Edit this essay
only $12.90/page

Report on Mix Culture Essay Sample

Report on Mix Culture Pages
Pages: Word count: Rewriting Possibility: % ()

Introduction

Companies are growing globally and making an investment in countries or areas of an economy to strengthen their companies in Global Market but it is an important decision for the Company to decide the best mode for entry in the Foreign Market. This report is based on the issues that a company should take care before making a selection in the Foreign Market. A Company should get the pre merger Due Diligence before making a move in Foreign Market to analyze the factors that plays a vital role for the potential market selection.

The main objective of the report is to analyze the risks involved in making a cross-cultural merger and the kind of difficulties which have led to failure of some cross-cultural mergers. The report also deals with the methods through which a cross-cultural merger can achieve the motive for which it was eventually formed and to make a cross-cultural merger a success.

The report concentrates on the concept that if a proper education and training is being given to the Companies pre and post merger it will help the companies to understand the behavioural and process of the counterparts. As the cross cultural merger is eventually a beneficial transaction for the companies as it helps in reducing the risks involved in the projects for the company.

The definition of merger in general and finance can be stated as follows:

General,

“Merger is absorption of one or more companies by a single existing company”

Finance,

“Merger is an act or process of purchasing equity shares (ownership shares) of one or more companies by a single existing company”[1]

Therefore, Merger can be defined as that when two or more companies decide to come together to carry on the respective ventures with a common interest and benefit with an intention to grow in the respective location or market.

An Organizational Change is an attempt to achieve an ideal state through a continuous process of execution, evaluation, goal-setting and restructuring.[2] It is an important process for the growth of the company to evaluate the standing of the company in an International Market by restructuring the programs and setting up a short term and long term goals.[3]

A failure of an Organizational Change is based on various issues and generally the Companies are overlooking the factors involved like Pre Merger Due Diligence, Pre-Merger Cultural Due Diligence, Post merger training programs, making a vision of change, communicating the vision of change to the employees, setting up short term goals based on the change, building the change and Setting up a Long term goals based on Change. If after an Organizational Change the Companies are able to develop the trust and understanding in and among the employees.[4] The Companies will be able to achieve the motive of entering into a cross-cultural merger and to make Companies a great success.

Cultural theory a main reason for failure of Daimler-Chrysler Merger

It is absolutely correct that Mergers and Acquisitions take place to realise the synergies between two or more companies involved but in case of ‘Daimler-Chrysler’ a mismatch in cultures was the one of the main reasons for the failure to realise the synergies that were expected from it. As in the aforementioned merger, both the companies belonged to different cultures, as the Daimler belonged to Germany which is the Eastern Culture and Chrysler belonged to the Western Culture.

Daimler-Benz was the largest industrial group in Germany $68.9 billion revenues in 1997 has evolved itself as an innovator in automobile sector with a high quality engineering and heritage building for manufacturing the luxury cars and the cultural behaviour of the Daimler was Conventional, Customary, Polished and Authoritative. Whereas, Chrysler, was having a culture of Casual, Easygoing, Elastic, Bravado in the other hand, and has evolved itself as new design’s trendsetter with its organizational flexibility and sense of market opportunities. Chrysler with its unconventional methods has been able to challenge the established players of automotive industry like Ford and General Motors.[5]

In Daimler decisions making often use to take a long time because of its branch and authoritative like working. Everyone was having responsibilities of their own and the same were strictly separated. It was a normal routine to work on weekends and late hours.

Chrysler was unconventional and executives were not having any status symbols. Even lower level use to take own decisions and it was not necessary for them to take approval from executive’s. Chrysler was having a strict management for cost. Executives use to work on a deadline which was opposite to Daimler executives working for late hours.

Daimler and Chrysler both were strong players in their category of market and yet failed to overlook their differences and make it is as a strength for having a working culture which was blessed with both the sides of culture and to complement each other so that both the companies could have created a company that had the potential to make a mark and compete for a major market share.[6]

As pre merger SWAT analysis of both the companies had been done and companies were educated about the cultures of each other than they would have been aware of the fact that both are contrast to each other in cultural behaviour and if proper scrutiny is done the odds and even of both the companies could have been matched . That’s why Daimler-Chrysler merger failed to realise the synergies that were expected from it.[7]

Issues to be dealt with to make cross culture merger a success

In order to grow and maintain their competitive advantage the companies search out new markets. As over the last 20 years globalisation and cross- border mergers are normal manner of business operations for the companies to grow in the upcoming market but the past records of the cross-border mergers points to the failure rates of 70%.

