opportunity to do

Then, I would like to sincerely thank my supervisor, Ian Money. He is a patient

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Mergers and Acquisitions (M&A) have become an increasingly broad-based

1.1 Statement of the Problem

1.2 Structure of the paper

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CHAPTER 2: LITERATURE REVIEW

Mergers and Acquisitions (M&A) is a popular strategy that used by some

2.1 Mergers and Acquisitions Overview

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and organizational behavior.

Potential merger or acquisition partners are typically identified pursuant to some

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impede the implementation of integration process in mergers and acquisitions

Based on Cartwright and Cooper’s (1993) opinion, the successful pre-merger

Not only researchers are interested in organizational culture influence on M&As,

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2.2 Corporate Culture Overview

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Corporate culture has been used as an independent variable to explain differences in

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their effects on organizations is highly problematic, a large number of research

At the beginning, cultures are an integral part of an organization. Some researchers

In 1990s, increasing number of researchers has found that management of the

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2.3 Conclusion of Literature Review

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3.1 Introduction of Methodology

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employees and female employees are selected to complete the questionnaire.

3.2 Research Questions and Objectives

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of acculturation, such as integration, assimilation and separation, and measures to

3.3 Research Strategy and Design

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3.4 Methodologies and Methods

3.4.2 Data Collection Methods

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“new” corporate culture, so the self-completion questionnaire is appropriate for the

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3.4.3 Data Analysis methods

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Qualitative Data Analysis

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3.5 Reliability and Validity

3.6 Ethical Issue

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questions about participants’ privacy. Deception occurs when researchers represent