Visakhapatnam

Assignment

on

Cross Cultural Management Case Analysis

Submitted By

J. Prathima (1226312111)

Submitted to

S. Sri Lalitha

Associate Professor

GITAM School of International Business

CHEMICAL BANK’S MERGER IN EUROPE

The Chemical Banking Corporation, a multibillion dollar bank holding company,

began as a division of a New York City chemical manufacturer during the early

19th century. The company grew steadily through its long history, then more

dramatically in the late 1980s and early 1990s when it became a superregional

bank with holdings in New York, New Jersey, and Texas, in addition to

maintaining its position as a money-center bank. In 1995 Chemical merged with

the Chase Manhattan Corporation to form, under the Chase Manhattan name, the

largest bank in the United States. Chemical's chairman and CEO, Walter V.

Shipley, engineered just such a move with the 1991 merger of Chemical with

Manufacturers Hanover Corp. Called the first major bank merger among equals

and the biggest bank merger in U.S. history to date, it brought together the nation's

sixth- and ninth-largest banks into what became the nation's second-largest bank,

behind only Citicorp, with assets of $135 billion. The merger also marked the

beginning of an unprecedented era of bank consolidation that would see several

mergers dwarf even the Chemical-Manufacturers merger.

The new institution retained the Chemical name, but it would initially be headed

by Manufacturers chairman John McGillicuddy, who under the terms of the merger

served as chairman and CEO of the new Chemical through the end of 1993, after

which Shipley took over. Each of the banks boasted of large retail banking

networks in New York; merged together, Chemical achieved cost savings by

closing redundant branches and eliminating jobs. Over the next few years, 6,200

employees lost their jobs and $750 million in costs were cut each year. While

assets grew slowly, reaching $149.89 billion in 1993, Chemical improved its

profitability through these cost savings, increasing its return on assets from 0.3

percent in 1990 to 1.11 percent in 1993 and its return on equity from 5.94 percent

in 1990 to 16.7 percent in 1993.

The retail bank division of Chemical Bank was performing a radical organizational

transformation into a market-focused and customer-focused organization after the

1991 merger with the Manufacturers Hanover Corporation. The new vision of the

bank was to shift its image from a narrow provider of traditional financial services

to a broader and innovative provider of superior financial service and advice for

targeted customer groups. The objective was to position the bank in order to

remain competitive in a very challenging and changing business environment

characterized by intense price competition, outflow of deposits to mutual funds,

rapid technological change and more sophisticated and demanding clients.

Michael Hagerty, head of this division, envisioned Balanced Scorecard (BSC) as a

powerful tool to achieve the organizational and cultural transformation required by

the Retail Bank in order to articulate and implement this new vision, mission and

strategy across all levels of the organization. A main objective was to create a

performance focused organization.

The process of implementation of the BSC systems proved very successful for the

Retail Bank because it allowed managers and overall organization to stay focused

on key consumer segments and profitability targets. In addition, the process helped

the Retail Bank to clarify its main strategy statements, develop clear and well-

articulated business objectives for each business dimension and implement a

performance measure system to monitor progress. The final outcome was learning

and more unified organization and a deeper understanding of key business value

drivers and activities.

The process of implementation posed many challenges that the Retail Bank needs

to overcome such as in communication, compensation linkages, information

infrastructure, and data reliability to measure performance among others.

Question 1: What challenges do mergers create for managing national and organizational cultures?

Merger has become very popular strategy to enter into the international business. But it creates lots of challenges for managing national and organizational cultures. Some are given in the following:

Managing with different languages

●Language is an essential part of every culture. Merger may be created between two companies from completely different cultures as well as languages. It would be the most sensitive issues for both companies. So, all internal and external parties have to deal very carefully in every aspect of business activities.

Different types of historical background

●Every country or nation has particular type of historical background. It always influences their business activity as it’s a part of the culture. So, all should properly handle with others history and heritage.

Communication process

●Regular meeting, get-together; these are very important in merger. Both companies should try to maintain an effective communication process. Without an efficient communication process, no company can sustain in the long-run.

Level of coordination

●Coordination may differ from one country to another. It has an impact in the overall activity of business. Merger may create conflicts in this coordination sector.

Question 2: How might the challenges associated with postmerger integration in Europe be affected by the fact that the parents of each company in both mergers were based in the U.S?

