business culture practice of mergers and acquisitions

business culture practice of mergers and acquisitions

Negotiation and Conflict Resolution in Mergers and Acquisitions

The business practice of mergers and acquisitions faces challenges that occur during negotiations. Such problems exist when engagements between stakeholders of two or more organizations seek to propel their interests in a proposed partnership. Some of the conflicts affecting mergers and acquisitions are related to culture, especially if the two entities combining are from different backgrounds. Such disagreements might affect managers who experience the challenge of convincing employees to embrace the new order. Workers who do not understand the importance of the merger are highly likely to rebel, thus the need for managing conflicts arising from organizational changes. The film “Gung Ho” exhibits significant cases of a cultural dilemma when American employees are forced to work under new conditions set by the Japanese leadership. The culture clash rises to such extreme levels that employees down their tools, eventually threatening the company’s well-being and the continuity of the city at large. Cultural dimensions influence the success of mergers and acquisitions by affecting the attitudes of both the administration and the employees.

“Gung Ho,” as directed by Ron Howard, is a comedy representing cultural differences in the workplace. The film involves the takeover of an American auto firm by a Japanese company and the resulting struggles as employees try to accustom to the new policies. The local automobile plant in Pennsylvania has been closed for the last nine months and the foreman goes to Japan to request the Assan Motors Corporation in Tokyo to reopen the company. However, upon exploring the United States, the Tokyo-based investors take advantage of the desperate conditions of the employees and institute many changes. These changes are oppressive, including the denial of workers’ freedom to join unions, as well as lowering wages than before. Additionally, employees are not allowed to remain in the same occupational position for an extended period to enable them to learn the various company’s processes. The American workers are resistant to change when they are forced to engage in calisthenics as a group. They also express a negative attitude towards work ethics and quality control, which are critical to the corporation’s success. Consequently, the Japanese management is disappointed that the American personnel are not willing to follow the new rules, prompting them to bribe Kaz, a former manager at the organization, to compel the workers to embrace the guidelines. Although it is difficult to convince the local employees to follow the new order, the stakeholders eventually learn to work towards a common end goal, and the company realizes success in the long-run.

Cultural differences may influence the success of mergers and acquisitions in different ways. The introduction of foreign norms forces other employees to adopt to new practices, a factor that can result in opposition. For instance, the American employees feel that the rules set by the Japanese management are too difficult to follow when they have to engage in calisthenics every morning. The workers also perceive the Japanese work ethic to be strict. However, such cases of cultural incongruence can be solved if the employees understand the reasoning behind the proposed guidelines. For instance, the American employees return to work after observing Kaz, who is an American go back to the factory and participate in the making of cars.

Cases of Stakeholder Conflicts in Mergers and Acquisitions

New York Central and Pennsylvania Railroad

The New York Central and Pennsylvania Railroad merger to form Penn Central is one of the most significant investments in the rail industry. The deal resulted in the sixth-largest corporation in America. According to Marks and Mirvis (2001), the company was not prepared for the cultural differences that would arise amidst rapid competition in the industry, leading to bankruptcy after only two years. Noting that the two railroad companies were rivals long before the merger, both might have been brought together by the need to remain relevant in the industry (Saunders, Minton, Lewicki, & Barry, 2015). The most substantial problem that faced the union was the nature of revenue streams within each organization. One of them operated outside the north eastern part of the United States and enjoyed the stable income from the long-distance shipment of commodities. In contrast, the other organization concentrated on the densely northeastern region and enjoyed a more diverse revenue source that came from investments in heavy industries and various waterway shipping points. However, the merger failed because the companies had common aims but could not agree on common strategies of achieving them (Saunders et al., 2015). The organization also had no formal plan on the implementation of the merger. Moreover, the culture clash, union interests, and incompatible operating systems also led to the collapse of the merger. This case is similar to the deal presented in Howard’s “Gung Ho” movie, where the Japanese management introduces new terms that the local workers perceive to be retrogressive, leading to resistance. The inventors prevent the American employees from forming labor unions, a move that is interpreted as oppressive, resulting in halted operations.

The Daimler-Chrysler Merger

The merger happened the 1990s, bringing together the two firms in the automobile industry. During this time, Chrystler was one of the leaders in the production of cars in the world always recording high revenues. Daimler Benz was also among the top manufacturers in the industry, although it was looking for a merger that would enable it to overcome the effects of poor economic conditions. The proposed deal was considered a merger of equals to stabilize and provide financial stability to both companies by capitalizing on their strengths. According to Saunders et al. (2015), negotiations occurring between organizations are often made fast with the need to realize strength, especially in times of financial crisis. Nevertheless, such haste does not necessarily result in positive outcomes. The merger between Daimler and Chrysler was not successful due to a combination of risk factors. Firstly, proximity played a significant role since both companies were located in different countries and continents. Other than the geographical strain, the firms operated under different cultures, languages, and legal status (Hollmann, de Moura Carpes, & Beuron, 2010). The challenges were similar to the case in the merger presented in the “Gung Ho” movie, where the union happened between a Japanese company and the American motor assembly organization located in Pennsylvania. Both corporations are situated in different countries, which are characterized by cultural differences that make it difficult for employees to adapt. Language plays a crucial role, noting the lack of quality communication among the stakeholders. Both companies in the Daimler-Chrysler merger faced intense cultural conflicts as they had different corporate cultures influenced by their national values. However, before the collapse of the merger, both firms invested in intensive workshops on cultural sensitivity for their employees, which is different from the use of Kaz, a local American manager in the “Gung Ho” movie to mobilize employees to follow the new Japanese system.

