Daimler Chrysler Merger Analysis

Organizational Behavior | |DaimlerChrysler | |The case study of a historical merger, between two automobiles manufacturers, which was being branded as ‘match | |made in heaven’. This report analyses the root-causes, actual facts and an insight to the corporate culture | Raja Naveed Khalid BD-32/2010 | |M Tauseef ur Rahman BD-28/2010 | |Khan Raid Altaf BD-15/2010 | |Syed Moazzam Ali Pasha BD-43/2010 | Contents Case Background3 Case Analysis3 The History3 Cultural Heritage3 Social Differences3

Living Standard4 The ‘Domination’ Factor4 Geographical Distance4 Organizational Structure4 Job Insecurity4 Merger or Acquisition4 The Communication Gap5 Solution – Redesigning DaimlerChrysler Strategy5 Vision6 Mission Statement6 Establishing Strategies6 Bridging the Communication Gap6 Cultural Differences6 Branding6 Organizational Structure6 Who Owns Who6 Implementing the Strategy7 Conclusion7 Case Background Daimler, a German car manufacturer, was the thirteenth-largest car manufacturer and second-largest truck manufacturer in the world.

Chrysler on the other hand was one of the largest automobile companies in USA, North America, in particular. This case gives us an insight into the world’s most anticipated merger in the automobile’s industry which was predicted to turn the automobile industry upside down and being branded as the ‘match made in heaven’ by the German CEO who dreamed of conquering the American automobile industry through this merger. With everything configured and all systems in place, both leaders proceeded with the merger and the rising sun of winter 1998 pronounced the Daimler and Chrysler hereby as ‘DaimlerChrysler’.

During the setup, strategy and business planning, every single detail was worked out however both sides perhaps ignored the most important and sensitive element called ‘Human’, the bones of any corporate skeleton which later on become the major factor in the demerger of the DaimlerChrysler. Case Analysis The case review tells a lot of stories and issues running in parallel and in fact all the problems are interconnected and little things collectively made up a huge issue which later on proved the ‘perfect match’ as indeed a mismatch.

We will discuss all the issues in details and cover them one by one: The History The major issue between the employees of Daimler and Chrysler or both parties was the ‘history’, which was full of retaliation, vengeance and revenge. Both countries were involved in blood-shedding battles and had a grudge for each other and this factor was something completely beyond the German and American CEO. They could have encouraged and driven the employees towards a common goal but can’t alter their feelings for each other. Cultural Heritage

Both companies share a different heritage of culture which was in fact a modern shape of their countries’ respective histories. German had always been in war were used to live in more sort of dictatorship hence they were very disciplined and set of rules towards everything they do and this could have been easily observed in Daimler’s hierarchy and chain of commands. Whilst Chrysler employees had a very laid-back attitude towards corporate environment, they were very casual and rough with an open environment truly reflecting the American culture which was unacceptable by the Germans.

Social Differences As discussed above Americans had a laid-back attitude and hence they used to drink at work too and had vending machine in the offices full of alcohol. They also used to wear casual clothes in office and had lenient policies in place for their human resource. Germans had a very strict zero-tolerance policy and in fact the German CEO was popular for his irrational decisions like firing hundreds of people immediately and shuffling the companies. He was considered an aggressive and ruthless and that did not help Americans to understand the Germans at all Living Standard

Germans used to travel in first class cabins of airlines and stay in lavishing hotels since they were the brand ambassadors of Mercedes-Benz and all employees had a highly sophisticated code of conduct varying the brand image of their company. After the merger Germans are not willing to compromise on this since they take pride in it. Americans, used to travel in economy classes to cut the cost and similarly in economy hotels since they always had limited budgets. Travelling in first class and staying in five-stars is not very moral to Americans and not considered as good business.

This difference led the minor conversations into a major argument and it became difficult for the senior management to synchronize this. The ‘Domination’ Factor People on both sides had serious concerns regarding the domination of the opponent culture or conducts over their own ones. Germans were concerned that their heritage might be Americanized after the merger since Americans always had this dominant image and perception in everyone else’s mind and they do not show flexibility in many cases.

Americans were concerned that it might become the case where Daimler being not only huge in size but also superior in engineering and technology would dominate their operations and processes having an upper hand on Americans and thus Americans would end up following a dictatorship resulting in losing their freedom. Geographical Distance Both companies are in different continents let alone in different countries when it comes to geographical location.

Even the time zone is not the same which means office timings for both companies would be very difficult and thus resulting in a greater communication gap with a possibility that emergencies and issues requiring immediate attention might get delayed Organizational Structure Both companies have different organizational structure with different salaries, positions and rankings, incentives and other benefits. Even a synchronization attempt would result in one person getting a significant increase in the salary whilst other balancing it by taking the hit on his pocket. Job Insecurity

In most of the mergers, people in the middle management are the ones most likely to be losing their job and same was the case with Daimler Chrysler. In fat not just the middle management but most of the employees were unsure about their own jobs due to the unpredictable dimension of the merger. Merger or Acquisition Although legally a merger was announced between Daimler and Chrysler however everyone knew that this might not be the case since Daimler being gigantic in size, revenue and brand name along with its superior engineering and technology would easily over shadow Chrysler.

