Different companies, similarly to people, have their own unique culture that is founded on ethnic, regional, temporal and industry-relevant factors. Therefore, when two or more businesses work together or decide to merge, these specific attributes may clash, leading to conflicts and worsened performance outcomes. The process of acquisition has to be planned in detail from the first contact between the companies to their full integration. In most successful cases, firms prepare thoroughly to enter the new relationship by mapping out the process of the merger and trying to predict the potential issues.
However, the importance of the steps following the official merger may be overlooked by managers who fail to account for the fundamental cultural and structural differences between the businesses. In foreign mergers, this lack of attention to the whole strategy may be detrimental to the outcome of the project. This problem is especially evident for cultures that have some opposing views formed under the influence of closed borders and a history of isolation. Such nations as Japan and South Korea, for example, have been existing and evolving without any international intervention for decades. As a result, their business structure and their standards and expectations may be challenging for European and American companies to understand.
The central set of case studies under investigation looks at the failures and successes of Renault, General Motors, and DaimlerChrysler in acquiring companies in South Korea and Japan. These companies, while existing in the same industry, did not complete their mergers or alliances with the same conclusions, which points to another factor of impact in the process of acquisition. Their financial situation and size were comparable at the time of the operations, but their success or failure in the mergers demonstrates a difference in the chosen strategy. Each case is investigated separately below to determine which aspects of their approach contributed to the outcome of their efforts.
Case 1: Renault-Nissan Alliance
The first M&A is not an official merger, but an alliance between the French Renault and the Japanese Nissan that was initiated in 1999. While the integration did not receive the official status of a merger, it can be considered as such. Renault assumed control over improving the operations at Nissan and acquired a stake of 37% (later, this number was increased to 44%), which is viewed as a ruling stake in Japan. In response, Nissan gained 15% of Renault’s shares, making it a non-voting stakeholder in the French company. These numbers, as well as the level of intervention performed by Renault, make this alliance a merger.
During the post-acquisition process, the French company chose a high integration level, meaning that it significantly changed the structure of the Japanese company as well as its own processes to deliver the promised results. Renault organised specialized cross-company groups, the primary purpose of which was to find the best approach to the merger. Moreover, the company established a clear promise of transparency – the information about the alliance was shared with all employees, and Japanese workers of all levels, from the management to factory workers, were contacted by Renault’s representatives to explain changes and introduced the plan for future action. The commitment of the main board, including the crisis manager in change, Carlos Ghosn, was put in worlds in a commitment to improve the financial performance or quit the company. The integration was a success, and, in several years, Nissan became a significant player in the international car market.
There are some apparent reasons behind, why this acquisition yielded such positive results. First, it is apparent that Renault and Nissan had significant cultural distance – the corporate and national cultures of France and Japan vary in many ways. Japanese businesses are constructed according to the country’s values of collectivism, commitment, hierarchical relationships and hard work, while European companies value individualism and freedom. Moreover, Japanese workers are strongly biased against foreign management, and they are highly reliant on their local leadership. Thus, the establishment of trust and high autonomy is crucial for succeeding in the country.
Renault’s strategy combines transparency, knowledge transfer and independence of Japanese managers. This approach adheres to the style of symbiosis. Indeed, Renault made efforts to keep Nissan operating as a separate entity, placing its crisis managers on the board of directors but leaving most operations in the hands of Japanese managers and workers. Arguably, this strategy allowed to overcome the cultural distance between the companies. Moreover, one can pose that the company also used sociocultural factors to influence the outcomes of post-acquisition integration. The French company established clear goals and communicated them to the employees. Next, it provided effective leaders while also integrating local authority figures to inspire commitment. The motivation was strengthened with serious promises and an argument demonstrating personal responsibility.
Overall, one can see great attention to sociocultural aspects of the merger and HRM practices in the activities of Renault. While on their own, these actions do not adequately prove that Renault’s integration was successful due to its focus on post-acquisition practices, the comparison of this case with those of General Motors and Daimler-Chrysler allow making such conclusions.
