Emergence Of Globalization And Fierce Competition

Published Date: 02 Nov 2017

Introduction:

In the last decades the emergence of globalization and fierce competition in international markets has pushed companies to be competitive at a worldwide scale.

Companies are establishing their presence globally, seeking to increase profitability, looking for expansion, growth and lower cost in order to respond to the increasing pressures of globalization and technological change.

From the 1980 until today, the world has witnessed an increase in M&A between corporation of different sizes and from different industries.

Mergers and acquisitions (M&A) become a widespread phenomenon and essential vehicle for corporate evolution to gain significant financial performance, growth and sustainability by Multinational Corporation.

M&A activity hold a strategic option that companies select to face the global competitive market and to create a global presence by entering the inaccessible foreign markets.

The human capital play an important role in M&A because they carries the whole process and today a large scale of M&A are influencing and affecting the lives of millions of people worldwide and the satisfaction and commitment of those employee this the key that added value to such companies for stakeholder.

The values of mergers and acquisitions in 1998 totalled$2.5 trillion (Viscio, Harbison, Asin, & Vitaro, 1999). the mergers and acquisitions continue their progression in the global business landscape with $ 3,7 trillion in 2006 against 3,4 trillion in 2000 (Thomson financial, 2008) .

Unfortunately, many M&A do not reach to the expectations in terms of increasing shareholder value and value is rarely created through mergers and acquisitions.

Several researchers have shown that mergers and acquisitions have had an unfavorable impact on the profitability of the combined organization (Cartwright & Cooper, 1996; Deogun & Lipin, 1999; Eberhart, 2001; Viscio et al., 1999)

Nevertheless, many researchers have highlighted the high rate of failure among M&A, and the difficulty to achieve expected results and synergies.

Therefore, many factors explain the unachieved goals of a large amount of mergers and acquisitions.

Among the factors of failure, many analysts have pointed out the determinant influence of the cultural aspect in the success or the failure of a cross border merger.

Indeed, Culture play a significant role in the success of an effective integration and especially in cross border merger and is considered as the most complicated factor to manage in mergers and acquisitions.

The "people problem" is well-known as an important factor that contributes to the success or failure of M&A because the implementation of the merger depends on employees (Marks & Mirvis, 2001).

When two different companies with different backgrounds, histories and ways of working get together especially in cross borders, it imply to give a lot of consideration to national cultures and corporate culture which corresponds to the habits, thoughts, beliefs that differentiate people from one country to another.

Going global and working at a worldwide scale imply meeting and working with different cultures in order to gain a sustainable competitive advantage.

In general, mergers and acquisitions correspond to significant changes in organizational environment; the new organizations member must adapt to the new cultural norms and accept basically different ways of doing things (habits, thoughts, beliefs).

In 2006, in a paper from the Economist Intelligence Unit, 67 percent of survey respondents pointed out cultural integration as both the most important people issue and the most critical factor in a successful M&A deal (Bundy and Hukins, 2009). According to Hill (2005: 498) a lot of acquisitions failed because of cultural clashes between the acquiring and the acquired firm.

However, the cultural issue in M&A is often neglected and too less emphasized.

Plus, according to the research by CFO Magazine, Business Week, Fortune 70% of mergers and acquisitions fail to achieve their anticipated synergies because the leaders do not recognize the importance and the influence of the human factor as one of the most important issues during the post-merger integration process.

Senior leaders who have experienced a merger reveal that most of them recognize that human resource- related issues are a growing root cause of failed mergers.

Unfortunately only the ones that have been facing cultural problems in the past appreciate the worth of the experience.

They usually underestimate the process of integrating different corporate cultures which leads into tremendous human resources issues that can devastate the newly merged company.

Moreover, leaders and M&A teams do not pay attention on managing cultural change though they are more preoccupied by the shareholder value and financial synergies and to close the deal.

As former IBM CEO Louis Gerstner mentioned in his book, Who Says Elephants Can’t Dance, "Culture isn’t just one aspect of the game – it is the game…" (Bundy and Hukins, 2009). Indeed, an organization is nothing more than the collective capacity of its people to create value (Gerstner, 2002).

The management of the human side of change is the real key to maximizing the value of a deal.

Outline of the thesis:

In order to have a better understanding of the corporate culture s and national culture issues,In this paper we will go first through a general M&A framework followed by more detailed theories concerning organizational cultures.

The merger and acquisition context (different types, methods and the classification of mergers and acquisitions and the motivations of their emergence), the corporate culture Therefore, we have decided to focus our study in compiling and analyzing the literature about corporate culture in M&A.

(Define terms as corporate culture and national culture, and their interrelation. Moreover, we will illustrate an acculturation model, its stages and modes. We then focus on the leader‟s role in integration process during mergers and acquisitions).

A remplir avec chapitre 3

We will focus on the corporate culture aspect during mergers and acquisitions as it plays an essential role in the success or the failure of M&A.

