Resolving Cultural Conflicts in Mergers: A Case Study of DeWaal Pharmaceuticals and BioHealth Labs

This report analyzes the challenges faced by DeWaal Pharmaceuticals and BioHealth Labs during their merger due to cross-cultural differences. It explores the conflicting values at stake, critiques the integration process, and recommends solutions for resolving conflicts and building a successful top management structure. The report utilizes relevant management theories, including the Operating Synergy theory, Organisational Change Management, and Hofstede's cultural dimensions, to provide a comprehensive analysis of the case.

Contemporary Management
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Table of Contents
Executive Summary.........................................................................................................................3
Introduction......................................................................................................................................4
1. What conflicting values are at stake in the case?.....................................................................5
2. Critique the process that is being applied to work out the details of the integration,
particularly with regard to structure and top management staffing using relevant management
theory and concepts.........................................................................................................................6
3. How would you recommend the conflicting values be resolved?............................................8
4. What process would you recommend that the two senior executives and their HR people
follow to work out the details of integration in regard to the top structure?.................................10
5. Evaluate the usefulness of the management and organisational theories and practices from
the subject that you have applied in analysing the case.................................................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Executive Summary
The report explores the various issues that can affect the merger of companies with cross-cultural
characteristics. A detailed discussion regarding the approaches and models for resolving those
conflicts and steps that can be taken to foster the relationship among DeWaal Pharmaceuticals
and BioHealth Labs has been included.
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Introduction
This report analyses the issues that are faced by merger of DeWall Pharmaceuticals and
BioHealth Labs because of cross-cultural differences among the firms. BioHealth Labs is a USA
based company and DeWall Pharmaceuticals is based in the Netherlands and these companies
have been able to establish their operations in across the globe. The Operating Synergy theory
has been explained and the actual issues faced by the firms related to managing the employees.
Managing the workforce is one of the major concerns of the firms and the cause of this issue has
been explained in detail. The report ascertains the importance of developing Organisational
Change Management approach and using Hofstede model. The report also contains a detailed
Hofstede model that has been developed for the USA and the Netherlands. The benefits of using
these approaches has also been analysed along with the ways in which the conflicts can be
resolved by these two firms.
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1. What conflicting values are at stake in the case?
Mergers and acquisitions are considered as the strategies for expand the market share and
enhances the ability of the firms to generate more revenues as well as increase the goodwill and
reputation of the company. Yet, there are various issues which are faced by the firms for
following effective merger and acquisition strategies. The major concern is the intercultural
contact among the firms belonging to different geographies and this is known as Acculturation.
This happens because these cultures since people do not give up their values and beliefs easily
and a particular culture tries to dominate the other and this is clearly indicated in the above case
study wherein CEO of DeWall Pharmaceuticals Kaspar van de Velde trying to dominate the
meeting. This leadership exodus which happens in the cross-cultural mergers results in
employees losing their morale since they feel uncertain regarding their future as they have
aspirations towards the management regarding their career growth (Ahern, et. al., 2015).
In order to understand the issue faced in the above case study, Operating Synergy theory of
mergers can be applied wherein, operating efficiencies can be achieved in various functions such
as research and development since the firms exchange their competencies related to marketing
and finance as well as the skills and expertise of the employees can be utilised to the optimum
level. However, the issues related to employees are encountered since the actual number of top
executives has to be decided in order to maintain the efficient vertical flow of communication
This again contributes to the problems since both the firms will try to include maximum number
ofemployees because they trust their respective employees because the employees trust them for
providing them higher management posts (Norros, 2018).
Managing the employees is one of the most important tasks and the respective heads of the firms
are currently trying to gain as much as possible. CEO of BioHealth Labs, Steve Lindell has
different approach towards dealing issues as compared with his counterpart since he wants to
close the deal as early as possible and to change the posts of the employees after considering the
level of competencies. However, Kaspar wants to delay the integration process and hence, there
has been delays regarding the finalisation of the executives for managing various operations.
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2. Critique the process that is being applied to work out the details of the integration,
particularly with regard to structure and top management staffing using relevant
management theory and concepts.
The major concern during the mergers is to finalise the corporate structure and selecting the
executives for top management. Over-simplifying or under-estimating the employee-related risks
results in poor collaboration, incurring additional costs, and losing talent by the firm. Hence,
firms try to retain the best employees considering the interests of the firm.
The companies prefer using Organisational Change Management approach for avoiding because
it enables to reduce disruptions, developing an effective leadership structure, prioritising for
maintaining honest and transparent communications and aligning priorities and teamwork. This
results in developing the structure which ensures smooth flow of operations (Nordin, 2012). The
fundamental elements of change management are:
 Determining the leadership structure and assigning their responsibilities.
 Identifying, analysing, and mitigating the impacts on the firm and stakeholders
 Open an efficient communication channels by:
 Important messages explaining the importance of each phase of integration process.
