IHRM Challenges: Johnson & Johnson's Acquisition of Actelion, BUSN3050

This essay delves into the international human resource management (IHRM) issues that arose from Johnson & Johnson's acquisition of Actelion. The analysis examines the challenges related to employee selection, attrition, and cross-cultural communication within the newly formed firm, Idorsia. The essay highlights how power politics and a lack of expertise in management roles contributed to IHRM issues, impacting the firm's profitability and employee morale. Furthermore, it explores how differing organizational cultures between Johnson & Johnson and Actelion created intercultural issues, affecting employee performance and workplace dynamics. The essay provides a comprehensive overview of the IHRM challenges faced during the cross-border merger and acquisition, offering insights into the importance of effective HRM practices in such scenarios.

Running head: INTERNATIONAL HUMAN RESOURCE MANAGEMENT
International Human Resource Management
Name of the Student:
Name of the University:
Author’s Note:

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As opined by Cooke (2016), the process of internationalization and the widespread
usage of different kinds of innovative technologies have significantly changed the nature of
the contemporary business world from that of the earlier times. Reiche, Harzing and Tenzer
(2018) are of the viewpoint that there are various factors which motivate the business firms to
undertake the process of international expansion like to opportunity to increase their customer
base and thereby profitability, opportunity to enhance the scope of their business and others.
In this regard, it needs to be said that there are various methods through which the firms enter
into the business markets of different host nations like merger and acquisition, foreign direct
investment (FDI), strategic alliances, franchising, licensing and others (Hajro 2015).
However, one of the most important problems that the diverse firms face for the process of
their business in the host nations is related to the effective management of their human
resources because of the fact that they are not sure regarding the kind of human resource
management (HRM) that they need to adopt in the host nation (Sarala et al. 2016). This can
be explained on the basis of the fact that national cultures of different nations, on which the
business style depends, vary from each other and the international firms are often in a
dilemma whether they should follow the HRM that they had been following in the parent
nation or should they modify it on the basis of the national culture of the host nation. This
essay will analyze the international human resource management issues that the business
firms during the process of cross-border mergers or acquisitions in the particular context of
Johnson & Johnson’s acquisition of Actelion.
Tarique, Briscoe and Schuler (2015) have articulated the viewpoint that the cross
border merger and acquisitions have become the recent trend within the framework of the
contemporary business world and its emergence can be attributed to the process of
internationalization or globalization. As opined by Yao (2016), cross border merger and
acquisitions can be defined as the process through which a firm either undergoes a merger

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with some other business firm operational in another nation or acquire its. In this regard, it
needs to be said that the firms through the usage of this process either acquires a particular
section of the firms or completely acquires or for that matter forms a new firm by its merger
with the other concerned firm (Teerikangas et al. 2015). More importantly, there are various
benefits or rewards that the firms are likely to get by indulging in such a process like the
opportunity to use the resources of the other firm, their customer base, the product portfolio
offered by them and others. Furthermore, recent researches in a succinct manner reveal the
fact that this is one of the most commonly used modes of market entry into the business
markets of the other host nations (Xie, Reddy and Liang 2017). This is perhaps one of the
major reasons for the extensive usage of this process in the recent times by the different
business firms from all over the world and some of the most important examples in this
regard are Johnson & Johnson’s acquisition of Actelion, the merger between U.S.-based
chemicals firm Huntsman Corp (HUN.N) and European rival Swiss Clariant AG (CLN.S)
and others (CNBC 2019). As a matter of fact, an article of Forbes.com (2019) clearly reveals
the fact that the instances of cross border merger and acquisitions in the last decade between
the different US and European business firms have increased by more than 82% because of
the higher propensities shown by the firms to indulge in the process of global expansion.
However, despite the plethora of benefits offered by the concerned process there are various
issues like international human resource management (IHRM) issues, cross-cultural issues
and others that the firms need to take into account for indulging in the concerned process
(Reiche et al. 2016).
Johnson & Johnson in January 2017 made the offer to acquire the Swiss firm Actelion
for the creation of a new R & D firm, which is called by the name of Idorsia (Jnj.com 2019).
The Swiss firm was acquired by Johnson & Johnson for $30 billion or more particularly each
of the shareholders of the concerned firm were to receive around “$280 per Actelion share”

