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International Management

Culture, Strategy, and Behavior

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Fred Luthans | Jonathan P. Doh

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THE MEANINGS AND DIMENSIONS OF CULTURE

The World of International Management

Culture Clashes in Cross-Border Mergers and Acquisitions

I n one of the largest cross-border deals ever proposed, Belgian-Brazilian beverage giant ABInBev offered US$104.2  billion to acquire British-owned SABMiller. Both companies have multiple investments and brands in every major beer market in the world. The merger brings ABInBev’s brands of Budweiser, Busch, Corona, and Stella Artois together with SABMiller’s brands of Miller, Foster, Grolsch, Peroni, Castle, and Carlton, resulting in the largest beverage company on the globe. The combined company will account for 30 percent of beer sales worldwide and 60 percent of sales in the U.S. market. In late 2015, SABMiller’s shareholders agreed to the terms of the deal.1

Mergers and acquisitions are among the most challenging strategic moves by companies seeking to grow their markets and reap hoped-for efficiencies. Many cross-border mergers and acquisitions have failed or experienced extreme difficulties in the face of cultural differences that manifest in communica- tion, work policies, compensation systems, and other aspects of strategy and operations. These cultural differences can be aggravated by geographic, institutional, and psychological distance. With operations spanning the globe, and leadership teams in both Latin America and Europe, the combined ABInBev and SABMiller company will need to address the interests of its culturally diverse constituencies. Although both SABMiller and ABInBev have recent, extensive experience with cross-border mergers and acquisitions, neither company has been involved in a deal this large. How can this integrated company fully realize the benefits of combining peo- ple, production, and brands from diverse cultures? Will ABInBev be able to achieve its aggressive sales goal of US$100 billion annually by 2020? Looking at some past cross-border mergers, both successful and failed, may provide some insight.

DuPont in Denmark When DuPont, the U.S.-based giant chemicals company, set out to acquire Danisco, a Danish producer of food ingredients, shareholders in Denmark initially voiced skepticism and disapproval. To better understand the concerns of the Danish investment community, DuPont sent executives to Copenhagen.2  Gaining

A major challenge of doing business internationally is to respond and adapt effectively to different cultures. Such adap- tation requires an understanding of cultural diversity, percep- tions, stereotypes, and values. In recent years, a great deal of research has been conducted on cultural dimensions and atti- tudes, and the findings have proved useful in providing inte- grative profiles of international cultures. However, a word of caution must be given when discussing these country profiles. It must be remembered that stereotypes and overgeneraliza- tions should be avoided; there are always individual differ- ences and even subcultures within every country. This chapter examines the meaning of culture as it applies to international management, reviews some of the value differences and similarities of various national groups, studies important dimensions of culture and their impact on behavior, and examines country clusters. The specific objec- tives of this chapter are

1. DEFINE the term culture, and discuss some of the compar- ative ways of differentiating cultures.

2. DESCRIBE the concept of cultural values, and relate some of the international differences, similarities, and changes occurring in terms of both work and managerial values.

3. IDENTIFY the major dimensions of culture relevant to work settings, and discuss their effects on behavior in an international environment.

4. DISCUSS the value of country cluster analysis and relational orientations in developing effective international management practices.

 

 

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that would dictate a unified approach to planning, information exchange, communication, and decision making. Executives believed that a unified company culture—part American, part German—would lead to a better working relationship between employees and result in improved fiscal results for the com- pany. After just a few months, however, continued cultural dif- ficulty led executives to conclude that imposing a single culture on its diverse workforce was a short-sighted strategy. Engineers between the two companies continued to disagree over quality and design, and personality conflicts persisted. Americans found Germans to have an “attitude,” while Ger- mans found Americans to be “chaotic.”8

In response to these failures, Daimler-Chrysler took a more drastic approach to altering its operations. Rather than attempting to impose the Daimler culture on Chrysler employ- ees, individual business groups were permitted to adopt whichever culture worked best for them. Essentially, two cul- tures were allowed to persist at the merged company—those of American Chrysler and of German Daimler. Though this strategy worked well for groups that were located solely in the United States or Germany, business divisions that spanned both countries continued to face challenges. Communication was often misinterpreted, and the approach to staffing was questioned by executives on both sides.9

After a decade of struggle, the merger was ultimately reversed. Daimler sold nearly its entire stake in Chrysler to an American private equity group for a fraction of its original invest- ment, and Chrylser entered bankruptcy proceedings just two years later. Roland Klein, former manager of corporate commu- nications at the merged Daimler-Chrysler, remarked that “Maybe we should have had a cultural specialist to counsel us. But we wanted to achieve the integration without outside help.”10

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