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A merger is defined as an amalgamation of two or more firms into one company. Daimler-Benz and Chrysler Corporation decided to merge in order to share the ambitious objective of being the leader of the international’s car industry and they aimed to attain this objective by combining their dissimilar expertise, work processes and organizational cultures in order to use the shared channels of distribution, technologies and information (Hollmann, Carpes and Beuron, 2010). Therefore, this study will assess the role of culture in the merger between the two firms. The objective is to evaluate the reason why the merger came to be termed as the “clash of culture” as well as what fundamental reasons can be examined for issues that took place after the merger. In addition, the study will attempt to show whether the merger was a “merger of equals” and the reason why it failed in spite of the promising progress. Therefore, this study is based on the case study as well as the secondary literature on mergers and acquisitions.

Research Design and Approach

The central objective of this research study is to identify the role of culture on mergers of the Daimler-Benz and Chrysler Corporation. The study will primarily analyze the merger between the two firms as such the paper will use a descriptive design in studying the case study. This research study will generate qualitative data, since the sources of data collected will primarily be from secondary sources like articles, journals and magazines, as well from internet sources. Accordingly, the data analysis for this research study will be qualitative. The data will first be coded and then analyzed using descriptive statistics techniques. Once the data has been organized and analyzed, it would now be easy to identify the relationship between the variables and therefore form the basis for consequent discussion.

Overview and Background of the Merger

Daimler-Benz, a manufacturer of cars in Germany was established in 1926. Daimler-Benz was a well-established firm in the European region from the beginning. Daimler-Benz is a name that represents precision as well as German products that have a superior quality. The manufactured cars represented luxury cars in this sector. In spite of its progress in Europe and Germany, the firm never achieved being on top in the U.S. market, as before the merger, the market share of the company in the U.S. market was below 1%. The company worked hard to produce high quality products, but did not gain a competitive advantage in the U.S. market (Hollmann, Carpes and Beuron, 2010).

On the other hand, Chrysler Corporation also was a deep-rooted and tightly positioned firm in U.S. market. Chrysler was successful in manufacturing car models, which reacted to the demand in the American Market for pioneering and adventurousness. Chrysler Corporation an automotive producer was most profitable in mid-1990s internationally. This was as a result of maintained a record of van, light truck, and huge sedan sales, thus revenues were high at all time. Chrysler took a risk in manufacturing vehicles that attracted valiant, as well as ground-breaking American spirit at the time when imports controlled the market that is the Dodge Ram, LH Sedan Series and Jeep Grand Cherokee. In 1997, the Chrysler market share in the U.S. increased to 23% and as market share and income increased, the production cost decreased to 2.8% of the income when compared with 8% and 6% at General Motors and Ford respectively. The company’s team of integrated design and the non-rivalry relationships with the suppliers maintained the costs low, whilst its department of marketing scored progress after measuring consumer tastes. Chrysler had recovered four times from the verge of bankruptcy ever since the World War II, and with its boom-bust income flow pattern, made it to recover its reputation. With $7,500 million in cash and a complete range of the best-selling products, Chrysler at last seemed prepared in the year 1997 to endure the unstable business cycle of the American automotive industry with no bailouts from the government of cutbacks from the large-scale R&D. But the company’s was noticed and a shareholder holding 13% threatened to start a takeover saying that the cash hoarding done by the managers was his reasons.

At that moment, Daimler-Benz faced similar challenges like Chrysler on the global market for the passenger’s cars. However, the firms had to control the imposed challenges as a result of overcapacities, thus increasing environmental consciousness and strengthened clients’ position. Besides overcoming many challenges, Daimler-Benz planned to gain a huge market share in the U.S. market. Therefore, from Daimler-Benz perspective, the joining of forces with Chrysler appeared to be promising as well as it hoped to gain an important competitive advantage. Chrysler was thus regarded as the perfect match for the deal. The annual income, high efficiency, low production costs and well-built network of distribution in the U.S. turned Chrysler extremely attractive target.

As a result of development in this industry, the two firms started negotiations in 1998 over a probable merger. In this year, Chrysler announced that it would join forces with Daimler-Benz. As a result of a $37,000 million stock-swap deal, it became the largest merger in the Trans-Atlantic, thus Chrysler had to look for another company to merge with. The CEO of Daimler-Benz hailed the merger as “merger of equals or merger of growth.” The new corporation, with a total of 442,000 employees as well as approximately $100,000 million of market capitalization, and from the synergy, the company would benefit from purchasing, product design, retail sales, research and development and distribution. Three years after the merger, the market capitalization was at $44,000 million, equal to the Daimler-Benz’s value prior to the merger.

The merger of the two firms was considered as the “merger of equals.” because the two firms did not want to takeover each other. Rather, they wanted to utilize the two firms’ strengths to be strong. Following the successful early merging of firms, the progressive post-merger-integration was guaranteed, so as to make sure the long-range merger success. During post-merger-integration progression, it was critical to connect the two firms with completely varying company cultures inherent in the firms.