Answer: Fortunately, the prospect of working for a successful new company helped managers overcome many of the obstacles in Europe. Focusing on common denominators rather than on differences was so important. Communication was a key element in this regard. Bimonthly meeting in London of country managers

became the norm. Reward system is another factor. It includes bonus. Language and historical background are very influential in this case. Level of coordination is another issue. These challenges were the fact. So, both mergers were in the U.S.

Question 3: What management skills are most important to making a cross-border: merger successful? How might these skills differ from those needed during “routine” periods?

Answer: The skills needed to make a cross-border: merger successful are in the following:

Communication skills

● Routine meeting, local community; these are very much important in an effective communication process. Merger will become more and more successful, meaningful and sustainable in the long-run.

● Reward system

●Reward system is another issue. It creates motivation among the employees. Thus, it makes the merger more successful.

●Adopting with different cultures

It involves understanding:

-Historical background

-Language

-Ethical issues

-Level of coordination

Question 4: What specific steps were taken in the two mergers to try to align the interests of different parts of the organizations so that they were all looking toward the overall good of the firm?

Answer: Some specific steps were taken which are given in the following:

●Meeting with bankers: All the bankers were organize meeting and consult about the important issues. They thought about the overall goodwill of the firm and they also discussed about the solution of the problems.

●Building relationship with the colleagues: Relationship is an essential part of modern business that helps an organization to create a feasible environment. The

company built a strong relationship with their colleagues to get the idea about the overall situation and environment.

●Effective reward system: Reward is an effective motivator for the employees. The company established an effective reward system to motivate the employees. Because they were the people who would take the organization in the long run . So, motivation as well as reward/bonus was established.

●Team building: Team work is an important factor now-a-days. It is better than doing a job individually. Each member can share their expression and solve the problem in the best possible way. So, the company tried to establish proper team work environment.

●Effective communication: Strong communication is very necessary in modern competitive business age. Without proper communication among the related parties, no business can sustain. so, the company wanted to set up a better level of communication.

Question 5: How might diversity among employees of different cultural backgrounds and with varying specialties and expertise actually strengthen an organization’s culture after a merger?

Answer: Diversity among employees of different cultural backgrounds and with varying specialties and expertise is strength of an organization. After merger, two different companies become close and they can share their feelings, ideas, plans, perspectives, viewpoints etc. It is very much helpful to overcome complexity and tackle problems. Both companies can consult from their own perspectives and think which strategy is better for the specific problem. Experience, another important issue. of business, can help the companies to survive in the competitive world.

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EURO DISNEYLAND

There are many environmental issues that affect businesses when entering a

foreign market, the main environmental factors that will be discussed is as follows:

technological, economic, social, political, and demographic. Each factor will

impact the business different and cause various degrees of impacts on the company

and its decision to enter a foreign market. Euro Disney, a foreign division of Walt

Disney Company; is located France and opened in 1992 to service the people of

France. Researchers had discovered that like the many people in the United

States, foreigners also were attracted to the whole them park idea. When Disney

decided to launch Euro Disney, many issues were bough up and many

environmental issues were faced; in this paper these issues will be briefly

discussed. First off the cultural differences that existed between the US and France

had to be discussed and worked out, for example the weather in France was an

issue when determining rather the park would be a success or not along with the

staff who would ultimately become family to the Disney Corporation.

Fist off the economic factors, which are usually income, expenses, and resources;

that Disney faced when deciding to build Euro Disney were easily noticed and

overcame. Issues such as attraction and income it generated played a huge part in

the economic factors, in the beginning Euro Disney estimated that during the first

year it would attract 11 million visitors achieving operating income of $373

million; this would show that the estimated revenue could be met. The resources

were there to make the park a success, people were ready to enjoy the park and

revenue was sure to be met by the cost of admission into the park.