Case 2: Acquisition of Daewoo by General Motors
The acquisition of the Korean company Daewoo by the American General Motors (GM) in 2001 followed a different path and reached its positive outcome much later than the M&A described above. In contrast to Renault, GM chose to acquire a firm that was not fully independent, being a part of a more extensive system of Korean businesses. As a result, the coordination between Daewoo and its headquarters placed additional restrictions on the American company.
Nevertheless, GM hoped to achieve substantial changes quickly, choosing a more authoritative and controlling result. Therefore, the communication between employees was not as open as in the Renault-Nissan alliance, and the knowledge exchange happened on the top management level. GM created rigid plans and established strong management that controlled the implementation of all strategic decisions. Moreover, the American company appointed specialists from within and outside of its staff who had experience with cross-border integration. In the end, the merger was initially unsuccessful but reached performance improvements later.
First of all, the company, similarly to Renault, has stated its goals and plans transparently, although this information was only available to the highest executive level. Moreover, GM hired professionals with sufficient knowledge of M&A, which raised their chances of positive results. At the same time, the lack of dialogue with employees and the high-level control by both GM and the parent company of Daewoo impeded the process and failed to inspire Korean employees of Daewoo to contribute to the integration in a more meaningful way. GM did not aim to preserve Daewoo’s original values, focusing on the financial and organisational sides of the process instead. The cultural distance between the companies – the Korean Daewoo being driven by collectivism and commitment to the local management and the American GM focusing on its own values – was not overcome with open interaction and knowledge exchange. Instead, it was analysed by outside specialists and overpowered by the need to save the firm from the financial crisis. GM acquired more than 44% of Daewoo’s stake and raised this number to 51% later. This made GM the main decision-making force in the firm and contributed to its control over the acquisition. This choice of the company is consistent with the idea that equity participation is determined by the business’ desire to use executive power to influence the outcome of the merger.
The strategy of GM could have been improved to complete the acquisition faster and with better results. One may see an apparent lack of attention to sociocultural factors – the culture of the employees and management and the need to deliver information transparently, to all levels of the business. This failure to provide a sufficient amount of knowledge possibly led to the workers being resistant to change, which had a detrimental effect on the process. Thus, while the strategy yielded positive results, eventually, it could have been made more effective using a sociocultural approach.
Case 3: Daimler-Chrysler’s Failure to Acquire Mitsubishi
In 2000, Daimler-Chrysler attempted to acquire the Japanese company Mitsubishi the financial situation of which was critical at the time. While the aims of the German-American company were similar to those of GM and Renault, its strategy did not deliver the same results of global expansion and technological innovation. First of all, it should be noted that the Western company was not experienced in cross-cultural integration at the moment of the deal. Second, in contrast to the independent Nissan, Mitsubishi was a part of a larger business system (keiretsu) which have a rigorous hierarchical structure in Japan. Finally, Daimler Chrysler failed to provide the same level of transparency and communication during the post-acquisition period.
The lack of strong leadership, for instance, led to the failure to inspire commitment and establish a dialogue with Japanese employees. According to their own comments, they did not treat Daimler-Chrysler as a new authority, seeing its managers as outsiders instead. Thus, no channel of communication was established, and the companies did not trust each other to deliver excellent results. Furthermore, Daimler Chrysler did not formulate goals that would be understandable to both parties which caused further confusion and failed to create a sense of urgency which is vital in changing the financial situation of the acquired entity. The cultural distance between the countries was not addressed in any way, and the companies, while trying to develop a structure of control, did not see each other’s goals as valuable. Daimler Chrysler did not attempt to hire professionals to fix these issues.