The most challenging areas in cross border merger for the majority of executives and senior personnel in companies are culture and communication. Many a cross cultural mergers have been failed because the difference in culture were not properly taken care by the companies either “Pre-Merger” or “Post-Merger”.[8] The Companies have somehow failed to analyze the fact that the companies strength and weakness are directly related to their employees and if post merger they are not able to understand and communicate among each other, employees will not be able to give the desired results. The Employees should be educated and trained to understand the fact that the employees of both the companies are now the employees of one single company and they should not divide the company in different sectors based on the pre merger companies. Employees should complement the Strength and weakness of each other as in most of the case studies it was found that the cross cultural merger companies were having contrast cultures and the same could have been used in a very effective manner as in contrast culture the weakness of one company is the strength of another. So if it is properly managed the company can make a remarkable score in the market.

The culture can be further categorised in two different forms (1) National (2) Working. As in cross-cultural mergers a specific attention, education and training of both the companies is required to analyze and understand the rituals and rites of each other. The Companies are required to do an extensive work on pre merger due diligence as the cross cultural mergers can be of a great advantage if the companies are able to understand and communicate among each other.

The difference in national cultures increases risks and opportunities from within and outside the company and a pre-merger due diligence should consider an assessment of these cultural opportunities and risks.[9] The companies should educate the employees about the behaviour, processes, structures, reward scheme and practices can eventually lead to the loss of key talent due to frustration and employee disengagement. In order to get the desired results from a cross cultural mergers companies should adopt the “Mix Culture”.

Mix Culture shall be a fusion of both the culture that covers the cultural diversity as a creative and productive source as complementing the positives of both the companies and doing things in a new and positive manner and can evolve a mix culture that can be shared by all employees and shareholders can also appreciate the same. Employees should be properly educated and trained for the language, cultural values, attitudes and behaviours of the employees to make it a success.

It is primary responsibility of the companies entering into cross-cultural merger for creating positive outcomes for the new company to understand often hidden values and to reconcile national and working cultural differences. If the companies failed to reconcile the cultural differences it will increases the likelihood of failure.

It is required for making a cross cultural merger a success that a training and education at all steps are required from pre merger to post merger as under:

1. Pre-Merger Cultural Due Diligence

2. Post Merger Training

3. Making a Vision for change

4. Communicating the vision of change to the employees

5. Setting up of Short term goals based on Change

6. Build on the Change

7. Setting up a Long term goals based on Change

Recommendation

An essential aspect for restructuring and integration is a well laid out plan. The integration plan should contain the following:

• To conduct proper due diligence before the merger takes place.

• Planning for cultural integration right from the due-diligence phase:

▪ Considerable care should be taken that during the due diligence phase only the planning of the merging of the two cultures shall be done rather than planning it after the merger.

• To appoint an integration manager: It is the sole responsibility of the integration manager for the integration of the two companies. The responsibility for the creation and delivery of an integration plan lies on the integration manager. All the reporting shall be made to the integration manager by the acquired company and it can also ask all kind of questions regarding the new culture which could help them to adopt it easily.

• The restructuring should be done as fast as possible and the employees shall be laid off with all due respect and dignity.

• Arrange people from two organizations to mitigate the problems and hold them responsible for results: The responsibility to mitigate business problems should be handed over to Small teams containing members from both the organizations and they shall be given the targets to achieve it and produce the best end results.

Renault’s choose a joint venture entry mode over Green Field to enter the Indian Market

The factors that Influenced Renault’s Decisions to choose a joint venture entry mode as opposed to Green Field entry mode to enter the Indian market as under:

In Joint Venture Renault had access to the local knowledge of Nissan as Nissan was incorporated in India since 2005 and a Joint Venture and incorporation took place in the year 2007. The Companies together are named as Renault Nissan Automotive Indian Pvt. Ltd[10].As Nissan had access to the local knowledge of the Indian Market which has helped the Renault in decision making for the launch of the Product in the various territories in India for the growth of the Companies and to make a Joint Venture a Success.[11]Whereas in Green Field entry mode Renault would not have an access to the local knowledge of the Indian Market which could have led to the Slower Startup for the Renault in Indian Market.[12]

Nissan was operative in Indian Market since 2005 and was aware of the cost involved in the project. Therefore the concern of overpayment was not a bothering for Renault and a proper cost management was one of the biggest advantages in choosing a joint venture over the Green Field. Whereas, in the Green Field entry mode Renault would not had knowledge of Indian Management as it was a foreign territory.[13]