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after the formation of the new firm in June 2017 (CNBC 2019). This move on the part of the
firm is not only considered as an initiative to enter into the pharmaceutical business market of
Switzerland but also as an initiative on the part of the concerned firm to reduce the business
competition that it had faced in the pharmaceutical business industry in the earlier times
(Forbes.com 2019). More importantly, Johnson & Johnson not only got the opportunity to use
the brand image of the firm Actelion for the process of their business in Switzerland but at
the same time was able to utilize the resources of the concerned firm for the development of
new line of products. On the other hand, the firm Actelion was also being able to gain in a
significant manner through the deal by the reinvigoration of its business and profitability
since in the recent times it had been seen that the performance as well as the profitability of
the concerned firm had gone down in significant manner (CNBC 2019). However, at the
same time it was seen that the new firm Idorsia, which was formed through the deal under
discussion faced various kinds of IHRM issues and also cross-cultural communication issues
that adversely affected the prospects of the concerned firm.
Francis, Huang and Khurana (2016) have articulated the viewpoint that one of the
major issues that the different firms undertaking the process of cross border merger and
acquisition face and which as a matter of fact significantly affects the stability of the new
firm that had been created can be ascribed to the IHRM issues. As opined by Humphery‐
Jenner, Sautner and Suchard (2017) one of the major IHRM dilemmas that the firms during
the process of cross border merger and acquisition is the fact that they are often confused
regarding which employees to offer important management designations and others for the
effective management of the business operations of the new firm that had been created on the
basis of the process of merger or acquisition. This can be explained on the basis of the fact
that the top-performing employees from both the firms involved in the concerned process had
expectations that they would be rewarded for the hard-work that they have done for the sake

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of their firms and also the contribution that they have made towards the growth or the
development of their firm (Xie, Reddy and Liang 2017). However, it is seen that the firms
undergoing such processes often fail to live up to the expectations of the employees and this
is one of the major reasons for the high employees attrition rate that the firms undergoing
such processes often face (Deng and Yang 2015).
An analysis of the IHRM issues faced by the new firm Idorsia, created through the
merger of the two firms under discussion here would reveal insightful information regarding
the IHRM issues faced by the firm undertaking the process of cross border merger and
acquisition. For example, it was seen that immediately after the declaration of the news
regarding the concerned merger, the employees from both the firms involved in the process
developed high hopes for getting the important management and other designations of the
new firm Idorsia (Forbes.com 2019). However, when the list of the employees who would
hold the management designations in the new firm came out it was found that only a small
fraction of the top-performing employees from both the firms were given important
management destinations. The net result of this was that the majority of the hard-working
employees of the both the firms felt that their hard-work as well as the contribution that they
have made towards the growth or the development of the firm was not being recognized or
appreciated by the firm (CNBC 2019). Thus, it was seen that the employee attrition rate of
both the firms got increased in this condition because of the failure of the concerned firms to
fulfill the expectations of their employees.
A major issue which was seen within the framework of the employee selection
process which was used by the two firms for the selection of the employees to the top
management designations was the fact that the employees were selected on the basis of power
politics rather than their capabilities (Forbes.com 2019). For example, it was seen within the
framework of the new firm which was created, CEOs from both the firms involved in the

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process wanted to have the maximum amount of power by way of appointing employees
from their own firm to the top management destinations rather than thinking about the growth
or the prospects of the firm and thereby appointing the best qualified individuals from the
firms on the basis of their capabilities. Another significant IHRM issue which the newly
created firm faced was the fact that the individuals who were appointed to the higher
management designations in this firm lacked the required expertise to manage the affairs of
the concerned firm (CNBC 2019). The net result of this was that although the individual
profits made by the firms Johnson & Johnson and Actelion soared through the news of the
merger both of these firms were undertaking yet at the same time it was seen that the
profitability made by the new firm Idorsia failed to match the hype that was created around it
(Forbes.com 2019). This can be directly related to the IHRM issues that the firm faced
regarding the selection of the employees to the higher management designations and also the
high employee attrition rate that the concerned firms faced in the light of the merger because
of their inability to fulfill the expectations of the employees.
Deng and Yang (2015) are of the viewpoint that the cross-cultural issues that the
different firms undergoing the process of cross border merger and acquisition is another
major problem or issue that the firms face which in turn contributes in a significant manner
towards the diverse IHRM issues that they face. For example, in the majority of the cases it is
seen that the firms undergoing the process of cross border merger and acquisition are from
different nations whose national cultures are significantly different from each other. More
importantly, according to Cooke (2016), the element of national culture had a profound
impact on the working style of the individuals and also the kind of organizational culture
which would be predominant in the firms that had been formed through the process of cross
border merger and acquisition. However, in the majority of the cases it is seen that rather than
taking the help of an organizational culture which will integrate the cultures of both the firms