Germans on the same hand, were not willing to report to any American and Americans not to any German. Germans having a sophisticated, reputable and luxurious brand of Mercedes-Benz were in complex of being inferior and to them merger was a low-cost purchase transaction of buying a low cost, less sophisticated brand. The Communication Gap The major and indeed the greatest of all problems was the communication gap; not just between both parties but in fact the internal communication of their respective companies. The vision was not clear and the leaders did not communicate the main objective or the common goal of the merger.

Everyone was in the dark with nobody had clear directions of what to do, what’s going to happen and what to expect which resulted in the ambiguities getting bigger and bigger and the original objective was faded away among the issues. During our case analysis, above were some of the main issues that were encountered in and after the merger. They were perhaps ignored by the leaders or even if worked out then not very well communicated. If we had to design a solution or give recommendations on the given case then we would use a few models to redesign and implement the new strategies and the communication structure.

Solution – Redesigning DaimlerChrysler Strategy The most important part and aspect of any strategy is the vision, the main objective and the common goal which has to be achieved through various strategies. Let’s have a look at the diagram below: [pic] DaimlerChrysler needs to redefine their vision for what exactly they would like to achieve, is the market share or volume i. e. penetrating different markets or to be the largest automobile company so in that case market share won’t matter since they can merge with a couple of others and become the largest manufacturer in the world.

Vision ‘To be the largest automobile manufacture providing high quality vehicles around the globe’ Mission Statement To enter the highly profitable North American market using the world-class German engineering and technology and thus merging the Daimler and Chrysler Establishing Strategies Since the DaimlerChrysler had adapted to go for a merger hence strategies must be carefully evaluated and analyzed in order to achieve the mission statement and vision of the company. Here we will address the solution for the issues mentioned above. Bridging the Communication Gap

DaimlerChrysler will have to increase the coordination to bridge the communication gap between two companies. Further employees get-to-gather at top and middle management required. Due to the geographical location DaimlerChrysler will have to open a regional office in UK or Africa which share both times zones of Germany and USA for further collaboration and synchronized meetings for immediate issues and emergencies. Vision and mission statement need to be clearly addressed to the employees of both companies and coaching them how to achieve it.

Cultural Differences Although the cultural differences cannot just be wiped out however the increased communication and awareness programs will help both parties to understand each other thus contributing towards one common goal. Frequent visits to each other plants and offices will help this. Branding There must be mutual branding operations in both companies like a synchronized image of the company which is not just highly sophisticated and technologically sound but its young and fun which would cover both countries natural image.

Organizational Structure The policies, salaries and incentives need not to be synchronized although an attempt to introduce the plus points of each to each other could be made like incentives and benefits for Germans but low cost hotels and airlines and this must me clearly explained to all that for every benefit achieved a sacrifice must be made. Who Owns Who The ambiguities of both parties must be clear as to if this is a merger or acquisition and since it is a merger hence no one would have an obligation or dictatorship over the other.

This also must be accounted that wherever possible the personal desires are taken care for e. g. it could be tried to achieve in hierarchy that no German reports to American or vice versa (wherever possible). Implementing the Strategy Once there is a clear communication, set of policies and structure set then DaimlerChrysler can proceed to deploy their strategy with a mixture of managers (both American and Germans closely monitoring them). The major objective is to achieve profitability for both companies as one entity and hence no one would lose job and the operations and processes would continue as it is.

If a Mercedes has to be delivered and showcased in USA then it will be brought down from Germany where it actually assembles. Similarly if a Chrysler truck has to make an entry in Germany it would be manufactured and assembled in USA and delivered to Germany. During the evaluation and monitoring of these strategies if there is any hiccup then the managers assigned for monitoring must take corrective measures to realign it to achieve the main objective and vision set earlier.

Conclusion DaimlerChrysler although have completely diversified employees not only from different countries but from different continents and culture with their respective history. Initially it could be said that this merger was on its way to a successful relationship however the massive communication gap between both parties and negligence of leaders led it to the most unsuccessful and frightening climax.

All of this could have been avoided by taking the most important element ‘human resource’ into consideration and only if the employees concerns were taken into consideration then this disaster could have been the last thing they would be worried about. The synchronization would have been possible only if there was a common strategic goal for both parties and if initially there was any this should have been communicated properly to the employees with all of their concerns in their mind.

We highly recommend DaimlerChrysler to be on top of their game when it comes to employee satisfaction, employees, who are the most valuable asset of the company, and must not be ignored in any future plan or goal and this must be done through adequate channels. If Human Resource itself is not taken into consideration then the raising concerns and ambiguities will become a major issues just like the case of DaimlerChrysler and it would be beyond human control to resolve them let alone rectify them.