In Joint Venture both the companies can have performance incentive as the companies can achieve their short term goal and long term goal by communicating the vision of change to their employees. As one of the main reason for entering into a foreign market is the growth of company. So, it is important to access that joint venture eventually helps the companies to lower the risks involved in comparison to the Green Field Entry mode.[14]

In Joint Venture Renault has significant complete control over operations and it is very helpful when a proper education and training is given to the companies. [15]

India automotive market is growing globally and is recognised as one of the largest in Asia. As per the recent studies Indian Market will grow even more in the upcoming years and the Indian Automotive Industry is located in 3 clusters. Out of the which the southern cluster is holding the largest revenue share in Indian Automotive Industry by 35% as various automotive industries has also lined up their manufacturing units in Chennai by the year 2014 and the list of the companies are Renault, Nissan, BMW, Ford, Hyundai, Mitsubishi, Daimler, Hindustan Motors.[16] As Renault was well aware of the fact that if the company opts for the Green Field entry mode to enter the Indian Market it will have to cross the major barriers of Indian Automotive Sector which are limited accessibility to new technology, cost of developing high production , increasing competition and tax.[17]

In a competitive market for the Automobiles like India to achieve success it is necessary to improve the labour flexibility, capital efficiency and productivity.

Advantages and Disadvantages of Renault using Joint Venture and a theory on Renault as a good corporate citizen

The main disadvantages for Renault of using a Joint Venture mode Compared to a Green Field Entry mode are mentioned as under:

1. Proprietary Knowledge Loss

The Renault by way of joint venture will face a potential loss of proprietary knowledge as in certain cases companies do tend to keep it as a secret and within itself. As a joint venture company has to share the proprietary knowledge with the counterpart of the Joint Venture which may tend to cause loss to the Company in future if the both the companies decide to demerge the Companies.

2. Conflict

As the Renault and Nissan are from different cultures and a conflict may arise due to differences in culture. The Renault and Nissan should educate the employees about the behaviour, processes, structures, reward scheme and practices can eventually lead to the loss of key talent due to frustration and employee disengagement. In order to avoid conflict between companies’ aforementioned parameters should be take care by the Companies.

3. Performance Incentive

As a result of Joint Venture Renault will not able to have full performance incentive which would not have been the case if Renault would have opted for the Green Field entry mode.

4. Control over Company

In Joint Venture the Renault will be not be having a full control over the company and will be only having a significant control over the company. Whereas in the Green Field entry mode Renault would have been in complete control over the company and a decision making is much faster.

Advantages

1. Local Knowledge

Renault was benefited in a joint venture with Nissan as it was having a better local knowledge and the proper market analysis was done by the Nissan. As Nissan was already operative in Indian Market and was in a better position to understand the Indian Automobile Industry, this has really helped Renault to make a proper analysis of the Market and to streamline its products launch in India to make it a major success.

2. Reduction of Overpayment

Due to the Joint Venture an overpayment was not a matter of concern for the Renault as the Nissan was an established player in the Indian Automotive Industry and it could have been taken care by Nissan.

3. Performance Incentive

In Joint Venture both the parties’ share the performance incentive and it helps to the companies as it is reduces the conflicts amongst the employees of the company.

4. Control

In Joint Venture it was an advantageous for Renault to make a control as Renault supports in engineering of vehicle, styling as well as development of information systems and special project support.

In order to prove Renault as a good corporate citizen and also to reduce its political risk it has to analyze and make risk mitigation strategies for building a confidence in the nation that Renault will be contributing to the Country’s culture and economy with a worthy projects.

Renault will also have to make a diversity programs for the women business owners and minority with equal opportunities, foster economic development and create jobs. By introducing such programs the benefits for the Renault will be increase in market share, improved external relationships and good corporate citizenship.

Recommendation and action plan

To reduce the political risks of the Renault to portray it as a good corporate citizen the following steps shall be followed:

• Indian FDI regulations shall be followed.

• Till the time Mahindra does not come into a joint venture with Renault it shall not enter in the Indian Car market with a wholly owned subsidiary.

• Before entering the Indian Car market the structure of the Government of India and its political environment shall be reviewed and the risk to be assessed as a sudden change in the policy will affect the company’s prospects in the country.

• Conduction all the activities by Renault shall be such that they shall be politically accepted.

• It shall be taken utmost care of that any of the activities of Renault shall not hamper the sovereignty of India as protection of the national interest is the main thing which government lay emphasis on.