Literature Review

Culture is the pattern of rules, norms, attitude and values that persuade person and group behavior in the organization. Therefore, culture is not an independent variable in an organization equation rather it exists or has to exist to maintain the company strategy (Gitelson, Bing and Laroche, 2001).

The Path to Mergers and Acquisitions Success

Mergers and acquisitions (M & A) is possible, nevertheless, being friction of the seventeen percent that succeeds rather than the eighty three percent that doesn’t make it needs more insight.  M & A success is based on stepping up, focusing and making a crucial mass for operational change. These represent the crucial and susceptible part of mergers and acquisitions and the complexity of this process is compounded by the diversity in both organizations cultures. Therefore, organizations engaged in mergers and acquisitions require considering these differences in the right way for it to succeed (Kuhlmann and Dowling, 2005).

Preoccupation

People in Canada are preoccupied with how the organization can be affected by working together. In turn, it transform into individuals searching for a job in various organizations. Frequently, a company in the middle of evolution loses a potion of its capacity, thus reinforcing the antagonism in the market. In nations where individuals are established mainly in groups, they tend to search for support in these groups. Individuals in France as well as Italy are mainly trapped in the middle of M & A frequently turns to amalgamations. However, the amalgamations cannot offer an answer because these people have not been included in the negotiation procedure and they may strike. The invasive loss of the output of those opting to stay is less noticeable. Researches show that line employees and all management levels loses no less than fifteen percent of personal efficiency as an outcome of propaganda and chitchats along with anxiety. Groups also point out that teams have a tendency of failure and turn out to be not efficient all through M & A process (Cartwright and Cooper, 1992).

The strategy: Acceleration – integration process should be speeded in order to decrease the anxiety and uncertainty. Delayed decisions making to relieve the pain merely expand and maintain the pain as well as put off the organization, the people and groups from carrying on with their work and lives. Globally, M &A, it make sure that both person as well as collective apprehensions are attended (Bijilsma-Frankema, 2002).

List-Making

Notwithstanding overwhelmed uncertainty and increased fears of anxiety that will occur. Creating an inclusive list is very logical reaction to one’s world if scared out of your wits and it also fills the gap together with anxieties suppression and seem sensible except for the economic drivers and the bottom line that are the foundation of mergers and acquisitions. Once the mergers and acquisitions are publicized, and the preliminary calls to take action are proclaimed, departmental and personal are required to compel the distribution of resources. Swiftly, as days go by, there exist a broadening cut-off between the market-based and fiscal objectives of the M &A and the actual-time distribution of exertion.

The strategy: Concentration- In the first ninety days, the focal point and make everyone in the organization concentrate on twenty percent of the objectives that return eighty percent of the economic worth.

Organizational Propagation

The United States Organizations have several committees, task forces and incorporation teams that are made to organize the list and come out with a new one. The Team of Transition and the Integration Structures created to be comprehensive and represent a symbol of a new partnership that will weigh totally on firm, aiming to watch its clientele together with the market. Extra exertion can be put in place on temporary regulations in order to obtain the goals of the organizations. For global mergers and acquisitions, this subject is compounded due to the organization change across different nations.  For instance, states with sense of chain of command are stronger than others, change comes due to the workforce from all departments expect new guidelines from the management. This might put to a stop cross-cultural mergers and acquisitions, because top managers expect inputs from the teams as well as committee, while other stakeholders anticipate guidelines from their management (Buono and Bowditch, 1989).

Uneven and Improper Communication

Panic and decline of answers hinders the management team from giving information that is needed by the clientele, employees and also shareholders for redirecting their actions to addition of value to the deal. In various international M & A, the two firm’s languages are not similar; therefore, communication can fail even in a situation when the workforces of the overseas M & A target countries with a similar language. For example, in a situation of Norwegian-American, which is a joint venture, the Norwegians focus more on the relationship-oriented, whereas American focus the concentrated task, the parties didn't sail in the same boat due to this difference.  The Norwegians protested that it had not developed enough confidence to bargain the concluding particulars and required extra time, but the Americans responded by saying that they were not able to squander precious time on additional meetings, as well as that the issue should be resolved by the team from the legal department. Pressure reduced after the teams comprehended that their objectives were similar, but their means of accomplishing them were somewhat diverse and the arrangement was in the end struck.

The strategy is to accelerate, concentrate and adapt, habitually communication that contains little information such as emails, short meeting and print.  When comes to the stressing period, survival noise as well as ambiguity affect the information and therefore, it is necessary to keep vital information between the receiver and sender. A current PriceWaterHouseCooper survey of one hundred and twenty four mergers shows that those companies that implemented effectual communications strategies indicated better outcomes in clientele focus, workforce commitment and output than those companies with strategy of delaying communication. In a global situation, communication recurrently necessitates translations with adaption. Undeniably, the best way to come up with a presentation and to have a wide coverage of audience differs from one state to the other.

