The Issues At Daimler Benz Ag Management Essay

The Issues At Daimler Benz Ag Management Essay Daimler AG is one of the worlds automotive companies. It distributes into Mercedes Benz Cars, Daimler Trucks, Mercedes Benz Vans, Daimler Buses and Daimler Financial Services. The Daimler Group is one of the biggest producer of premium cars and the worlds biggest manufacturer of commercial vehicles with a global reach. (Daimler, 2011) Daimlers corporate goal is to achieve stainable profitable growth and to increase the value of the company. Daimler aims to be the worlds leading automotive companies, intend to inspire customer with the brands, products and services and strive to occupy the leading for sustainable drive systems. (Daimler, 2011) Figure 1 is shown the Daimler Target System. 1.2 History Daimler AG has 125 years history. Gottlieb Daimler and Carl Benz were the pioneers of the automobile manufacture in the 19th century. After the First World War, there was a world economic crisis. The war caused a great depression for the world economy. It was a great challenge for Daimler-Benz. In 1937, Daimler-Benz AG started to produce armament items and aircraft engines. It was necessary to do reconstruction after the war damage in 1945. In 1949 to 1960, Daimler-Benz AG succeeded in regaining the position in the automobile industry. In 1960s and 1970s, Daimler-Benz defended an outstanding position in international motor vehicle markets. In the end of 1970s, Daimler-Benz assessed cautiously with the oil crisis and new Asian competitors. Since 1995, new strategic realignment concentrated on transport and services. The global economic crisis affected Daimler-Benz deeply in the end of 2008. (Daimler, 2011) 2. Issue Identified The issue is the merger between Daimler-Benz AG and the American automobile manufacturer Chrysler Corporation, but the near decade merger was finished by DaimlerChrysler AG sold 80.1% stake in 2007. 2.1 The Reason of choosing this issue Since Daimler and Chrysler located in different countries that are Germany and United States respectively. Both of them have their own culture. It is cross-culture. Through the merger between Daimler and Chrysler, I find out that the culture is one of the factor should be considered when two companies come from different countries. 2.2 Brief description of the issue In 1998, there was merger between Daimler-Benz AG of Germany and Chrysler Corporation of the United States (BBC News, 1998). On 6 May 1998, the merger agreement between Daimler-Benz AG and Chrysler Corporation was signed in London. On 7 May, they announced the merger to the worldwide and the new company called DaimlerChrysler AG. (Sheltom, Hall and Darling, 2003) DaimlerChrysler became the worlds fifth largest car make after merger. Mr Schrempp described the merger as a marriage made in heaven. Also, the new combined management had promised that there will be no plant-closures or lay-offs after merger. (BBC News, 1998) In 2002, DaimlerChrysler implemented a restructuring program that aims to bring it struggling Chrysler division back into the black by 2003. (BBC News, 2002) In 2006, DaimlerChrysler ordered to pay former Daimler-Benz shareholders about 232m euros to settle a dispute over its 1998 creation. This was not the first time that DaimlerChrysler had been sued over its establishment. (BBC News, 2006) Also, in 2006, the company brought unwelcome information to investors by revealing that Chrysler was losing money. This year, Chrysler set to clock up $1bn losses (BBC News, 2006) In 2007, there was deeply concerned about its poor performance, and the shareholders were pressuring the company to sell it. (BBC News, 2007a) In 2007, the German-US firm paid 5.5bn euros to buy 80.1%, much less than the $36bn paid for Chryslers 1998 merger with Daimler-Benz. (BBC News, 2007b) In 1998, Daimler Chairman Juergen Schrempp promised a merger of equals. But it wasnt long before Chrysler executives complained the bullheaded Germans would not listen to the Americans. The relationship began to fall quickly. Schrempp said that if he had been honest with the Americans about German dominance before the merger, they never would have made a deal. (abc News, 2010) Culture differences were blamed for the failure of DaimlerChrysler. This is like citing irreconcilable differences. DaimlerChryslers incapability to combine the company cultures was one of the reasons of failure. (Mann, 2007) 3. Analysis of situation 3.1 The Reason of using this model I will use Hofstedes culture different model to analyze this issue. It is because Hofstedes culture different model can have a comparison between these two countries. Also, Hofstede collected over 116,000 people in 50 countrys research (Deresky, 2003) about organizational behavior. This data makes the model more believable. Also, Hofstede used constructed scaled indices to rank each of the nation within the dimension based on cultural differences (Signorini, Wiesemes and Murphy, 2009) 3.2 Hofstedes culture different model Hofstedes culture different model is a framework that understand how basic values underlie organizational behavior. Hofstede proposed four value dimensions, they are power distance, uncertainty avoidance, individualism and masculinity (Deresky, 2003). First, the value dimensions is power distance, it is the level of acceptance by a society of the unequal distribution of power in organizations. High power distance that employees accept the bosss authority is larger than themselves in the hierarchy and they seldom bypass the chain of command. The example of high power distance is Philippines. On the other hand, low power distance is that boss and employees are having equal power, and the relationship between boss and employees are more harmony and cooperation, such as Austria. (Deresky, 2003) For the second dimension, it is