Pharmacia AB – Upjohn

The merger was thought to be one of the most successful investments in the pharmaceutical industry. Both organizations were brought together by the need to gain a greater market share in the pharmaceutical market. Pharmacia AB had a weak presence in the American market while Upjohn Co. needed more international business that could help them to increase revenues. In the proposed deal, both companies would complement each other since Upjohn would use Pharmacia to develop advanced drugs while helping it to expand its distribution network (Laneve & Stüllein, 2010). However, within the first year of business, it was evident that both organizations had different incompatible cultures, a factor that threatened the sustainability of the merger. The most prominent element undermining the newly realized union featured as the management styles of both companies, the businesses’ systems, and dissimilar cultures (Saunders et al., 2015). The merger became even more difficult since the American managers were not willing to adopt the different work culture presented by their Swedish counterparts who had a different way of operating and administration. This situation is similar to the American motor company that merged with the Japanese motor firm in the film “Gung Ho.” The managers did not seek an appropriate method of imposing the envisioned changes and were, thus, met by resistance from the employees, eventually threatening the merger’s success. The American employees felt that the Japanese system was harsh; thus’ they opting to rebel. However, the Pharmacia & Upjohn union was solved by hiring a new CEO who instituted the establishment of a common headquarter other than the three offices that existed (Belcher & Nail, 2000). These strategies further enhanced the development of a common culture that saved the success of the organization that was on the verge of collapsing. The absorption of Kaz in the film serves a similar unifying role as the creation of a central office.

The Volvo­-Renault Case

The merger between Volvo and Renault in the eighties was meant to enhance the production capacity of both organizations ahead of anticipated harsh economic times. Nonetheless, both firms had differing cultures since one was highly established in Latin America and Southern Europe while the other was present in Northern Europe and Northern America (Laneve & Stüllein, 2010). Several cultural differences were visible after the deal was completed with the managers trying to moderate them. Firstly, the French and Swedish administrations had different perceptions concerning the role of the government. Moreover, both the Swedish and French cultures are different with regards to personal character, a factor that affected the ability of the administration to work closely together. The merger provided the Sweden-based company Volvo with only 35% of the shares while the highest percentage of the shares being given to the French-based Renault (Gebrekidan & Mukhtar, 2017). The employees of Volvo, therefore, revolted the changes as they felt that they were losing their identity to the merger. Eventually, the deal failed since both companies did not focus their emphasis on the development of a common culture, instead focused on the financial and industrial features, a scenario that is identical to the case in “Gung Ho.”

HP and Compaq

Both companies faced tough economic times in the early 2000s, and this problem saw HP acquire its close competitor Compaq. The merger was ill-fated from the beginning since both organizations had different cultures. Critics mentioned that HP had an engineering-based approach while its competitor, Compaq, operated on a sales-driven strategy. These differences were noticeable during the first few years of business as the firms engaged in cases of infighting that, eventually, resulted in the loss of $13 billion in market capitalization (Denison & Ko, 2016). Nevertheless, the organization has managed to overcome its differences by making cultural and leadership changes that have resulted in long-term success (Saunders et al., 2015). The struggling company’s culture is similar to the case provided in the “Gung Ho” movie, where both corporations have different and clashing principles that make it challenging to function harmoniously.

Recommendations

Cultural conflicts could result in the collapse of mergers and acquisitions if they are not adequately monitored. Organizations engaging in such unions are forced to come together by the need to remain economically viable even during crises. The result is that organizational managers engage in swift decision-making processes that often fail to capture essential functional details, which contribute to failure. In this view, organizational managers should focus on the development of strategies that enable them to develop a common culture based on the interests of all stakeholders from both sides so that they feel represented (Belcher & Nail, 2000). Additionally, organizational managers should engage employees in intensive training, such as in the case of the Daimler-Chrysler merger, to enable them to not only understand the need for change but also their role in promoting the new order. Such strategies as the introduction of a common headquarter to centralize a company’s operations as in the case of the Pharmacia & Upjohn. The organizations managed to solve their differences by hiring a new CEO that set up a shared office through which the company’s operations were managed. Other approaches that would be helpful in the management of mergers and acquisitions include the use of influential leadership to provide a sense of direction to the organization in the process of change (Denison & Ko, 2016).The effectiveness of such a plan is evidenced in the acquisition depicted in the film “Gung Ho”, where the Japanese authorities use the American manager Kaz to inspire the resident employees to adopt the change for the company’s success. He features as a competent leader who leads by example, especially when he engages in the making of cars.

In conclusion, mergers and acquisitions are highly sensitive to culture. The most prominent reason why organizations engage in mergers is to maintain a positive financial image, particularly in times of economic crises. In most cases, such collaborations are effective since they provide organizations with the opportunity to leverage each other’s strengths. Nevertheless, if these alliances are not properly monitored, cultural differences can force stakeholders to reject the changes brought by the mergers, leading to failure as is the case in the “Gung Ho” film. The administration, therefore, has a significant role to play in developing a common culture that accommodates all the involved parties.