 Communicating the goals of the proposed mergers and ways in which employees can
help.
 The outlook of the firm after merger.
 Explaining the impact of changes on employees and their future career growth.
 Presenting the milestones of each stage that has been achieved during the process.
 Explain the responsibilities and expectations of the management by forming new teams.
 Develop strategies for providing periodic training for growth and development of the firm
(Grant, 2014).
However, in the case study, there has been confusion regarding the integration process since the
top management has not been finalised which makes it difficult for deciding the future actions.
Since the operations can only be effectively performed when the roles and responsibilities are
delegated and the teams are formed which enables to assign the targets that are to be achieved.
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The reasons for facing the challenges related to integration of DeWaal Pharmaceuticals and
BioHealth Labs are:
Lack of Communication: Both the firms have not been able to communicate the values and
future career prospects of the employees clearly which has resulted in confusion among the
employees. This state of confusion has resulted in few employees to leave the firm because of
fear of job-loss resulting in losing the talented employees.
Lack of confidence in management: Employees lose the trust and confidence on the
management and look for new opportunities outside the firm (Stahl, et. al., 2013).
Lack of Support: The management will lose the cooperation from the employees which is vital
for performing the tasks efficiently since managers depend on the knowledge and expertise of the
employees for achieving the business targets.
Loss of competency: The lack of motivation of the employees result in the poor quality of
output resulting in losing the market share of the products and it is evident in this case study
where the share prices of BioHealth Labs have dropped by 20%.
All these have resulted because BioHealth Labs has not prepared a comprehensive document
resulting in taking hasty decisions and relying on the fact that the roles and responsibilities of
employees can be reassigned after ascertaining their performances in future. The level of
expertise offered by DeWaal Pharmaceuticals has also not been studied which has resulted in
delayed integration process. Understanding the competencies of the employees is important since
the talented and able employees can be retained which enhances the competitiveness of the firm
and overall objectives of merger can be achieved.
Another concern that that has been raised in the merger is the amount of fairness that can be
applied for retaining the executives. This happens usually in mergers since each individual tries
to understand the impact of the position occupied by the other firm. For instance, in this case,
study, both Kaspar and Steve try to retain their best employees Krug and Naipaul for managing
the company operations in India. This is due to the fact that Steve has not prioritised the
employee-management resulting in confusion and feeling of deprivation among the employees as
well as managers (Stahl, et. al., 2013).
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3. How would you recommend the conflicting values be resolved?
By considering the challenges that are being faced in the integration process of DeWaal
Pharmaceuticals and BioHealth Labs, the following steps can be followed for resolving the
issues are:
Developing Conflicts of Interests and Disclosure Policy:
This statement requires disclosing all the information related to the number of actual operations
possessed by the firms, valuation of total assets, and procedures that have to be followed in case
of conflicts. This ensures collecting accurate information as well as amount of control required
for managing the operations in particular location. Also, the number of actual employees and
staff required for performing the tasks efficiently can also be ascertained (Kaynak, et. al., 2013).
Engaging Legal Advisors and Third parties:
It is advisable to involve legal advisors and third parties for taking their expert opinion related to
the ways in which the proposed merger can be completed. Legal advisors can provide the
necessary inputs regarding the possible effects of concluding the deal and the measures that can
be taken to avoid future conflicts related to various transactions. The third parties such as HR
consultancies enables to conduct a skills audit, such as 360-degree reviews for understanding the
current expertise possessed by the employees and the suitable job roles that can be assigned for
the employees (Weber and Yedidia, 2012).
The advantages of involving third parties for performing skills audit are:
 There will be no bias in the reports as third parties directly reports to the top management
and hence, there is only a minimum interaction with the middle and lower management.
 The expert knowledge of the third parties is crucial for analysing the actual potential of
the employees since they are professionals in their field.
 These experts will have the knowledge regarding the actual requirements of the firm and
hence, the focus is maintained towards providing accurate information to the management.
 The HR department will be relieved of performing the audit and will be able to
concentrate on its core duties.
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Building an effective communication network:
Communication is vital during mergers since this helps to overcome hindrances, as well as
perspective of the other parties, can also be understood. The benefits of developing effective
communication are:
 Communication is essential in cross-cultural integration since the values and beliefs of
people can be understood and suitable communication techniques can be developed which results
in smooth performance of activities.
 Misunderstanding can be minimised as the parties will be able to communicate their
opinion and state their aspirationsclearly (Cheng and Seeger, 2012).
 Employees will be able to know the actual benefits of mergers and their career prospects
in the future.
 The stakeholders will be able to ascertain the value proposition of the merger in the
present market scenario and the benefits offered by merger.
 The management will have complete cooperation of the employees since their roles and
responsibilities will be communicated which enables to complete the integration process quickly.
 The views and opinion of the participating firms can be communicated which helps to
understand the different perspectives and ensures building trust and confidence (Cheng and
Seeger, 2012).
