Introduction
Culture
refers to a shared and deeply held set of norms, values, beliefs and attitudes
that influence individual and group behaviour within an organization. When
M&A happens, it becomes the prime task for the enterprise to integrate resources
and operations in terms of its organizational culture, doing so sometimes it
faces various cultural clashes.
Literature review
Each
organization has its own norms, customs, roles, rituals, ceremonies, dress
code, symbols, and hierarchy and reporting lines. To avoid or lessen the
conflict of cultural clashes, two aspects need to be considered. One, whether
cultural differences should be considered before the decision to acquire/merge
is taken. Cultural clashes between enterprises are found in the way they
operate, direct, communicate, and motivate. It is the core content of cross
border M&A cultural integration to integrate cultural clashes of nations
and those of enterprise, which are interdependent, not separate. Communicating
with each other effectively and understanding each other’s' culture is the most
effective way to eliminate cultural clashes. According to (Cartwright & Schoenberg, 2006) , the main factor in
making or breaking the merger equation is the culture. Calculations prove that
50% to 80% of the mergers and acquisition are failure because they are
performing low than the expected according to different industry and cannot
adopt in the culture and cultural clashes happens. For example the Ford motors
acquired Jaguar before Tata but it was not a profitable acquisition because of
cultural clashes so the Ford motors sold it to the Tata motors but now Tata
motors is struggling to pay the bridge loan taken to buy the Jaguar Company and
manage its cultural environment.
http://www.tatamotors.com/investors/pdf/2008/Jaguar-Land-Rover-Acquisition-Part-1.pdf
Comment
The
first case of culture clash is the one that occurred between the merger of
Hewlett-Packard (HP) and Compaq. The reason of the merge is to improve HP’s
market share across the hardware line and double the size of HP’s service
unit—both essential steps in being able to compete with industry-giant IBM.
Moreover, they hope to create a full-service technology firm capable of doing
everything from selling PCs and printers to setting up complex networks. The
merger had face culture clash as their cultural differences among these two
companies. In 2004, the fact of HP missing the merger’s longer-term revenue and
profit goals had become clearer. This poor cultural fit resulted in years of
bitter infighting in the new company, and resulted in a loss of an estimated 13
billion dollars in market capitalization. Though the merger itself was widely
regarded as a failure, the company has hung on, and has been able to make
significant cultural and leadership changes that have resulted in long-term
success. (Hewlett, 2009)
Another
example of the failure of merger due to problems with cultural integration can
be seen in the case of Daimler-Chrysler. The merger of Daimler-Benz and
Chrysler became a straight out clash between the business cultures of the two
firms. The differentiation in corporate culture of the firms involved was the
main reason for the non-success of this alliance. While the management style of
Daimler-Benz's was more of a formal and planned out sort, Chrysler's management
was more tilted towards a stress-free, unrestrictive style. Additionally, the
views of both the firms on key factors, for instance pay scales, benefits and
travel expenditure, were completely different from each other. As a result the
company's shareholders had to bear the burden of the collision. (DiMaggio, 2009 )
Conclusion
Compare
to HP-Compaq, IBM had outstanding performed in its business for over a century.
The reason of their success: ‘IBM has been found in its core business
development through organizational culture, decision making and organizational
structure’.
First,
it should coordinate the cultural differences of peoples to promote
understanding and communicating between the different communities in one
enterprise and to avoid the negative influence arising from the different
thinking models, behaviours, and values. Second, it should coordinate the
different company cultures to eliminate the barriers in leadership styles,
communication models, personnel system, performance appraisals, and social
security benefits. Third, it should establish the company's core values by
integrating diverse cultures to improve the company's creativity and
competitiveness. Fourth, the effective integration of the companies' cultures
could provide conditions beneficial for the integration of operations. (Jacobsen, 2012)
References
Cartwright, S. &
Schoenberg, R., 2006. Thirty Years of Mergers and Acquisitions Research:
Recent Advances and Future Opportunities. British Journal of Management, 17(s1),
pp. s1 - s5.
DiMaggio, M., 2009 . Rasmussen College. [Online]
Available at: http://www.rasmussen.edu/degrees/business/blog/best-and-worst-corporate-mergers/
Hewlett, R., 2009. Article Base. [Online]
Available at: http://www.articlesbase.com/ask-an-expert-articles/failure-of-mergers-examples-987272.html
Jacobsen, D., 2012. Globoforce. [Online]
Available at: http://www.globoforce.com/gfblog/2012/6-big-mergers-that-were-killed-by-culture/
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