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involved in the process, the firms just try to follow their individual organizational culture that
they had been used to following (Reiche et al. 2016). This in turn creates various kinds of
intercultural issues which not only adversely affect the performance of the employees but at
the same time create an uncongenial workplace culture that can significantly affect the
growth or the development of the firm.
In the particular context of the newly created firm Idorsia it was seen that both
Johnson & Johnson and Actelion tried to follow the organizational culture that they had been
used to following in their native nations of operations (CNBC 2019). In this regard, it needs
to be said that the firm Actelion belongs to the nation of Switzerland and the firm Johnson &
Johnson belongs to the nation of USA and the national cultures of both of these nations are
drastically different from each other (Refer to Appendix 1). However, it was seen that rather
than taking this differences in national cultures into effective consideration and thereby
formulating the kind of organizational culture which will take into account elements of
national cultures of both of these nation, the newly created firm resorted to the usage of a
fairly simple organizational culture which completely disregarded these aspects (Forbes.com
2019). This in turn lead to the creation of different kinds of IHRM issues like intercultural
conflicts, intercultural miscommunication and others which in turn significantly affected the
work of the concerned firm. More importantly, the differences in the working styles of the
employees of these nations conflicted with the overall work of the firm and also lead to the
creation of different kinds of disputes or conflicts which in turn adversely affected the
organizational culture of the firm.
There are various measures which could have used by the two firms under discussion
here which were involved in the concerned process of cross border merger and acquisition
that could have mitigated the IHRM issues that the newly created firm Idorsia. For example,
both the firms could have resorted to the usage of a common selection process for the

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recruitment of employees to the higher management designations of newly created firm rather
than selecting the employees on the basis of power politics. This would have given equal
preference to all the employees from both the firms and the best qualified candidates would
have got selected for the newly created firm. More importantly, this would have significantly
fulfilled the expectations of the employees as well as reduced the employee attrition rate and
would also have ensured the work of the newly created firms did not gets affected. Another
important measure which could have been used by the firms is the creation of an
organizational culture which would have taken into account the national cultures of both
USA and Switzerland. This in turn would have significantly reduced the cross-cultural issues
that the employees faced within the framework of the newly created firm. Apart from these
two there are other measures like talent management, effective people management and
others which could have been followed for the resolution of the IHRM issues that the newly
created firm Idorsia faced.
To conclude, cross border mergers and acquisitions have become the recent trend
within the framework of the contemporary business world and are often seen as the net result
of the internationalization strategies followed by the firms. More importantly, it is seen that
the concerned process offered various benefits to the firms undergoing the same process like
the opportunity to earn a higher amount of profit, expansion of the scope of their business, the
opportunity to gain competitive advantage and others. However, at the same time it is seen
that there are various IHRM issues that the firms undergoing the concerned process face
which adversely affects their growth prospects. For example, it is seen that the employee
attrition rate of the firms gets enhanced during such processes because of the inability of the
concerned firms to fulfill the expectations of their top-performing employees. In addition to
this, the cross-cultural issues that the employees face are another major IHRM issue which
significantly affects the prospects of the concerned firms. These aspects of the process of

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cross border merger and acquisition become apparent from the analysis of Johnson &
Johnson’s acquisition of Actelion for the creation of the new firm Idorsia and IHRM issues
faced by it.

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References
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offer on June 16, 2017. [online] Available at: https://www.actelion.com/media/media-
releases?newsId=2112236 [Accessed 8 Apr. 2019].
CNBC 2019. Johnson & Johnson to acquire Actelion for $30 billion with spin-out of new
R&D company. [online] Available at: https://www.cnbc.com/2017/01/26/johnson-johnson-to-
acquire-actelion-for-30-billion-with-spin-out-of-new-rd-company.html [Accessed 8 Apr.
2019].
Cooke, F.L., 2016. Human resource management in the context of mergers and acquisitions.
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Deng, P. and Yang, M., 2015. Cross-border mergers and acquisitions by emerging market
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Hofstede Insights 2019. Country Comparison - Hofstede Insights. [online] Available at:
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mergers and acquisitions. The Routledge companion to international human resource
management, pp.423-456.

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Xie, E., Reddy, K.S. and Liang, J., 2017. Country-specific determinants of cross-border
mergers and acquisitions: A comprehensive review and future research directions. Journal of
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Appendix 1
Difference in the national cultures of USA and Switzerland
Source: Hofstede Insights 2019