Daimler-Chrysler: Post Merger News Analysis

1.The merger was expected to result in synergy from which attributes of each organization?

With the merger, both profitable automobile companies, will have the opportunity to benefit from the potential of each other. They had both identified opportunities to increase sales, to create new markets for both while being able to expand their markets in new countries, to reduce purchasing costs and to realize enconomies of scale.

The synergy would drive to product integration and ensure sharing of innovation, knowledge, technologies and ideas. At the time of the merger, Daimler Benz had close to 1% of the American Market, which Chrysler could aid them with this problem. Chrysler also wanted to enter into the European market, which Daimler Benz could help sell Chrysler products at their distribution centers in Europe.

Mutually, the two companies expected to exploit on retail sales, purchasing, distribution, product design and research and development. And last but not least, Chrysler’s Dream Team was an attribute that could be beneficial to the merger. It could work as an innovative addition to Daimler Benz to help them find ways to expand a limited Daimler Benz market.

2. What were the issues/problems encountered after the merger.

One of the main problems with the merger was the cultural clash between management and work styles. Even thou they had fairly equal number of members of the board of management, the integration efforts lacked between the Americans and the Germans. They clearly had differences in management styles, processes, cultures and work styles, which resulted in an abyss between the two.

Other issue encountered was the mocking and thought from Daimler Benz that Chrysler was low quality and poor in technology. This rejection reflected in a tangible manifestation of the growing separation when Daimler refused to offer Chrysler vehicles at their distribution centers for fear of ruining their image. This had been an essential key in planning for Chrysler to enter into the Europe market.

Although they were clear that strict guidelines segregated the Daimler and Chrysler brands, synergies were expected from joint administrative functions, market research, vehicle and spare parts logistics, and wholesale operations. With this rejection, this wasn’t happening. They needed to work upon effective communication and overcome their cultural differences.

3. What went well with the merger?

Although this companies underestimated the level of cultural difficulties they had to face in order to be successful, and in 2001 the merger resulted in the biggest lost in German business history, the beginning of the merger was well received by the public. Over the first years, the share price from DaimlerChrysler rose significantly, indicating that the public speculated that this merger could be good for all parties and the new company would be considered to have the potential to revolutionize the automobile industry.

Also, management at the top level agreed and was on board to making the merger be successful. Management starting sharing plants and parts as to saving huge amounts of money. Furthermore, management agreed on cutting expenses such as fixed manufacturing cost and material costs. By the nine-month period, net income and revenues had increased 12 per cent. Operating profit had improved by 15 per cent. Clearly, the results are attained were higher than expected, therefore, this were some beneficial aspects of the merger. 1. Discuss the historical background that has most influenced Germany.

It is said that countries, much like individuals, are influenced by their experiences. Therefore, one could say that the most influential historical events that have affected Germany and transformed the country to what it is today are: 1) its role in the first and second World Wars, 2) related periods of extreme inflation, and 3) the “economic miracle” phenomenon of the post-WWII reconstruction of what was then West Germany. Every single one of these circumstances has had huge impact in German’s character in general: in the way Germans reason and behave.

One example is how due to the hardships associated with wars, the fear and uncertainty, and the economic challenges of inflation, that Germans tend to be really risk averse, skeptical about organization and order, prefers security and structure and are way perfectionists. They are really focused when they want to achieve something and take pride on a job well done and highly performed. All this history from 1914’s until present day have taken part in shaping Germans to what they are today and their beliefs.

2. What are some of the cultural dimensions that have shaped German management?

Some of Hoftede’s and GLOBE cultural characteristics and dimensions are discussed in the reading to help explain the significant elements in the German culture that have shaped their management. The most significant elements in the German culture are: their high levels of uncertainty avoidance, assertiveness and individualism, and low levels of humane orientation and power distance. According to Hofstrede, Germany’s power distance scores a 35. It is highly decentralized, which is supported by a strong middle class. They believe in a flatter organizational structure.

