DaimlerChrysler Integration and Culture

This assignment delves into the integration process of DaimlerChrysler, highlighting the cross-cultural communication issues that arose due to the merging of German and American companies. It explores how the new management tackled these challenges using various cultural models, including Hofstede's framework. The analysis focuses on successful strategies implemented by both companies to ensure a smooth integration process.

Running head: CASE STUDY ANALYSIS
CASE STUDY ANALYSIS
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1CASE STUDY ANALYSIS
Table of Contents
Introduction................................................................................................................................2
Various Stages of Merger Progression.......................................................................................2
Reasons for DaimlerChrysler Merger........................................................................................3
Analysis of the Various Issues Inherent in the DaimlerChrysler Merger Process.....................5
Hofstede Model of the National Culture................................................................................5
Individualism vs. Collectivism...............................................................................................6
Theory of Low and High Context Culture.............................................................................8
Laurent’s Study of Culture.....................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

2CASE STUDY ANALYSIS
Introduction
The DaimlerCheysler merger has raised some important issues related to the cross-
cultural communication as the earlier two organizations named Daimler-Benz AG and
Chrysler Corporation were from two different nations, sharing different working culture
(Schneider, Schneider and Barsoux, 2003, p. 94). The report will focus on different stages of
DaimlerCheysler merger progression, the reason for the merger and the analysis of the
various issues in the merger process by Hofstede Model of the National Culture, theory of
low and high context culture and Laurent’s study of culture
Various Stages of Merger Progression
.The Mercedes-Benz, a brand of Daimler-Benz AG, sold total 600000 vehicles and
became the world’s largest manufacturer in 1995 and Chrysler sold 2.7 million units in the
same year and became the world’s sixth largest manufacturer. Therefore the companies at the
time of the merger were leading the market.
In May 7, 1998, Daimler-Benz AG, a German manufacturer of internal combustion
engine and motor vehicles merged with the famous American automobile manufacturer
Chrysler Corporation and constitutedDaimlerChrysler AG. Both these companies were joined
together to own a company, which code name was Q-star during 1994/95(Morosini and
Radler, 2003, p. 4). The importance of formation of the Q-star was it was the initial entity
before the official introduction of the DaimlerChrysler AG and the executives from both
companies could examine whether they could work together.
However, the contacts between these two companies was being continued after falling
apart of Q-star. The importance of this stage was how the merger progression was proceeded
after falling apart of the initial entity called Q-star.

3CASE STUDY ANALYSIS
Project Gamma, the code name given by Schempp and Robert Eaton to discuss about
the merger initiates was formed March 2, 1998(Morosini and Radler, 2003, p. 4). The
importance of this stage that Project Gamma had given the more formal negotiations of the
informal talks between Schrempp and Eaton about the possible merger. According to
Morosini and Radler (2003), the Project gamma had also provided opportunities to
include the other important executives of both the companies. Under this project, delicate and
difficult issues were handled, like, the possible legal structure of the newly merged entity.
Project Gamma was responsible for the name of the new joint company, the amount of the
premium paid to Chrysler shareholders and worker representation following the German law
in an American corporate environment(Morosini and Radler, 2003, p. 5). However,
according to the suggestion of Project Gamma about the location of the newly formed
company, the members of Project Gamma decided that, for taking the advantages of the
German tax benefits, the new company should be located in Germany.
On May 6, 1998, the international media had reported about the potential merger
between the Daimler and Chrysler for the first time. This is the final stage of the merger
process and the reason lies here in its final procedure. On the same day, the supervisory board
of Daimler-Benz met in Stuttgart and announced about the deal. On the next day, the deal
was announced publicly by the CEOs of both the companies. On May 14, 1998, the
supervisory board of Daimler-Benz AG provided the merger of its approval (Morosini and
Radler, 2003, p. 5).
Reasons for DaimlerChrysler Merger
Daimler-Benz AG was the oldest car manufacturer company in Germany. Since mid
1980s, the company had been going through number of radical changes. The company faced
largest loss in the German history when in 1995 the diversification strategy came into sudden