Conclusion

The cross-cultural mergers work well for a period till the business is growing and in the tough times the cross-cultural mergers become unmanageable but to make it a success the companies have to develop the understanding and trust in the employees in regard to the organizational change and to believe in process and strategy of the Company. If a proper education and training is being given to the employees for the cross cultural merger it will be a great success.

In order to get the desired results from a cross cultural mergers companies should adopt the “Mix Culture”. Mix Culture shall be a fusion of both the culture that covers the cultural diversity as a creative and productive source as complementing the positives of both the companies and doing things in a new and positive manner and can evolve a mix culture that can be shared by all employees and shareholders can also appreciate the same. Employees should be properly educated and trained for the language, cultural values, attitudes and behaviours of the employees to make it a success.

References

[18] http://kalyan-city.blogspot.in/2012/04/what-is-merger-definition-meaning-and.html

2 http://www.nacs.gov.tw/english/_files/1000216-301.pdf

3 Cummings, T. G.., & Worley, C. G.. (2001). Organization Development and Change. Cincinnati, OH: South-Western College Publishing

4 Cummings, T. G.., & Worley, C. G.. (2001). Organization Development and Change. Cincinnati, OH: South-Western College Publishing.

5 http://www.scribd.com/doc/59790315/Daimler-Chrysler-Merger-Failure

6 http://www.slideshare.net/apurva.chiranewala/daimler-chrysler-ma-study-spjcm

7 http://cascavel.ufsm.br/revistas/ojs-2.2.2/index.php/reaufsm/article/viewFile/2506/1536

8 http://du.se/PageFiles/5051/Janik%20thesis.pdf

9
http://www.studymode.com/subjects/many-a-cross-cultural-merger-has-failed-because-proper-attention-was-not-given-to-the-difference-in-cultures-between-the-two-companies-page1.html

10 http://mca.gov.in/DCAPortalWeb/dca/CompanyMaster.do

11 http://www.renault.com/en/groupe/renault-dans-le-monde/pages/renault-en-inde.aspx

12 http://www.renault.co.in/news/images/Renault-Nissan_alliance_inaugurates_Chennai_plant.pdf

13 http://www.nissan-global.com/EN/NEWS/2012/_STORY/120928-02-e.html

14 Charles W.L.Hill, Peter Hwang and W.Chan Kim (1990) An Eclectic Theory of the Choice of International Entry Mode, Strategic Management Journal. Wiley, USA.

15 http://www.slideshare.net/eonemo/renaultnissan-alliance-case-study

16 Business Monitor International “India Autos Report Q3 2007.” According to BMI data, .70 percent of the Indian population owned a car in 2006, while 1.10 percent of the Chinese population owned a car.

17 http://www.renault.co.in/range.html?type=0

———————–
[1] http://kalyan-city.blogspot.in/2012/04/what-is-merger-definition-meaning-and.html

[2] http://www.nacs.gov.tw/english/_files/1000216-301.pdf

[3] Cummings, T. G.., & Worley, C. G.. (2001). Organization Development and Change. Cincinnati, OH: South-Western College Publishing.

[4] Cummings, T. G.., & Worley, C. G.. (2001). Organization Development and Change. Cincinnati, OH: South-Western College Publishing.

[5] http://www.scribd.com/doc/59790315/Daimler-Chrysler-Merger-Failure

[6] http://www.slideshare.net/apurva.chiranewala/daimler-chrysler-ma-study-spjcm

[7] http://cascavel.ufsm.br/revistas/ojs-2.2.2/index.php/reaufsm/article/viewFile/2506/1536

[8] http://du.se/PageFiles/5051/Janik%20thesis.pdf

[9] http://www.studymode.com/subjects/many-a-cross-cultural-merger-has-failed-because-proper-attention-was-not-given-to-the-difference-in-cultures-between-the-two-companies-page1.html

[10] http://mca.gov.in/DCAPortalWeb/dca/CompanyMaster.do

[11] http://www.renault.com/en/groupe/renault-dans-le-monde/pages/renault-en-inde.aspx

[12] http://www.renault.co.in/news/images/Renault-Nissan_alliance_inaugurates_Chennai_plant.pdf

[13] http://www.nissan-global.com/EN/NEWS/2012/_STORY/120928-02-e.html

[14] Charles W.L.Hill, Peter Hwang and W.Chan Kim (1990) An Eclectic Theory

Search For The related topics

  • culture