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Daimlerchrysler Merger the Quest to Create “One Company”

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In order to understand and be critical on Daimler’s choice of partner, apart from the motives presented in the case, one also needs to consider the enterprise environment trends during the time. 90’s was a wave of mergers and acquisitions characterized by Cross-border ventures (Lipton M. , 2006). According to Lipton it was an era where size mattered and mergers were considered the one-way to internationalization and market expansion. Furthermore, nine of the ten largest deals in history all took place in the three-year period 1998-2000.

Having established that, one can understand that Daimler was under market and investor pressure to go large. In such an environment, a European company would think of an integrative expansion to the vast US market as the best strategy (Japanese market too cultural different). So, from the choices of either founding a new subsidiary (high risk) or seeking for a JV, or an acquisition or a merger Daimler went for the merger. It was an effort to meet the environmental trend by increasing market share and to make a big impact to the larger competitors.

Comparing the three great American car companies, GM was too large (in 1997 GM had $178b revenues compared to Daimler’s $71b) and difficult to control, Ford had investor issues (Ford family), but Chrysler, a similar size company, would seem the best partner. Chrysler was also ideal partner for Daimler because it had a good knowledge of the local market, which lowers the venture risk (Bartlett & Beamish, 2011), and it would offer R&D synergies and broaden the offered product range (Glavin W.

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F. , 2004). Considering all those factors I believe that Chrysler was the best choice of a partner.

However, during those early stages of cross-cultural mergers and acquisitions there was little experience on making the venture work. In the appendix, I raise the main friction points and analyze how they should have been treated according to the literature. From this analysis we can see that the companies where different in all regards. In fact, seeing the range of daily activities and structure it is evident that the two companies operated in completely opposite. Thus, it was truly a “marriage of opposites”. But still this is not a strong argument for integration efforts failure.

According to Bartlett & Beamish persistence and willingness to evolve and adapt are the key to success in all collaborations. By looking through the friction points and what the literature suggests I tried to point who the person in charge of each process should in fact be. The company in Bold in appendix is the company that should lead the efforts in that process after the merger; due to its expertise which then would benefit the whole. It is evident that either Chrysler or both companies should manage the new company.

In reality Chrysler tried to pass this through to Daimler but simply the management failed to penetrate the strong conservative culture of Daimler in the beginning and then it lacked the persistency. Then, Daimler took advantage of that weakness and it saw this merger not as a marriage of equals but as a takeover. So the greatest problem of the integration process was the combination of Chrysler’s inability to assert its processes and then Daimler’s failure to evolve, adapt and respect its ally. Question 2 In order to give advice I consider Bartlett’s & Beamish’s framework on guidelines for a successful JV.

First, there was a lack of proper pre-merger analysis which, had it been executed properly, would have raised early on the friction points. Secondly, there were no common objectives set and there was no plan on the course of action after the merger. The CIC and the PMI integration teams had no framework and dealt with issues as they arose, and thus were bound to fail. So, before embarking on a collaboration venture the CEOs should have thought of those steps. As we found, the inability to adapt and the cultural differences had been the main source of problems.

Trust is the main fuel of collaboration and it can only be developed over time, being a result of shared experiences (Bartlett & Beamish, 2011). In our case the two extremes merged one day and they were simply expected to run like clockwork. An alliance has similar benefits with a merger (Bartlett & Beamish, 2011) but addresses the core problems better for the following reasons. A main benefit of an alliance is that when it is formed it has an exit clause, which allows the two companies to integrate more relaxed, and it offers a vehicle to learning and experimentation for the necessary bonds and trust to be formed.

This lays the best conditions for a hybrid culture to form. Also, the companies’ operations that offer the greatest potential to synergies can be integrated, whereas the extreme opposite ones can be left to operate independently. This means that sectors such as R&D can be jointed and Branding can operate independent. However, an alliance, alone, would not work for those companies as they wanted to go large. In my opinion, the best solution would be to form an alliance as a way to build on trust and learning and then as a second step, if both sides where mature, merge in common respect with clear objectives and structure.

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Daimlerchrysler Merger the Quest to Create “One Company”. (2018, Sep 29). Retrieved from http://studymoose.com/daimlerchrysler-merger-the-quest-to-create-one-company-essay

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