Blue Ridge Spain is a joint venture established between an American fast food chain and a Spanish agricultural firm, Terralumen. Terralumen contributed the most to Delta’s success in foreign markets. After 15 years of a successful joint venture, Costas was shocked to find out that new owner, Delta, wanted to end the partnership despite of the joint venture’s profitability. Issues and Analysis
Cultural differences, as related to doing business, come into play here. Significant cross cultural conflicts between parents of different nationalities paved the way for the dissolution of the joint venture between Delta and Terralumen. In a Board of Director’s meeting, the American-Spanish joint venture partners could not work together or agree on common goals and policies, or resolve problems.
The Hofstede Model(Appendix A) has demonstrated that individuals living in a particular country tend to share similar values, and that they bring these values to the firms for which they work. The stark contrast of cultural values between managers of Delta and Terralumen make it difficult to ensure the success and the longevity of Blue Ridge Spain.
The European Regional Director, Yannis Costas, is of Greek nationality. According to Hofstede, Greece is high on power distance and high on uncertainty avoidance. As a Greek, Costas values the solid interpersonal relationship and trust which he and Francisco Alvarez had built over the years in trying to foster a successful joint venture. Costas was often employed to solve conflicts and mend damaged relationships. He also questioned the ethics of his company’s strategy to secretly achieve the upper hand in buyout negotiations. Alvarez, representing Terralumen, is from Spain. He shares many similar cultural characteristics with Costas, including patience and mutual respect. This explains how Costas and Alvarez have come to establish solid friendship and cooperation throughout the joint venture. They both understood the intangibles of cultures, relationship and business.
Delta was represented by Mikael Södergran and Geoff Dryden. Södergran was from Finland and Dryden was born and raised in the US. Hofstede shows that both Finland and USA are high individualism countries where personal decision and opinions are considered very important. Both Södergran and Dryden have a strong work ethic that emphasizes short term orientation with quick results. They wanted a more rigorous and aggressive growth from Blue Ridge Spain for immediate returns. On the other hand, Alvarez and other Blue Ridge Spain managers were pretty content with their current growth rates and they protested on Södergran’s rapid expansion plan. Personal relationships are less important for Södergran and Dryden. The fact that Delta hired a VP without any background in restaurant management demonstrates that American firms place higher importance on specialized skills rather than on experience or seniority. Clearly, the two parents do not understand each other’s goals, capabilities and behavior. They failed to renegotiate future goals and development plans in response to environmental changes, which is key to sustaining the joint venture.
The key consideration for this case is whether or not the relationship between Delta Foods and Terralumen is worth repairing. Each party must decide if they want to attempt to mend the relationship and try to make it work, or if they are better off going their separate ways. Delta must consider the cost of the buyout as well as the possibility of losing most of its managers from the Blue Ridge Spain stores who were brought in by Terralumen. They also must consider their weak international experience, and whether or not the consultants’ recommendations carry more weight than the opinions of the Terralumen management team that works extensively in the market and feel the growth projections are too aggressive. For Terralumen, they...
Appendix A: Cultural Analysis
There were four major cultural perspectives involved, relating to different management styles and cultural nuances. This created significant conflict among key personnel. The business needs of each partner were very diverse, as was comfort level with growth and the manner in which business is conducted. Delta wants to see higher profits, faster, and Terralumen does not need to see the aggressive goals met. All of this added to the clash between partners.
Geert Hofstede Cultural Dimensions for Greece, Spain, Finland and United States.
The scores for Greece are PDI 60, IDV 35, MAS 57 and UAI 112.
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