SUMMARY:
Integration processes and strategies have been growth the last decades due to the implication of a globalized world where companies need to expand themselves in order to compete with bigger competitors and gain expertise for customer satisfaction and recognition.
Nowadays, not only big firms around the world are making business: big companies need small and more specialized companies and by contrary. However, the success or failure of this kind of business depends on the strategy implemented by the actors since the planning process, until the post-business stage.
The most common integration strategies used are the Mergers and Acquisitions (M&A), which principal objective is the fusion or the acquisition of two companies of the same sector, in order to increase the market presence in other countries and to expand its operations with certain cost (time, money, resources, independence, participation, etc). This is an important decision that companies have to take with a structured plan, analyzing all the variables involved before and after the integration process, because the company have to decide if it would grow more with a partner or through a merger, than it would by own. Sometimes the organizations take this decision because they have internal conflicts that they would not resolve by themselves and they need capital injection to survive in the market or because the company wants to expand to other markets and create future value.
In this process of integration the companies need to take into account the importance of transference of technology and knowledge because both companies are using learning process in order to achieve common goals: this is a necessary condition to the merger process. However those transferences are not always enough and sufficient to the merger success because the companies have to face with another dangerous barrier with this kind of business are made in different countries: The acculturation process. This concept become a real problem for the outcomes and performance of the companies involved when they cannot manage the cultural differences
In this process of integration the companies need to take into account the importance of transference of technology and knowledge because both companies are using learning process in order to achieve common goals: this is a necessary condition to the merger process. However those transferences are not always enough and sufficient to the merger success because the companies have to face with another dangerous barrier with this kind of business are made in different countries: The acculturation process. This concept become a real problem for the outcomes and performance of the companies involved when they cannot manage the cultural differences and try to make a kind of “ideal cultural fit”, or even worst if their cultures do not fit at all.
“Nahavandi and Malekzadeh (1988, p.82) adopted the anthropological term acculturation to describe the cultural changes resulting from the interaction of one organizational culture with another, or: … the ways in which two groups adapt to each other and resolve emergent conflict.” (Taken from: “Challenges and opportunities in mergers and acquisitions: three international case studies”)
Challenges:
- The market situation: This is a significant variable that firms have to take into account before to think in investment or purchasing of any other firm. Sometimes every step is followed correctly by the actors of the merger, but if the market conditions such as economical variables, political stability are in troubles, one acquisition may fail immediately. In the first case of DB and BT, we can see clearly how the market situation was an important advantage for the development of this successful integration process, but this is not the same all the times.
- Cultural Convergence: This is the key factor that we are dealing with in this topic, because sometimes is more effective if one company makes all the efforts in order to manage and address the cultural differences and not to try to achieve in ideal cultural fit that sometimes is impossible to reach. This process take many steps an planning, however those conflicts can be observed in the post-merger stage and this is even more complex because the firms have already invested much money and resources and they cannot lose them. In the case of the banks, the German and American banks made all the possible efforts in order to reduce the cultural clashes to the minimum level.
Recommended reading:
Alzira Salama, Wayne Holland, Gerald Vinten, (2003) "Challenges and Opportunities in Mergers and Acquisitions: Three International Case Studies – Deutsche Bank-Bankers Trust; British Petroleum-Amoco; Ford-Volvo", Journal of European Industrial Training, Vol. 27 Iss: 6, pp.313 – 321.
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