The failed merger between Daimler-Benz and Chrysler suggests that the integration of large corporations requires in-depth assessment of external risks and possible conflicts within an organization. Provided that these precautions are not taken, even very efficient companies can become stagnant. On the whole, it is possible to make several recommendations on the basis of this case.
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First of all, the management of merged companies should not be too optimistic about the performance and profitability of their organizations. The thing is that the integration of large corporations is a very time-consuming process because it is necessary to align different cultures, production methods, performance appraisal techniques and so forth.
This issue is particular important in those cases when business administrators set timelines or develop schedules. The management of DaimlerChrysler expected significant revenues within several years, but these expectations were unrealistic.
The problem is that unrealistic expectations often lead to panic and hasty decisions. For example, many Chrysler executives were fired only because DaimlerChrysler did not attain the expected financial goals. Such a strategy only increased the tensions within the organization.
Prior to the merger, the management of companies should pay close attention to the competitive positions of each other and the trends that emerged in a certain market. For example, Daimler-Benz was an indisputable leader of the German car-manufacturing industry.
Moreover, they believed that the partnership with Chrysler would give them access to the U.S. market. Yet, Chrysler faced significant competition from Ford as well Toyota. Again, this recommendation is related to the problem of unrealistic expectations set by corporate executives who expected that the merger would become successful almost immediately.
The executives of such companies should find ways of reconciling various organizational cultures. It should be noted that Daimler-Benz and Chrysler had different polices regarding executive compensation, work styles and decision-making within the company. These differences resulted in many conflicts between the employees of these corporations.
Their corporate executives should create a culture that appeal to the workers of a newly-created company. Under these circumstances, the HR managers of both companies should join their efforts and develop a set of policies related to compensation, evaluation of performance, and the structure of the new company. In this way, companies can avoid many potential conflicts.
The managers of merged companies must ensure that different departments or divisions of the organization can share resources, technologies or information. For instance, Chrysler did not receive any support from Daimler-Benz. Thus, corporate executives should eliminate the barriers that prevent different departments from cooperating with one another. These organizational policies were not developed in DaimlerChrysler.
Business administrators should inform the employees about the future strategies and goals of an organization. The workers should now what is expected from them and how they are supposed to achieve these goals. The Chrysler employees never had an opportunity to interact with the management and discuss future activities of the organization.
Many workers were not confident of their job security and this lack of certainty could adversely affect their performance. It should be noted that many former executives were fired because of satisfactory results and this influenced the overall morale with within the company. This is one of the reasons why this merger was unsuccessful.
The executives, who plan the merger of two organizations, should determine whether this partnership will be really a merger of equals. They have to decide which partner will play the leading role.
The union of Daimler-Benz and Chrysler was described as the merger of equals, but this approach resulted in a great number of conflicts between the executives of the American and German divisions of DaimlerChrysler. At the very beginning, this issue was not properly addressed by the leaders of two corporations.
Finally, business administrators should find ways of making large corporations less bureaucratic and hierarchical. In particular, they must ensure that workers can communicate with top executives of any organization.
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This task is particular important for merged corporations like Chrysler and Daimler-Benz. This goal can be achieved by joining several departments and empowering workers. The managers of DaimlerChrysler did not do it.
On the whole, the merger of Daimler-Benz and Chrysler can be viewed as a valuable lesson for other companies that intend to merge with one another. Moreover, the recommendations put forward in this paper can be applicable to other industries, for instance, financial services sector, IT industry, manufacturing and so forth.
Furthermore, the challenges described in this report are particularly relevant to large corporations that can be based in countries with legislation, work culture, language, and labor relations. In particular, this case illustrates the importance of reconciling different organizations, exchange of information between departments, and employee involvement.
Furthermore, such a problem as unrealistic expectations can occur in various organizational settings. This is why the lessons of DaimlerChrysler should be considered by the management of various organizations that are supposed to merge with one another; otherwise these companies will not attain their objectives.