uncertainty avoidance that refers to the extent to which people feel threatened by ambiguity in the social. High level of uncertainty avoidance causes that people tend to have strict laws and procedures, also have a strong sense of nationalism. In business side, the formal rules and procedures were designed to provide more security and greater career stability. Japan is the example of high level of uncertainty avoidance. However, low level of uncertainty avoidance causes that the nationalism is less decided and protests is allowed, and then the company is less structured and less formal. United States is one of the low level of uncertainty avoidance. (Deresky, 2003) The third value dimension is individualism. It refers to the tendency of people to look after themselves and their family and to ignore the need of society. Individualism is that achievement and democracy are highly valued. The relationship is independence between individual and organizations, the instance of individualism is United States. Collectivism that there is a strong belief in group decisions, believe the group more than the individual. Japan is the one of countries of collectivism. (Deresky, 2003) Fourth, masculinity is the degree of masculine values that assertiveness, materialism and lack of concern for other. Masculine culture considers cooperation more than individualistic. High masculine societies that one finds great job stress and organizational interests generally intrude on employees private lives. The example of highly masculine societies is Japan. On the other hand, counties with low masculinity that cause less conflict and job stress and reduce the need for assertiveness, such as Switzerland. (Deresky, 2003) The fifth dimension is the short-term orientation and long-term orientation, it is Hofstede added later. Long-term orientation is fostering virtues about future rewards. Short-term orientation is fostering virtues about the past and present. (Signorini, et al 2009) 3.3 Analysis of the issue Power distance In term of power distance, larger power distance countries are having more privileges for high level status, small power distance countries are preferred egalitarian (Signorini et al., 2009). According to Figure 2, the power distances score of Germany and United States is 35 and 40 respectively. Their result based on Hofstedes analysis is nearly, the level of accept unequal distribution of power in organization is low (Schneider and Barsoux, 2003). About Daimler organization, they embraced formality and hierarchy that mean the subordinates prefer to listen superior. Also, the employee in Daimler needed to follow the hierarchy such as decision making process. Employee needs to follow the formal channel, it shown the manager relies on formal rule. (Badrtalei and Bates, 2007) Daimler-Benz had a more traditional way in management style, they used top-down management style (Anonymous, 2004). German managers preferred autocratic style in leadership style. German employees are obedient to m anagers and follow them unquestioningly expect give the employee specific order, that mean employee had high dependence. (Sheltom et al., 2003) Based on the above information, Daimler belongs the high power distance and became the tall organization pyramids. About Chrysler, they were ignored barriers and promoted cross-functional teams that favored free-form discussions and casual repartee that the subordinates wanted to be discussed to superior. Also, the executives allowed mid-level manager to go forward their own opinion. (Badrtalei et al., 2007) In term of management style, Chrysler had a reputation for having more freewheeling, open culture (Anonymous, 2004). Regard to the leadership, their employees expect to be treated accordingly that mean the employees enjoy the equal right. In organization, employees can challenge their manager that employees needed for low dependence. (Shelton et al., 2003) The organization pyramids of Chrysler are flatter than Daimler. Uncertainty avoidance Based on Figure 2, the score of Germany is 65 and United States is 46. It shown that German was unhappiness with ambiguous situations and people wanted more direction and less change and the ambiguous situation may develop anxiety or stress. Because little direction and considerable uncertainty would made work less effectively in the company, they wrote some rules to cover the situation. On the other hand, United States was more willing to take risk and much less resistant to change. (Brooks, 2003) In Daimler Organization, there was suit-and-tie dress code and the employees should respect their titles and proper names. About decision making process, Daimler set up the formal channel and followed the hierarchy and complex decision-making processes. (Badrtalei et al., 2007) Germans analyzed a problem need to use great detail, find a solution, then discussed with the partners to make a decision (Dorothee, 1999). It shown that Daimler needs laws and rules when manages the organization. Chryslers employees favored open collars and they could bring out their ideas freely (Badrtalei et al., 2007). It shown they were less need for rule. Based on the score of uncertainty avoidance, United States is lower than Germany. The result fitted in the Daimler and Chrysler, because Daimler management preferred more to follow the rule and formal. Conversely, Chrysler was more casual management style that less stress and relax. When American discussed the problem, they created the solution during the discussion, not follow the information. (Dorothee, 1999) Individualism versus Collectivism In individualist nations, the individual is more independent in the group. In collectivist nations, the groups interest is more important that individuals interest. (Signorini et al., 2009) According to Figure 2, the result of Germany and United States is 