4CASE STUDY ANALYSIS
halt. In response to this largest loss, Jurgen Schrempp, the newly appointed CEO of Daimler-
Benz AG implemented certain management tools that include managing financial returns and
introduction of the ‘US style’ in the corporate sector of Germany(Morosini and Radler,
2003, p. 2). In addition to that, the CEO channelized the company’s product portfolio from
35 businesses to 23. However, in 1996, the company started making profit again.
In early 1990s, the CEO wanted that the company should focus on the globalizing its
operation, which included opening a factory in the United States and joining several foreign
nationals. However, in the middle of 1990s, the company was visible in the international
brand lists(Morosini and Radler, 2003, p. 2).
On the other hand, in 1993, the new CEO of the Chrysler Corporation focused on
reducing its dependency from the North American market. The decision was taken due to
lack in the management capabilities implementing internationalizing plans.
However, both the companies felt the necessity to implement the internationalizing
plans and the profit after proper implementing the internationalizing plans(Morosini and
Radler, 2003, p. 3).
During 1994/95, the CEO of the Chrysler met for the first time with the CEO of the
Mercedes-Benz in an occasion of bidding for minivan contract(Morosini and Radler,
2003, p. 3). The negotiation for the merger was started from that occasion. The reason for
this merger was to expand the company’s global reach. Chrysler was an organisation that was
popular in the home country and the company was looking for an opportunity to expand the
business oversees. Another reason for the merger was reduction of the cost of production.
Both the companies have been a benchmark and a game changer in its own country and hence
the merger was deemed to be logical and rational.

5CASE STUDY ANALYSIS
Analysis of the Various Issues Inherent in the DaimlerChrysler Merger Process
Hofstede Model of the National Culture
Power Distance Index
As is shown in the graph supplied in appendix 1 the Power Distance Index of USA is
40 and Germany is 35.According to Hofstede’s model, the Power Distance Index could be
applied in cases of granting of leading position, payment of the top executives and execution
of PMI and IRT in the merger program of DaimlerChrysler(Fontes, 2017, p. 10). As the
German corporate arena is more complicated and conservative than the USA corporate style
of management, the handling and acceptance of power and its distribution should be unequal
in nature(Hofstede, 2013, p. 17). In case of the merger, the 58% shareholder was from
Daimler-Benz and in the integration council, the number of Daimler-Benz executives were
five where it was three in case of Chrysler(Morosini and Radler, 2003, p. 5). Even
there are differences in the total amount of salary of the top executives prior to the
merger(Morosini and Radler, 2003, p. 6).
Uncertainty Avoidance Index
The fundamental issue of the Uncertainty Avoidance Index dimension is how an
organization deals with unforeseen situations, ambiguity and uncertainty(Fox, 2014,
p.46).
The uncertainty Avoidance Index is 65 for Germany and 46 for America which is
below average (Hofstede, 2013, p.39). The approach of analysis of the risk and unforeseen
circumstances by the Germans are more rational and deductive rather than inductive. The
difference in the though process to deal with risks forms the major gap in this merger.

6CASE STUDY ANALYSIS
Individualism vs. Collectivism
In individual approach, one concerns to oneself only. On the other hand, in collective
approach, individual shows preferences for existing in a tightly-knot social
structure(Hofstede, 2013, p. 25).
In case of the merger, as there are differences between the preferences of personal
freedom and group integration in case of Germany and USA, the issues are allotment of
leading positions and various ways of work culture and competences to the problem
solve(Morosini and Radler, 2003, p. 6).The individualism vs. Collectivism is 91 for
Chrysler and 67 for Daimler(Hofstede, 2013, p. 36). America is one of the most
individualist countries, which hits that the society is loosely bound the society is more
outgoing juxtaposing the conservative society of Germany.
Masculine vs. feminine
This Aspect as seen in the graph supplied in appendix 1 represents the masculinity
score of both Germany and USA. Germany is at 66 where as USA is at 62 which show that
both the countries are masculine in nature and has a tendency of winning (Hofstede, 2013,
p.42). Hence if there is one aspect of the culture which matches between the two companies
is this one. Both the companies are benchmarking and pioneers in several fields in the
industry and the market. This is why many did not see the failure of the merger at the
beginning(economist.com, 2017).
Long-term Orientation vs. Short-term Orientation
Issues related to this dimension are allocation of leading positions, selection of the
right integration approach and various styles of working and problem solving competences.

