In early 1998, Daimler-Benz, one of Germany’s largest industrial companies and a leading car manufacturer in the European market, signed a merger agreement with Chrysler Corporation, one of the leading automakers in the United States (Gitelson, Bing & Laroche, 2001). Daimler-Benz represented luxury cars, but the firm had never achieved top sale rates in the U.S. market before the merger. Chrysler Corporation was successful in manufacturing passenger’s car models in the U.S. market, but it suffered from the unstable business cycle of the American automotive industry.
Therefore, the joining of forces seemed to be promising as the annual income, low production costs, high efficiency, and well-built network of distribution in the United States made Chrysler an attractive business partner for Daimler-Benz. Their strategic business reason for the merger was to share the objective of being the international leader of the car industry. In this regard, they expected to attain it by combining their dissimilar work processes, expertise, and organizational cultures in order to use the shared channels of distribution, information and technologies (Hollmann, Carpes & Beuron, 2010, p.432).
In fact, there were two approaches to business, two styles of auto-making and different cultures of two nations. The exploration shows that the dissimilar management and culture principles of the companies were mostly responsible for the failure. The primary cause of the failure is concerned with cultural gap between these two corporations. That is why the focus is on the cultural question.
Several theories explain the impact of cultural variances on the workplace, but the significant one is represented by Geert Hofstede. His research is based on a survey of employees in large multinational corporations about their beliefs and values. He identified five key points for cultural differences: masculinity vs. femininity, individualism vs. collectivism, uncertainty avoidance, power distance and long term orientation (Child, Faulkner & Pitkethly, 2001).
Cross-cultural business communication is affected by seven factors: language, social organization, environmental and technological considerations, context and face-saving, non-verbal communication behaviour, authority and time conceptions. Therefore, most barriers originate from these variables. Geert Hofstede called the authority factor “power distance”. Knowledge of these seven dimensions provides the foundation for a conception for understanding international business relations (Bijilsma-Frankema, 2002, p.199). In the case of Daimler Chrysler, there was a lack of consideration of these factors that led to the failure of the merger.
A recommendation regarding the existing cultural and other problems within the merged company is for the effective management by studying the concept of mergers. Communication is mainly highlighted as a helpful tool for sustainable mergers.
To sum up, it is obvious that culture played a prominent role in the merger of firms. Daimler-Benz and Chrysler Corporation decided to merge in order to benefit from organizational cultures, but this deal was unsuccessful. Integration process failed on account of culture dissimilarities, delays in communication, inappropriate management and strategy.