The Alcatel-Lucent merger Essay
The Alcatel-Lucent merger
1. Referring to the case and this chapter, discuss what conditions and negotiation factors pushed forth the merger in 2006 and were not present in 2001. Negotiation describes the process of discussion by which two or more parties aim to reach a mutually acceptable agreement. It comprises of five stages: preparation, relationship building, the exchange of task related information, persuasion and concessions and agreement. (Helen Deresky, 2000) In 2001 Alcatel and Lucent could not agree on how much control Alcatel would have, Lucent wanted the merger to be an equal one rather than a takeover. Alcatel of course did not agree to that. The negotions failed in 2001 because the companies did not exchange task related information, they did not understand what the other wanted.
Sherman and Hart (2006) confirm that disputes, misunderstandings and disappointments about the share of control in joint-venture is one of the main reasons why such proposals fail, and this is not unique in this case. The 2006 negotiations worked out because Lucent’s management no longer had concerns about who would be in power and there was more pressing issues to worry about. Alcatel chief executive Serge Tchuruk encouraged shareholders to back the merger to make it more profitable and gain competitive advantage over competitors from china that sprung up between 2001 and 2006. Competition drove this two companies to come together to improve their position in the market.
2. Research the status of the merged company at the time of your reading the case. What has happened in the industry since the merger, and how is the company faring? Six years have passed since the merger and after the resignation of American CEO Patricia Russo and French board member Serge Tchuruk due to cross-cultural misunderstandings, the company appointed French chairman who lived in US, Philippe Camus and Ben Verwaayen, a Dutch in the position of CEO. The strategy was a success since Philippe Camus was closely familiar with both cultures, French and US, and Ben Verwaayen, being Dutch had a ‘neutral’ nationality in the company, but still was also closely familiar with cross-cultural issues. In the end, it was ensured that these two executives had a comfortable working environment and had no personal issues with each other. On April 1st 2013, Ben Verwaayen was replaced by Frenchman Michel Combes as CEO.
They are in the top three with the services they provide and was recognized by Thomson Reuters as a Top 100 Global Innovator and named by MIT Technology Review among 2012’s Top 50 “World’s Most Innovative Companies.” They boasted revenues of 14.4 billion euros in 2012 and has operations in over 100 countries (Alcatel-Lucent website, 2013) 3. Evaluate the comment that the merger is “a giant transatlantic experiment in multicultural diversity.” What evidence is there that the company has run into cross cultural problems since the merger took place in 2006? The statement that the merger between Alcatel and Lucent is “a giant transatlantic experiment in multicultural diversity” aptly describes the nature of the merger and all the cross-cultural issues involved. The reason being that the merger brought together two cultural different companies and they had to find ways to make it work. The language barrier is of course a big issue, English is the universal language of the company but French is still a necessity when dealing with French shareholders.
The fact that the American CEO Patricia Russo and French board member Serger Tchuruk could not get along is evidence cross cultural problems. “Roger Entner, a senior vice president and telecommunications analyst for Nielsen IAG, a market research firm, said Lucent executives had found it difficult to adapt to Alcatel’s corporate culture. One barrier has been language. Another, he said, is the close interplay between French regulators and private-sector executives.” (The New York Times, 2008). In France, business is a male dominated field and Mrs. Russo found it very hard to regulate where French business and politics overlap. France being a high context culture and the US having a low context culture may have played a role in the resignation of the original CEO and chairman. A low context culture is one in which things are fully (though concisely) spelled out. Things are made explicit, and there is considerable dependence on what is actually said or written.
A high context culture is one in which the communicators assume a great deal of commonality of knowledge and views, so that less is spelled out explicitly and much more is implicit or communicated in indirect ways. 4. How much of the decline do you attribute to leadership problems, as opposed to industry factors? The company was facing competition from low cost Chinese competitors and the market was changing. That is one of the reasons the merger took place in 2006. According to the case, the market was changing beyond recognition and demand was weakening.
There was some leadership problems with Alcatel management feeling like Lucent got the leadership role in the company and people were being appointed based on nationality and not skills. But to be fair, the industry was bad and changing and the inability of the leadership to get along and solve problems together hurt the company. Right after a merger is a critical time for a company with the HR department on full recovery mode. There has to be cohesion in order for the company to succeed and there was no unity. Leadership problems and industry factors had equal roles to play in the decline.
5. What, if any, factors should have been negotiated differently? The issue of who would lead the company should have been negotiated differently so that everyone will be represented. The management of the company played a role in the decline and I think if time was spent in making sure the people hired had the people skills needed to bring everyone together for the common good of the company, then there would not have been so much loss. Time should also have been spent in coming up with ways to bridge the culture gap and put everyone on the same page as to the goals of the present merged company. All in all, with a change in management, Alcatel-Lucent is still going strong and seems to have worked out the cross cultural issues. There are presently talks of them merging with Nokia Solutions. We will see how it turns out.