7CASE STUDY ANALYSIS
The similar types of cross-cultural issues could be analyzed by Indulgence vs.
Restraint dimension. The Indulgence stands for a society that would allow free conciliation of
the basic and the natural forces of the human relating enjoyment in life. The Restraint factor
is just the opposite of it, which suppresses the gratification of the basic for enjoyment
(Hofstede, 2013, p.35).
As Germany is more conservative in nature by handling the issues related to the
management, its norms of how people would deal with work time and leisure would be
conservative in nature. In contrary to this, American style is much free (Trompenaars and
Hampden-Turner, 2011, p.21). The long-tem orientation vs. Short-tem orientation is 83 for
Germany and 26 for US (Hofstede, 2013, p.26). Applying Hofstede’s model, the German
culture stands for the restraint and American culture stands for the indulgence(Schneider,
Schneider and Barsoux, 2003, p. 33). The Indulgence vs. Restraint is 68 for Germany and 40
for US (The uncertainty Avoidance Index is 65 for Germany and 46 for America (Hofstede,
2013, p.42). However, the management of the merging company is well aware of the fact of
difference in culture and had handled the issue in delicate manner.
Indulgence vs. Resistance
This factor is the limit to which people can monitor their desires and impulses,
depending upon the way they are bought up. The German society is restrained in nature thus
this society has a tendency towards cynicism and pessimism. On the other hand the American
society scores high on indulgence. Perhaps this is one of the major cultural conflicts in
between the merger of the two companies. For two company that comes from a background
where there are juxtaposing approaches of control of desire the ideas and the theories related
to human behavior will be interpreted differently by the German company and differently by
the American company. For example: analysis of consumer behavior, market segmentation
etc(economist.com, 2017).

8CASE STUDY ANALYSIS
Theory of Low and High Context Culture
According to Edward T. Hall, high context are the defined as the society and
groupswhere the communication and the process of connection with other people are closed
and implicit, whereas the low context deals with the more explicit cultural practices.
The culture ofAmerica is an example of low context culture while Germany is an
example of high context culture (Trompenaars and Hampden-Turner, 2011, p. 34). As two
different countries have separate cultural context, the merger faced some problems.
Laurent’s Study of Culture
According to Laurent’s study of culture, managers from the international organization
need cross-cultural proficiency to manage multiculturalism(Fox, 2014, p.32). An individual
manager needs strong personality, sensibility and effective communication skill to manage
the cross-cultural issues (Storti, 2011, p.63). In the merger case, the top executives from both
the company would set the tone of the integration by their personal behaviour. Both the
companies wantto integrate in such a way that there are clear and defined responsibilities for
the implementation. The objectives actually say so.

9CASE STUDY ANALYSIS
Conclusion
It can be concluded by stating that the new management of the DaimlerChrysler had
overcome the cross-cultural communication issues raised out of the merger process. The
issues and the process of overcoming have been discussed with various cultural model of the
management.

10CASE STUDY ANALYSIS
References
Economist.com. (2017). The DaimlerChrysler emulsion. Available at:
http://www.economist.com/node/341352 (Accessed 10 Dec. 2017).
Fontes, L.A. (2012) Interviewing clients across cultures: A practitioner's guide. Guilford
Press. Available at:
http://www.imiaweb.org/uploads/docs/interviewing_clients_across_cultures_flier.pdf
(Downloaded: 1 December 2017)
Fox, K. (2014) Watching the English: The Hidden Rules of English Behavior. Nicholas
Brealey Publishing. Available at:
https://books.google.co.in/books/about/Watching_the_English.html?id=-kDPgxYU-
s0C&redir_esc=y (Downloaded: 1 December 2017)
Hofstede, G. (2013) National culture dimensions. The Hofstede Center. Available at:
https://www.hofstede-insights.com/models/national-culture/ (Downloaded: 1 December
2017)
Hofstede-insights.com. (2017). Country Comparison. Available at: https://www.hofstede-
insights.com/country-comparison/germany,the-usa/ (Accessed 10 Dec. 2017).
Morosini, P. and Radler, G. (2003) ‘DaimlerChrysler: Organizing the Post Merger
Integration’, IMD International, pp. 1-22.
Schneider, Susan. C. Schneider. and Barsoux, Jean-Louis. (2003) Managing Across Cultures.
Prentice Hall. Available at:
https://books.google.co.in/books/about/Managing_Across_Cultures.html?
id=KGIX5wSNQmcC (Downloaded: 1 December 2017)

11CASE STUDY ANALYSIS
Storti, C.(2011). Figuring foreigners out: A practical guide. Nicholas Brealey
Publishing. Available at:
https://books.google.co.in/books/about/Figuring_Foreigners_Out.html?
id=cJkPSSPwMWwC&redir_esc=y (Downloaded: 1 December 2017)
Trompenaars, F. and Hampden-Turner, C.(2011)Riding the waves of culture: Understanding
diversity in global business. Nicholas Brealey Publishing. Available at:
https://pdfs.semanticscholar.org/baa5/8e86493834d21459cba14437d8900542d666.pdf
(Downloaded: 1 December 2017)

12CASE STUDY ANALYSIS
Germany
USA
Appendix 1
Figure: Hofstede comparison between Germany and USA
Source: hofstede-insights.com, 2017