Martinez Construction Company in Germany

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MARTINEZ CONSTRUCTION COMPANY IN GERMANY

1. General presentation of the case study (Summary)

Martinez Construction is a well-established construction company in Eastern Spain. Because of a recent decline in contracts in the Spain society, Martinez Construction Company needed to expand to international market in order to survive (expand and grow). After a survey in the international market, the newly formed Democratic Germany seemed the perfect place. Furthermore, the best solution was to acquire an existing firm with the help of Treuhandanstalt (privatization agency). This was a result of the lack of liquidity of the Martinez Company. Therefore, an alliance with another German company would not allow it to establish itself as a serious competitor on the international market. The intermediary for Martinez Construction was THA (Treuhandanstalt), a company created in the former German Democratic Republic, whose main purpose was to find private buyers for some 13 500 business and 15 000 parcels of real estate that had been owned by the former German Democratic Republic. Their primary job was to sell the companies and match existing companies with buyers. That’s why Martinez Construction used THA’s services to find a new German company to acquire. From the time of his arrival in Germany, Juan felt that he was having a difficult time just getting acquainted with the Germans. . They didn’t seem to have time to get to know Juan personally: rush and urgency to complete the sale was the focus of their approach. Thus, THA found Konstruktion Dreizehn, based in Leipzig. Juan Sanchez was sent to handle the negotiations part of the acquisition in Germany. Juan was accompanied by Diego’s nephew and projected manager of the new German acquisition, Miguel Martinez. His background includes a business degree from a university in the United States, as well as years of employment in the family business, although lacking in practical managerial experience. During the negotiations, there were noticed strong discrepancies between the business styles of the two representatives of the companies, the cultural barrier between the two being noticeable. However, they managed to arrive at a common point by modifying the initial contract, after Juan insisted. The final contract stated that the original price would be reviewed in two years, and the contracted parties would recalculate it based on new and presumably more reliable data concerning the true value of the firm. The company had employed approximately 350 workers inside the German Democratic Republic (GDR). The THA had reduced the workforce to 100. Miguel and his team estimated that 50 employees would be sufficient. Miguel was frustrated by the unwillingness of some employees to actively participate in the formulation of ideas and implementation of new procedures and policies. Six months after Miguel’s triumphant arrival, his optimism was fading fast. He had just received the latest report concerning the company’s financial position, and it was clear that the figures were far from what Martinez Construction had been led to believe. Cash flow problems were beginning to arise, and this threatened the very existence of the company.

2. Identification of the problem(s), causes and negative effects:

2.1. Identification of the problem(s):

The main problem of The Spanish Company consists of the fact that they were not prepared for the acquisition of a foreign company and further more for the negotiations with the German THA. Companies which operate only in one country are not familiar with all the economic, cultural and political differences between societies because they are not confronted with them on daily basis. In order to do successful business, it is of major importance to acknowledge this differences and to take it into consideration when doing business. A second problem will...
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