According to a report, the merger, while planned to be quick and intensive, was not actively pursued for about two years. During this period, both sides of the acquisition struggled with developing personal growth strategies and deciding what they can contribute to the integration. The first executive managers were appointed two years after the merger happened, and this factor significantly lowered the workers’ trust and their responsiveness to change. According to both organisational and human integration principles, the faster the integration happens, the more chances there are for a positive outcome. The failure to plan for the post-acquisition stage, in this case, reveals an obvious flaw in Daimler-Chrysler’s plans as well as the importance of this step in determining the outcome of an M&A.
Case 4: Renault-Samsung Merger
The case of the second merger that Renault went through is discussed at the end because it differs from the previous situations significantly. While the previous mergers were focused on high speeds (which aligns with the principles of organisational integration), this acquisition happened over several years. Renault chose to acquire Samsung in 2000 when the result of its alliance with Nissan was only emerging. However, reviewing the position of Samsung, its culture and financial situation, Renault chose to pursue a completely different strategy.
Samsung is a Korean company that was not independent of Nissan, but a part of a larger conglomerate (chaebol). Thus, some connections had to be restructured during the merger. However, Korean chaebol does not depend on its headquarters in the same way as keiretsu. This position allowed Samsung to retain a high level of autonomy. Moreover, Samsung was much smaller than Nissan, employing fewer than 2,000 workers, which was about ten times less than the staff of Nissan. Renault also analysed the cultural differences between Japan and South Korea – the relationship between South Korea and the West was more amicable, and Korean managers were open to communication and innovation. On the basis of these findings, Renault decided to pursue a slow integration with gradual changes.
It is notable that Renault selected a strategy that, in theory, is considered to be dangerous, especially if companies need to achieve results quickly. As noted above, the speed of the post-acquisition activities may determine the success of the whole process. Nonetheless, Renault’s focus shifted away from short time periods but remained on cooperation, information flow and commitment.
Similar to their work with Nissan, Renault’s management focused on combining the efforts of new and old professionals from both sides, delivering all vital information to the staff of all levels. Furthermore, Renault established a leadership position with new appointments and solidified its decision-making power by acquiring as much as 70% of the stake. Once again, the horticultural side of the merger was not neglected by the acquiring company. The comparison with the Daimler-Chrysler merger, therefore, shows that the German-American company could have taken more time to complete the process, and it lacked not time, but planning for a post-acquisition merger. The crucial role of sociocultural aspects, in contrast, becomes more apparent when considering the mentioned above acquisitions.
Comparison of Above Four Cases
The comparison of the four cases allows one to see how the increased attention to the sociocultural factors influences the outcomes of the merger. Both Renault and GM have made efforts to understand the internal processes and the acquired companies. While they chose different methods – Renault appointed a crisis manager to the board, and GM hired professionals with a background in cross-border integration – the firms did not dismiss this part of the procedure.
Daimler Chrysler, on the other hand, did not consider the unique differences of Mitsubishi, including its dependable position on the conglomerate and the influence of the Japanese culture. It can be seen in the actions of Daimler Chrysler that the business did not account for sociocultural factors and did not develop a plan for post-acquisition integration. The lack of leadership, clarity, information flow, and managerial collaboration led to failure.
The last of the discussed cases reveals the value of these principles, even if the acquired company does not experience a sense of urgency. In most scenarios, this fear of losing the company of one’s job acts as a driver for change, which Daimler Chrysler did not create. Nevertheless, the examination of the merger between Renault and Samsung shows that even without urgency, integration can yield positive results due to the commitment of the personnel and management and correctly distributed authority.
The four scenarios demonstrate the effectiveness of the different post-acquisition styles, placing the approach with high autonomy and high knowledge transfer at the top of the list. In the examined acquisitions, symbiosis creates the most integrated structure in which employees and management understand their goals as well as the reasons for an M&A. Furthermore, it is possible that this strategy is also the most effective in dealing with cultural distance. While other factors such as equity participation, authority and unique cultural mismatches influence the outcome of cross-culture mergers, the commitment to investigating and addressing sociocultural factors seems to overcome most problems.