The initial plan

• Based on success in Japan and USA, the company wanted to make Euro Disney

the most lavish project • Over 200 locations selection, final Paris based on two

points: European’s biggest magnet for tourism, huge population can get very

quickly

• European vacation habits study: 5 weeks VS 2-3 weeks in USA: longer vacation

means more time • French government provide rail access and infrastructure

improvement: downtown Paris to park within 35 minutes

• Cold and wet weather in Paris: waiting areas and moving sidewalks built to

protect visitors from wind, rain and cold • Park attractions based on Frenchman

Jules Verne’s science fiction, a theater feature a movie on European history,

English and French languages use, a multilingual staff

• CEO: a US citizen with extensive ties to France • Wine and other alcohol

beverages would not be served

Problems

1, management hubris

• Assumption: European public’s big appetite for American imports (based on the

success of Big Macs, Coke, Hollywood movies)

• Reality: French are more resistant to American cultural imperialism

• Disney’s arrogant management style demoralize French workforces, create

hostility from French people----the number of French visitors down A French

native as CEO Promote Europeans to top management team

2, cultural differences

• The length of average stay: 2 days and 1 night VS 4 days in US (1 park VS

multiple parks in US)

• Seasonal attendance: peak summer vacation and troughs non vacation VS year

round in US (European parents reluctant VS American take children out of school,

longer vacation VS short In US )

• Lower food revenue due to misunderstanding European’s life

By the case we can say that Euro Disney’s financial results of the years 1992 and

1993 by far missed the plans given in the Offer of shares. 

This plans were mainly based on Disney’s experiences with its existing and

successfully performing theme parks. 

Although the planning process seems to have been carefully conducted and backed

by analysis of external experts some significant failures occurred. From the

financial results of the first two years of operation and from analysts’ comments on

the actual development one can see that the problems resulted amongst other

factors from the following general reasons: 

Wrong assessment of the market situation.

Overall economic development.

Development of property market.

Guest awareness of high prices.

Cultural problems.

Normally there are several ways to reach an organisations goal. To determine the

way to this goal which is for most organisations – except non-profit ones – the

maximisation of profit, a plan is needed. Planning means to decide for one of the

possible ways given.  

The process of planning takes three steps: 

Collection of information

Development of several alternative plans

Decision for one of these plans 

In the first step it is important to gather as much information as possible to provide

the best basis to decide for the plan that promises best results. Because of the

future nature of planning there will not be complete information. This requires

some estimations. Therefore all plans include more or less elements of uncertainty

and risk. Since planning is essentially about the future, the results and information

from the past usually are only relevant as the basis from which to forecast. 

On the basis of the information available and the projections of possible future

developments it is possible to retrieve alternative plans for different scenarios. In

spite of the uncertainty of the future, planning offers the means to evaluate

alternative proposals. This should reduce uncertainty and risk

Planning is involved in various kinds of decisions, but especially important for

major decisions concerning the overall future strategy and large investments. Such

issues are very risky since they require a high spending of capital and have a long-

term influence on the future development of the organisation. One example is the

foundation and setting-up of a new company.

Question 1 : Using Hofstede’s four cultural dimensions as a point of reference, what are some of the main cultural differences between the U.S. and France?

Answer: Hofstede’s four cultural dimentions are:Uncertainty avoidancePower distanceIndividualism Vs CollectivismMasculinity Vs Femininity According to these sectors, the main cultural difference between the countries is that the U.S. believes in individualism. But France believes in collectivism. They don’t want to see their children as a customer in business field. But U.S. wants to make profit if it is profitable to do business by motivating children.France culture likes to be stable in every case. They want certainty in business which is absolutely opposite to the U. S.

Question 2 : In what way we has Trompenaars’s research helped explain cultural

differences between the U.S. and France?

Answer: Trompenaar’s cultural dimensions are:

Universalism Vs Particularism

Individualism Vs Communitarianism

Neutral Vs Emotional

Specific Vs Diffuse

Achievement Vs Ascription

According to these dimensions, his research told that universalism is believed by

the U.S. rather than France because they made the infrastructure of Disney Land

according to their own culture. They didn’t think about the other’s sentiments.

Then, individualism is followed by the U.S. more than France. So, many critics

said that Disney made the children “customer” rather than human being. Moreover,

people in France are emotional as we can see that the farmers raise their voice for

the Disney symbol. In this way his research helped explain differences between

and France.

Question 3 : In managing its Euro Disneyland operations, what are three mistakes

that the company made? Explain.

Answer: In managing Euro Disneyland operations, three mistakes that the

company made. They are given in the following:

1. There was a great problem for personal space. People of France were too close

with others. But foreigners might want to have personal space for themselves. It

was one of the main problems that the company faced.

2. Disney placed its first work bids in English, leaving smaller and medium-sized

French firms feeling like foreigners in their own land.

