Writing task
Situation
You work as a consultant for an Intercultural Communication Consultancy. You have been asked to write a report on the merger failure described in the case study. ( see below ) Your report should highlight the key areas of intercultural conflict and suggest how the merger could have worked better. You can use the dimensions of culture below or any other frameworks from part one of the book to compare and contrast the two cultures.
How Culture ended the Daimler-Benz Chrysler Merger
The Daimler-Benz merger with Chrysler in 1998 is probably the most famous of all international mergers then ended in failure. Cultural differences and organisational culture are both acknowledged to have played their part. It was this failed partnership that first rang the alarm bells that cultural factors just cannot be ignored on a global level, especially not within mergers and acquisitions.
Cultural factors
Analysts agree that the cultural gap in corporate cultures was one of the main reasons for the Daimler-Chrysler failure. Daimler was a German company that could be described as “conservative, efficient and safe”, while Chrysler was known as “daring, diverse and creating” (Appelbaum, Roberts and Shapiro, 2009:44). If one looks closely, one will find numerous manifestations of these differences in corporate cultures. Firstly, the attitude to hierarchy was quite different. Daimler was a very hierarchical company with a clear chain of command and respect for authority. Chrysler, on the other cultural hand, favoured a more team-oriented and egalitarian approach. The other cultural difference lay in what the companies valued in terms of their clients. Chrysler valued reliability and achieving the highest levels of quality, while Chrysler was placing its bets on catchy designs and offering their cars for competitive prices. These two factors resulted in conflicting orders and goals in different departments. American and German managers had different values which drove and directed their work. Different departments were heading in opposing directions. Apart from differences in corporate culture, there was also an issue of trust. Employees on both sides felt reluctant to work with each other. Mainly this was caused by the realization that the agreed term “merger of the equals” was pretty far from reality. During the initial stages of organisational integration, huge bulks of Chrysler’s key executives either resigned or were replaced by their German counterparts. Moreover, Daimler was much more imposing and tried to dictate the terms on which the new company should work (Appelbaum, Roberts and Shapiro, 2009:44). Such a situation didn’t inspire trust in Chrysler’s employees and raised some serious communication challenges. So to summarise the cultural factors in play here:
- differences in corporate cultures and values
- lack of coordination
- severe lack of trust among the employees
All three resulted in communication failures which in turn caused a sharp reduction in productivity.
The financial impact of the merger
‘The proof is in the pudding’ as we like they say, and the pudding did not taste good. As you can see, share prices plummeted.
Daimler-Chrysler’s share prices between 1998 and 2002
- How much money was paid by Daimler to Chrysler in 1998? $38 billion
- How much money was paid by Cerberus Capital for Chrysler in 2007? $7.4 billion
The sheer difference in the amounts of money paid for Chrysler by Daimler and later by Cerberus Capital makes one really wonder how such a promising merger could fail so dramatically. Usually, it is extremely difficult to pinpoint exactly what role culture played in success or in failure. However, in the case of Daimler-Chrysler, it would be a safe assumption to say that cultural factor was among the crucial ones which determined the downfall of a new company.