A very good example is their welfare system. A direct and participative communication and meeting style is common, control is disliked and leadership is challenged to show expertise and best accepted when it’s based on it. Another dimension is individualism. Germany scores a 67 on the Hofstede scale making it one of the most individualistic countries in the world. In Individualist societies people are supposed to look after themselves and their direct family only.

They are not team-oriented but rather task-oriented. They are better at following rules than managing personal relationships and being perceived as kind or nice. Germans are also honest to a fault about an individual’s mistake, but will give that individual a fair chance to learn from those mistakes as well. Another important dimension is that which indicates if a society is driven by competition, achievement and success: masculinity/femininity.

According to Hofstede, Germany scores a 67 on the masculine/feminine scale, therefore is considered to be a more masculine society. Germans tend to value competition and high standard of quality. Are considered to be perfectionists and a highly trained workforce. Managers are decisive and assertive. Due to the hardships and uncertainties of war and economic struggles, Germans score a 65 in terms of uncertainty avoidance and risk aversion.

This means German leaders prefer deductive approaches to planning and thinking. Germs like to be told what to do therefore; a systematic overview has to be given in order to proceed. This deductive way of thinking coupled with the low power distance, results in Germans to prefer compensating for their high uncertainty by strongly relying on expertise. And last but not least, Germans have a low Long Term Orientation, scoring a 31 on the Hofstede scale.

Germans prefer quick results as well as a social pressure to keep up with the competition. In terms of management, Germans are impatient for achieving quick results and attain better and faster products than the competition. Germans do take pride in a job well done. All these cultural dimensions take part in defining and shaping German management and leadership.

3. Discuss in detail the leadership framework in Germany.

The German culture focuses a great deal on the importance of knowing business unlike Americans that focus more on self-knowledge, cultural awareness and business acumen. German leaders are more specific and concentrated in a certain area (“Führung durch Fachwissen”).

They are usually prepared to focus and in a specific subject matter since their power base of leaders is in their expertise rather than experience. It is known that German leadership strives on competency and expertise. As a result, German managers tend to be less able to develop effective visions for their organizations. Their fundamental mode of operation is that “Deliver Quality and your business will succeed.”

They are well known for their organization and management but lack skills as innovators. In this way, Germans struggle to expand their businesses in creative and innovative ways. Also, German leader does believe in communication, which is to be very direct and straightforward. Germans desire a very structured framework in that each person should have clearly stated goals and objectives that will work for the overall success of the organization

. For this reason, German leaders act as role models rather than bosses. They are very hand-on and translate their goals into actions hence, participate in the work processes (“Stellvertreter”).

They are not team-oriented and are high in uncertainty avoidance therefore makes German leaders to lack flexibility and difficult to them to cope with today’s fast-moving global business environment. The current economic challenges Germany faces forces German leaders to focus on three critical areas upon improvement: 1) revise and asses in a broad non-technical manner, 2) focus on vision and attempt to take greater risks and set more visionary strategies, and 3) develop more well-rounded leaders with the strategic and interpersonal skills side.

4. Knowing more of the culture in Germany and the US, discuss the steps you would have recommended to the management to prevent the cultural issues for the Daimler Chrysler merger.

The cultural clashes amongst USA and German cultures were the hardest thing to put together and make it work, which caused the merger to fail. As a result of the differences, the perceptions of both companies and their communication and understanding were never fair and transparent, causing tension and problems between the two. By making assignments and decisions fair across the board, the cultural differences could have been assuaged through increased communication channels and meetings.

A clearer task description matrix could have been beneficial in the understanding of who was in charge of what and should consult whom. Since the beginning, it was sort of a game of putting and taking out people from job positions along with resignations. Their differences in management styles, processes, and cultural work styles, amongst other differences should have been discussed since the beginning and reaching a consensus was needed.

For example, the problem caused because Americans did not want to use weekends to fly on or out for weekly meetings. This is the type of problem that could have been evaded with better communication, planning and understanding of each other’s cultural preferences and work styles. Another aspect that affected the merger and should have been evaded was their goals and expectations of the merger. None were clear and discussed before the merger. A thorough plan and goals should have been discussed previous unifying. It was not clear how both would help each other achieve what desired. There was not a concrete plan. -------------------------------------------------