3. Disney was forced to bail out 40 subordinators who were working for the Gabot-

Eremco construction constracting group, which had been unable to honor all of its

commitments.

Question 4 : Based on its experience, what are three lessons the company should

have learned about how to deal with diversity? Describe each.

Answer: The company experienced so many lessons from their operation in different countries associated with different cultures. Most important three lessons are:

All should respect others culture, beliefs and value.

People should respect others feelings.

Company should treat in terms of the host-county’s income, economy and financial condition.

Wal-Mart’s Japan strategy

Inability to carry out a low cost strategy

Given the above facts, it is obvious that the idea of ”Every Day Low Prices” does

not appeal to the Japanese market in the same way it does in the American,

Mexican and Canadian markets. This is a very different culture and population to

cater to. Wal-Mart’s low cost marketing strategy may not be as effective globally

as it is domestically. They earn their profits through high volume sales over

differentiation, and this approach is just not as successful in Japan.

Supply chain inefficiencies

In Japan there are strong and close-knit supplier webs that provide retailers with

their goods. This country puts a higher value on close, local relationships, making

it very difficult for foreign firms to enter the industry. With so many changes in

products due to local store specifications, it forces firms to deal with many

different suppliers. This is not favorable to large retailers, as they don’t have the

time or national presence to make the necessary relationships to do business. Wal-

Mart is not used to this high level of supplier power. Their value usually comes

from cutting costs with suppliers enough to pass onto their customers while using

synergy to increase efficiencies. Difficulties managing their supply chain are

another substantial reason Wal-Mart is struggling in Japan.

Pressure from competition:

The types of competition in Japan include both domestic and international players.

It’s biggest Japanese competitors are 7-Eleven Japan Co. Ltd., Aeon Co. Ltd., and

Ito-Yokado Co. Ltd. As of 2008, all of these companies drastically outperformed

Seiyu Ltd. (Wal-Mart). Although all of these companies have different strategies,

much of their success can be credited to their experience in understanding how

their country buyers and sellers interact. Two main international competitors are

Carrefour from France and Tesco from the United Kingdom. These firms had

similar challenges to Wal-Mart with their international expansions, but each faced

them differently. While Carrefour had complications so complex that it exited the

market in 2004, Tesco was able to gradually expand and prosper. Tesco made large

investments in market research that allowed them to build stores that better met the

Japanese consumer’s needs. Their cautious expansion and well thought out plans

have helped them succeed in the Japanese retail industry. It is imperative for Seiyu

and Wal-Mart to recognize their competition’s advantages and formulate better

ways to respond.

Question 1 : Do you believe Wal-Mart can be successful by circumventing the current Japanese distribution system? What are some of the problems you foresee?Ans: Yes, I believe that Wal-Mart can be successful by circumventing the current Japanese distribution system because its distribution system was to sale high quality products at a minimum cost and customers were also satisfied with their distribution system.

Some of the problems that I foresee are:1. Multilayered distribution system.2. Adaptation process of technology.3. Long and costly networks of suppliers which frustrates foreign investors.4. Local marketing competition.

Question 2 : Do you agree with Wal-Mart’s entry strategy? What are some of the inherent risk? Do you think that a faster market entry would be more effective?Ans: Yes, I agree with Wal-Mart’s entry strategy in Japan, because there was lot of opportunity o be successful in food manufacturing industry.Inherent risks:1. Cultural diversity: Japan’s retail market has its own cultural specific quirks that are often different for outsiders to fully grasp.2. Strong competition with local competitors.

3. A high failure risk for a new company to entry.4. Consumer’s different thinking about price and quality.I don’t agree that a faster market entry would be better, because it is important to identify, analyze a market opportunities and threats successfully before entering into a market.

Question 3 : In your opinion, what is the single most important thing Wal-Mart can do to ensure success in Japan? Explain.Ans: Japanese consumers realized through Wal-Mart that lower price doesn’t always mean lower quality. So Wal-Mart can focus on low cost of product with maximum/ good quality.

Question 4 : Do you think Wal-Mart is doing enough cross-cultural training with its Seiyu employees? What are the greatest challenges Wal-Mart faces in relating to its Japanese employees?Ans: Yes, I think Wal-Mart cross-cultural training programs was enough , related to achieve their goals.Greatest challenges Wal-Mart faces:1. Language barriers because Japanese employers have to transform their language into English.2. Technological barriers.3. Differences in management practices.