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4. What process would you recommend that the two senior executives and their HR
people follow to work out the details of integration in regard to the top structure?
The differences in approach of the two leaders is characterised by two different cultures
practiced in the respective countries. The individual perceptions are developed because of the
particular belief and culture followed in the region. The Hofstede model can be used to
understand the different opinion and belief of two chiefs of the firms.Hofstede has defined
culture as the collective programming of the mind which distinguishes different groups of human
beings and contains compares the cultures of the countries by broadly classifying the approaches
such as power distance, individualism, masculinity, uncertainty avoidance, long-term orientation,
and indulgence (Minkov and Hofstede, 2012).This approach defines the qualities of the people
living across the world. This model has been illustrated below:
Figure 1: Hofstede Model of Netherlands and the USA
Source: (Hofstede Insights, 2017)
From the above information, it can be analysed that there is similarities between the cultures of
the USA and the Netherlands except for masculinity and long-term orientation. The American
society is driven by competition, achievement, and success, whereas, in the Netherlands, the
society cares for others and standing out from the group is not admirable and it is important to
maintain work/life balance.The Netherlands society believes in setting long-term goals and has a
pragmatic approach and people easily adapt to the changing circumstances and have the qualities
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of thriftiness and perseverance for achieving the desired results. In the case of Americans, they
believe in quick results and hence, they prefer to set short-term targets so that the results can be
achieved as early as possible.
The above information can be used by the respective heads for building effective communication
for resolving cross-cultural conflicts in the following ways:
Learning about new culture:
The primary task for both these leaders is to accept the different attitude and perception of
foreign cultures and the level of discrepancies have to be identified for building cooperation and
understanding (Minkov and Hofstede, 2012).
Ignoring the cultural differences:
Ignoring diversity of cultures enables to minimise the issues and strategies can be built for
developing coordination among each other. This enables to consider the mutual benefits that can
be utilised for achieving the overall objectives.
Communicate the differences:
The cultural differences have to be communicated to the employees and stakeholders so that they
can prepare themselves for the impending changes that can happen because of mergers.
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5. Evaluate the usefulness of the management and organisational theories and
practices from the subject that you have applied in analysing the case.
The benefits of Organisational Change Management Approach for DeWaal Pharmaceuticals and
BioHealth Labs can be evaluated as:
Assessment and Motivation:
By developing this approach, the firms will be able to communicate their visions effectively and
the milestones that have to be achieved in future. This motivates the employees to perform better
and they thrive to achieve their targets (Georgalis, et. al., 2015).
Reduction of Risks:
By providing sufficient time for planning the changes that have to be implemented, the time
period for its execution is minimised since each phase of merger is thoroughly planned.
Additionally, the coordination is improved which enhances the efficiency of the work performed.
Optimum utilisation of the resources:
Since planning involves ascertaining the value of the existing resources, this helps to develop
strategies for using those resources instead of procuring additional resources including
manpower. This is important because each firm contributes individually towards attaining the
goals and objectives and each share different resources for conducting business.The skills audit
that is conducted enables to understand the level of skill possessed and the actual expertise
required for the job. The gaps are identified and the training modules are designed so that the
expertise of the employees can be enhanced. This enables to develop the second line of managers
within the organisation.
Increased Rate of Returns
The enhanced skills of the employees and optimum utilisation of the resources enable to perform
the various tasks efficiently which enhances the profitability of the new venture (Georgalis, et.
al., 2015).
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The benefits of Hofstede model are:
Understanding foreign cultures:
The main benefit of using this model is it helps to understand the cultural belief of foreign
countries and the firms will be able to develop strategies for building strong communication
channels. An example can be considered as the Americans believe in competition and success
and showcasing their achievement, on the other hand, in the Netherlands, the society considers
the position of others and displaying the achievements is not admirable (Sturman, et. al., 2012).
Understand the reason for different approaches:
The model enables to understand the different approaches used by the foreign countries. For
instance, as per this model, Americans believe in analysing the results quickly so that suitable
modifications can be made for achieving short-term objectives. Whereas, in the Netherlands,
people are patient and they wait for a longer period of time for achieving the goals. This explains
the reason for Steve taking hasty short-term decisions and Kaspar is not worried about delayed
process since the planning has been considered for long-term perspective.
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Conclusion
From this report, it can be concluded that merger is one of the important business strategy that is
adopted by the firms for increasing the market share. Mergers enable to exchange the important
resources among the firms which enhance the overall value and the firms will be able to develop
new products and services. The firms also benefits by exploring new avenues and they will be
able to operate in foreign markets which increases the revenues as well as enhancing the
goodwill and reputation of the company. DeWaal Pharmaceuticals and BioHealth Labs have to
understand the cultural differences and identify the ways in which the communication channels
can be built for completing the merger process quickly. Employees and stakeholders have to be
notified the changes that can happen and the impact of merger on their career prospects has to be
explained in order to motivate them and get their support for the proposed merger.
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