The second part will be illustrated by case studies: the Daimler-Chrysler (a failure) mergers. The case DaimlerChrysler merger represents the difficulty that leaders can meet in any cross border merger in the automotive industry. It is the typical frame where the cultural issues have been underestimated.

The research question:

Many reasons explain the failure of mergers and acquisitions but the cultural aspect is one of the most complicated to understand Moreover, culture can be studied from different perspective in M&A because it imply to look deeper at organizational and national culture to identify their influence on cross border merger.

Organization and managers need to have a greater understanding of the importance of organizational variables such as leadership styles and organizational culture ,since changing the way organizations conduct their businesses means changing the people and their cultures.if two companies come together and their culture are incompatible ,this will have a negative impact on outcome.(Cartwright&cooper,1996)

When two companies merge, one of the main issues is the compatibility of cultures and which culture the companies have to adopt in integration? How to communicate effectively across cultures? How does corporate culture and national culture influence the employee environment? What are the consequences and outcomes of cultural clash? And how employees perceive change?

A common culture is far away to be the convenient solution.

Thus, the culture of a company is deeply linked with the different elements describing an organization (the history and the experience of the company).

Both companies will not renounce to their own culture, or make some concessions to give up some aspects of its culture because it likes losing its own identity.

Each company has its own culture and it represents company identity: the management style, way of doing things, the behavior of employees.

When it comes to cross border mergers, M&A are expected to face more problems than domestic ones due to cultural differences and national culture (patriotism).

The companies present the specificity to confront both national culture and corporate culture which are different.

The main research question is that we would like to identify the impact of corporate culture and national culture in the success or the failure M&A and the different cultural problems that companies meet, when they try to acquire another company.

Aim of the thesis:

the conducting of mergers has become an increasingly popular option for organizational expansion and growth.however ,despite their popularity,less than 20 reach their anticipated purpose.

M&A have been an increasing strategy around the world in the latest decades as a form of expansion and growth.

With globalization; the firms are going global in several countries and trying to act local.

That’s why it is important to adapt its management style, its positioning according to the different features of the local culture in order to succeed in the overseas operations.

The purpose of my thesis is first to gain a deeper understanding of culture and its impact in the organizations.

The aim of the thesis is to analyze the different cultural problems that companies meet in M&A  especially in the implementation of a new culture and to describe how the companies manage cultural differences in order to avoid cultural conflicts.

Thereafter we will investigate the impact and outcomes of M&A to the environment of employee due to change.

In this thesis, we will point out the influence that culture has on mergers and acquisitions activity, and particularly the influence of the corporate and national culture.

The aim is to define the role of a leadership in influencing cultural change in the implementation process of the corporate culture during mergers and acquisitions.

The case study is based on the content of the research questions and will provide the illustration of the theoretical framework.

1.7. The limitation of the study

Acknowledging our condition of research master students, some important limitations were present during the development of this study. Since many studies about the importance of corporate culture have been made by other researchers, in this paper we will collect only secondary data. Consequently the research will be based on a case study. We will try to answer our research questions through the case study example. We have choose the method of case study, for its conveniences and the way it matches with the nature of our subject.

The case study is built mainly on secondary data obtained from company websites, press releases, newspapers and magazines, etc.

Moreover, case study research allows focusing on contemporary events which offer the opportunity to dig into the current trends and actions developed into the frame of our research field.

The M&A literature is extensive ,covering various aspect of the topic ,therefore it is not possible to refer to all aspect of M&A .instead certain organizational issues will be discussed more in depth to highlight a number of practical problems that companies could face one they engage in M&A.

Case study merger and acquisition:daimlerchrysler (dernier chapitre)

When a company does an acquisition the main challenge is to negotiate the difference of

culture. The firm acquired must integrate this new culture, see figure 1.2. One of the best

examples to describe the difficulty and the importance of the cultural stake is the acquisition

of Chrysler by Daimler (example cited in Hill 2005, p 498). Daimler, the famous German

firm, has acquired Chrysler, one of the best American car firms. The problem was the clash

of the cultures. Concerning the way of managing a team, the German’s culture and the

American’s culture are very different. The German culture is characterized by the will to do

things very strictly, Germans want to plan everything. The German culture is very formal. At

the difference of the American culture, Americans use more informal means of management,

of organization. Daimler imposed its conditions concerning the management, but it was a

mistake. This generated two main consequences. The US managers disagreed with these news

rules, because they had never worked like this, they did not know how to do. Maybe these

new rules were not adapted to the US car market. As a consequence, the US managers had left

the firm, and Daimler-Chrysler saw its sales decrease. The company lost a lot of market share

because of this conflict of cultures. (Hill, 2005)

When a firm makes an acquisition, the firm wants to impose its culture, but there is a need to

study all the differences of culture. If your culture is very different than the one of the

acquired firm, you must study how to integrate this new culture in your organization. Of

course there is a will to keep the company’s culture, because it represents the firm’s identity.

To impose your culture is not the best way towards a solution. But on the other hand the firm

acquired does not want to loose its identity, its culture, and this is understandable. The firm

must do all the things possible to become integrated with this new culture.