The Daimler Chrysler Case
THE DAIMLERCHRYSLER CASE
QUESTION 1: How would you evaluate Daimler’s choice of partner/target? What is in your opinion the main reason for the troubles in integrating the two companies?
The Daimler-Chrysler merger represent an example of poor partner selection when engaging in cross-border collaboration. Cultural and strategic differences between the two companies have significantly affected the outcome of the merger and should have been taken into consideration in the target choice phase. Strategic objectives of the two companies are opposite, with Daimler focusing on high-end, high-performance segment, and brand protection, and Chrysler focusing on more affordable and comfortable vehicles. Differences in organizational cultures, flexible and innovative on the Chrysler side, structured and bureaucratical on the Daimler side, have also played a significant role in the failure of the merger. Differences in executives pay, national regulations of governance structures and different degree of executives involvement, contributed to make the conflict even more harsh(see Appendix).
Although cultural differences may be identified as the most plausible cause of DaimlerChrysler merger failure, the cause of the negative outcome is rooted in the ex ante selection and negotiation phase. Negotiations have been mainly carried on by companies’ presidents with few, if any, executives involved in the process. No consideration has been given to business differences and no agreement on the new venture structure and culture has been discussed beforehand. Moreover, while the outcome of negotiations was presented as a merger, it was more of a Daimler acquisition of Chrysler. This misbehavior was the origin of main management flaws. In fact the creation of a board with equal number of the companies’ executives and the simultaneous differences in executive pay and titles, created confusion among the employees about the nature of the relationship. When Daimler tried to take the lead
QUESTION 1: How would you evaluate Daimler’s choice of partner/target? What is in your opinion the main reason for the troubles in integrating the two companies?
The Daimler-Chrysler merger represent an example of poor partner selection when engaging in cross-border collaboration. Cultural and strategic differences between the two companies have significantly affected the outcome of the merger and should have been taken into consideration in the target choice phase. Strategic objectives of the two companies are opposite, with Daimler focusing on high-end, high-performance segment, and brand protection, and Chrysler focusing on more affordable and comfortable vehicles. Differences in organizational cultures, flexible and innovative on the Chrysler side, structured and bureaucratical on the Daimler side, have also played a significant role in the failure of the merger. Differences in executives pay, national regulations of governance structures and different degree of executives involvement, contributed to make the conflict even more harsh(see Appendix).
Although cultural differences may be identified as the most plausible cause of DaimlerChrysler merger failure, the cause of the negative outcome is rooted in the ex ante selection and negotiation phase. Negotiations have been mainly carried on by companies’ presidents with few, if any, executives involved in the process. No consideration has been given to business differences and no agreement on the new venture structure and culture has been discussed beforehand. Moreover, while the outcome of negotiations was presented as a merger, it was more of a Daimler acquisition of Chrysler. This misbehavior was the origin of main management flaws. In fact the creation of a board with equal number of the companies’ executives and the simultaneous differences in executive pay and titles, created confusion among the employees about the nature of the relationship. When Daimler tried to take the lead
References: * C.A.Bartlett, P.W.Beamish, “Transnational management”, McGraw-Hill, 2011 * D.C.St. Jean, “DaimlerChrysler merger: the quest to create “One Company””, Babson College, 2000 Appendix Table 1: analysis of Chrysler and Daimler characteristics | STRUCTURE | CULTURE | PRODUCTS | CHRYSLER | * Highly centralized * Team work based tasks(plus matrix structure) * Lean employees * Highly centralized(cost leadership) * Top-down reporting system | * Informal * Relaxed * Fast, flexible and lean * Passionate * Shareholders oriented | * Mid-to-low end, attractive, but with low price * Innovative design * Comfortable | DAIMLER-BENZ | * SBU Structure * Strong Hierarchy, several lines * Independent BU managers * Homogeneous wages | * Very formal * Bureaucratic * Profit oriented | * Luxury product * High performance * Premium quality engineering |