67 and 91 respectively. United States is the highest score in the world. Hofstede found that American culture tend more individualistic and Asian cultures tend to be much more collective. (Brooks, 2003) Germans preferred a tightly knit social framework in which individuals look after one another and protect their members interests. Luthans (1998) said that Geramns are less individualistic than people in the USA. (Shelton et al., 2003) That reflected Germans perform best in in-groups. Also, Germans were more respectful of title, age and background connections, for example culture accords status based on gender, age or social connections. (Shelton et al., 2003) The executives of Daimler had larger staffs and fatter expense accounts (B adrtalei et al., 2007), the obligations of group were important than self. On the other hands, Chrysler is the American based company, so their culture was affected by American culture. USAs companies were tended to grant status based on achievement (Shelton et al., 2003), it reflected they hiring and promotion decisions based on skills. In Chrysler, officers had broader responsibilities and bigger salaries and bonuses (Badrtalei et al., 2007), their obligations of organization were low. Masculinity versus Femininity Based on Figure 2, the score of Germany and United States is 66 and 62 respectively. Masculinity countries that people strengthen assertiveness and competition and interest in material success. Femininity countries that people concern more with living environment and relationship. (Signorini et al., 2009) In the result of Hofstede, Germany and United Statess result was approach. In order to maintain the luxury image of Daimler, employees flew first-class during business travel. (Badrtalei et al., 2007) Daimler had a stress on competition. However, only top officers of Chrysler could fly first-class during the business travel (Badrtalei et al., 2007), it also was the performance of the masculinity. Because both of them preferred the masculinity in the result of Hofstede, their value of work, money and achievement were similarly. Long term orientation versus Short term orientation In term of long term orientation, there are differentiation between elder and younger sisters and brothers, in business that building of relationships and market position, people should live more equally. Short term orientation that all siblings are equal, in business that short-time results and the bottom line, economic and social life to be ordered by abilities etc. (Schneider and Barsoux, 2003) The result of long term orientation in Germany is 31, United States is 29 that shown in Figure 2. These two countries belonged to short term orientation based on Hofstede. Actually, Luthans (1998) remarked that Germans had a longer-time orientation. About workforce, Germany is more stable than United States. German employees preferred work for many years for the same company, they focused on building of relationships and a strong market position. (Shelton et al., 2003) Germans forced on full-year results of financial reporting system. (Badrtalei et al., 2007) On the other side, US employees were instable of the workforce and they rarely worked many years in the same company (Shelton et al., 2003), because they focus on short-term results. Also, the financial reporting system is on a quarterly basis (Badrtalei et al., 2007). 4. Conclusion Daimler AG is one of the worlds automotive companies and it has 125 years history. Gottlieb Daimler and Carl Benz was the founder of Daimler-Benz AG. In 1998, there was the merger between Daimler-Benz AG and Chrysler Corporation, these two companies located in Germany and United States respectively. And the cooperation of Daimler and Chrysler was merger of equals. At the beginning, their merger was viewed a strong alliance by international market. However, their relationship of merger maintained nine years. During the merger, DaimlerChrysler had cultural clashes, since the employees of DaimlerChrysler were came from Daimler and Chrysler respectively, they had some differences in work habits, communication style, planning and decisions, negotiation strategies and leadership. The cultural clashes of DaimlerChrysler can use Hofstedes cultural difference model to analyze. Hofstedes cultural difference model has five value dimensions to analyze the cultural difference. They are power distance dimension, the uncertainty avoidance dimension, individualist-collectivist dimension, masculinity-femininity dimension and long-term orientation short-term orientation dimension. According to Figure 2, the result of power distance dimension, masculinity-femininity and long-term orientation short-term orientation on Germany and United States is closely. Conversely, there was obviously difference on individualism-collectivist dimension and uncertainty avoidance dimension. In term of power distance dimension, Daimler executed hierarchy in the management style that subordinates must follow superior. On the other side, Chrysler was more freewheeling in management style, such as employee can challenge their manager. About uncertainty avoidance, Daimler was higher than Chrysler. Daimler was more traditional and need to use formal channel when making decision. Conversely, Chrysler preferred open collars, free-form discussions and casual repartee. (Badrtalei et al., 2007) Regard to individualism-collectivism, United States is the highest score in the world. Since Chrysler is the American based company, they were more force on themselves. To sum up, the Germans regarded the entrepreneurial spirit and innovative thinking, whereas the Americans valued the methodological engineering technical capabilities. (Darling, Seristo and Gabrielsson, 2005) 5. Recommendations Appendix Daimler Target System Figure 1 The result of Germany and United States Figure 2