Triangulation

Exclusive of a straight understanding of authority and where they blend in, workforce and executives are trapped in objectives conflict as well as in old constancy. This type of personal and organizational struggle robs the newly established firm energy, thus it end up affecting the final product. The acceptance of “vague” short-term organizational charts as well as the process for decision making which rely on the states engaged in the M & A. In hierarchical states, for instance, Philippines both the command chain and organizational chart require to be straight clear when compared to Canada. A Filipino worker under more than one manager like in the matrix firm will probably be rapidly overwhelmed. The situations interpreted as having two full sets of anticipations as well as perform more than one separate job, and for a Filipino requesting executives to talk about their inconsistent matters would be perceived as noncompliance. The strategy here is to give attention to and adapt, that is focus on the substance instead of the form as well as concentrate on assisting individuals adapt. The management necessitates providing information needed by individuals for them to be conformable with the firm, but this information relies on an individual’s cultural backdrop.

Guiding Light

During active supervision and leadership is mainly called for pressure as well as uncertainties linked with the M & A, it causes a deepest attentiveness and a drawback to secure and superior ground. The main function of the leader is to communicate a vision as well as inspire other to comply with the vision.  Declaring a vision together with processing laminated cards, nevertheless, does not make the vision for a new company. The understandable of the new vision take into account the crucial success aspects together with economic drivers responsible for bringing the firms together. Global M & A requirement for control remains, but the leadership environment changes. Therefore, being an excellent leader requires various skills and capabilities in various countries. For instance, charisma plus the image of the person are significant attributes of leaderships in the United States compared with Canada (Sally 2007).

The strategy: Adapt, merely a new way of life can make the situation for exact adjustment to occur and embrace. Altering culture means altering behaviors and the fastest ways to effect alteration as well as making the new organization is to position in all key locations those people who truly represent the changed culture as well as those who are able to direct effectively individuals the two-sided organizations cultural divide. (Child, Faulkner and Pitkethly, 2001).

Explanation for the Failure of Mergers and Acquisitions

The achievement of M & A is directly proportional to the attitude and superiority of planning engage. Daimler-Benz and Chrysler frequently spend inadequate time to analyze and anticipate recent and the future market trends as well as integration issues. In addition, they allocate inadequate resources to find out strategic objectives, a lot of transactions still fail or experience significant setback as an outcome of inadequate assiduousness carried out on the target goal (Oon, 1998).

Nevertheless, research demonstrates that the chance for mergers fail is at peak during the integrated process (Simpson, 2000). Integration process between Daimler-Benz and Chrysler fails because of inappropriate management and strategy, delays in communiqué, culture dissimilarities and short of clear vision. Mergers and acquisitions have an extensive history since 1990s (Gaughan, 1999). However, the saliency of Mergers and Acquisitions have increased significantly during the past decades, as many United States Organizations have adopted mergers and acquisitions as a universal corporate strategy to develop their organizational abilities, plus to take healthier competitive market positions (Buono and Bowditch, 1989).

This spread persisted during the 1990s and beyond adding to a sum of 7,809 Mergers and Acquisitions transactions with a total value of $1.19 trillion in the U.S. in the year 1998 alone (Guaghan, 1999).  Therefore, the question mainly asked concerning M & A is why such a big percentage of these transactions be unsuccessful to achieve expectations, estimates ranging from sixty percent to 1/3 (Gulky, 1991). Many of the researchers who searched the literature for systemic and clear answer to this question, but didn’t get the right answer, nevertheless some progress has been made to discover the appropriate answer. Previous research on mergers and acquisitions has concentrated on either the effects of different financial crisis, for example, the form of transactions and the recital implications of diverse strategic issues in a particular stage of relatedness. For instance, a general but also inconclusive claim is that connected mergers and acquisitions demonstrate higher performance as compared to unconnected Mergers and Acquisitions by offering better synergy because of economies of scale and scope (Datta, 1991).

A close appraisal of these issues might have resulted into learning progression focused at effectively management; such undertaking therefore in this the researcher will contend that by studying the concept of mergers and acquisitions using different perceptions.  The culture ambiguity structure assists organizations to be aware of the complexity of these phenomenons in a healthier way and perhaps, it can prevent some unwanted outcomes. Communication is mainly highlighted as a helpful device to negotiate meaning out of mergers and acquisitions ambiguities. In the last 20 years, management of the human factor in M & A has been identified as a significant source of success by expanding number of researchers (Limaye, 1991).

Conclusion

It is evident that culture plays a big role in the merger of firms. Daimler-Benz and Chrysler decided to merge in order to benefit from organizational cultures, but this deal was unsuccessful. Both firms were aiming to exploit the shared channels of distribution, information and technology in order to conquer the international car industry. Culture can either create big obstacles in attaining the objectives goals, or it can be a foundation of value learning and creation. In addition, culture differences have a great impact on the socio-culture integration, shareholder value and synergy realization in distinct ways (Hogan and Overmyer-Day, 1994).

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