Cultural Analysis of the Merger of Arcelor and Mittal Steel with the Help of Hofstede's Cultural Dimensions


Term Paper, 2017
30 Pages, Grade: 1,7

Excerpt

TABLE OF CONTENT

1. Background Information - ArcelorMittal

2. The Focus of Analysis: The Merger of Arcelor and Mittal Steel

3. An Appropriate Framework for this Analysis?

4. A Brief Introduction into Hofstede’s Cultural Dimensions
4.1 What is Culture?
4.2 National culture
4.3 National culture Differences and the Hofstede’s Cultural Dimensions
4.4 Criticism to Hofstede’s Cultural Dimensions and Limitations of the Framework

5. The Cultural Analysis of ArcelorMittal’s Merger
5.1 Cultural Map “ Individualism vs. Collectivism ” and “ Power Distance ”
5.2 Cultural Map “ Uncertainty Avoidance ” and “ Masculinity vs. Femininity ”
5.3 Dimensions “ Long-Term vs. Short-Term Orientation ” and “ Indulgence vs. Restraint ”
5.4 Successful Merger & Post-Merger Integration

6. Conclusion

I. Appendices
A. Appendix A - Types of Metal Products
B. Appendix B - Levels of Mental Programming & the Onion Metaphor

I,. List of Tables ͘

III. List of Figures

IV. References

V. Bibliography

1. Background Information - ArcelorMittal

In 2006, the world’s biggest 2 steel companies Arcelor and Mittal Steel bundled their forces through a merger and ended in the creation of the world’s leading steelmaking and mining company ArcelorMittal. The company is truly a global player, with steelmaking operations in 19 countries over 4 continents and a sales distribution to 160 countries, ArcelorMittal is represented all over the world. Over 200,000 employees are currently working for the group (ArcelorMittal, 2015).

The company attributes its success to its core values of sustainability, quality and leadership. ArcelorMittal supplies high-quality finished and semi-finished steel. A short description of its main product types can be found in appendix A. The main industries which are supplied by ArcelorMittal are the automotive, appliance, engineering, construction, and machinery industries. In the automotive steel industry ArcelorMittal has the biggest market share (ArcelorMittal, 2015).

ArcelorMittal operates in a very dynamic economic environment. Its revenues are mainly generated through the sales of its steel products; thus, the financial performance of ArcelorMittal is highly dependent on the steel sales prices (ArcelorMittal, 2015). These in turn, are very sensitive to changes in demand and supply. The demand for steel again, correlates with the worldwide and country-specific economic situation (Denina, 2016; Schuler et al., 2014). The reason for market volatility is the cyclical demand in the automotive, construction and machinery industries which are, as mentioned before, the main customers of steel (ArcelorMittal 2015).

The financial crisis in 2008 initiated a severe decrease in the demand for steel. Considering the fact that the high capacities of steel production cannot be shut down overnight, the prices for steel and at the same time the profitability of the industry fell rapidly (Magne & Frecaut, 2009; ArcelorMittal, 2015; Schuler et al., 2014). The macroeconomic conditions are still challenging. The company needs to adapt to the new market conditions of overcapacity through reconsideration of production capacities and more adequate cost control (ArcelorMittal, 2015).

2. The Focus of Analysis: The Merger of Arcelor and Mittal Steel

This analysis focuses on the cultural aspects, which could have influenced the merger and the post-merger-integration of Arcelor and Mittal Steel in either positive or negative way. Thus, the purpose of this work is to analyse the cultural factors which possibly played a role at forming the new corporate culture of ArcelorMittal.

The crucial reason for the merger was doubtless the pursuance for consolidation in the market, which was necessary to the producers as the consolidation should enable an oligopolistic market behaviour (Sharma, 2008; Wharton School, 2006). The chief financial officer of the new merged company ArcelorMittal, Aditya Mittal, refers to the merger as ‘the best combination within the steel industry’ (Wharton School, 2006). The CFO himself, believes that the corporate cultures of Arcelor and Mittal Steel did not differ significantly. Even if both steel giants arose from a different background and geography, the vision, the operational excellence, and the market conduct so Aditya Mittal, has been the same (Wharton School, 2006; Flash et al., 2013). After the first full year of combined operations, the first positive effects of the merger appeared as the revenues increased around 18 per cent and the net income increased about 30 per cent. Obviously, synergy effects could be realised and strengthened very quickly. Although mergers of bigger companies are more likely to fail, as proven through the case of DaimlerChrysler, GM, and Saab and many more (The Economist Intelligence Unit, n.d.), ArcelorMittal seems to manage the merger, and in particular the varying cultures, efficiently and expediently (Sharma, 2008).

Considering this sharp increase of the company performance, the question raises, how the post-merger-integration could be executed this smooth and quickly. How could it be that the 2 companies could communicate, and bundle their forces by all appearances trouble-free? Did the different national and corporate cultures complement or hinder the forming of a new organizational culture?

The following chapters aim to answer these questions with the assistance of the Hofstede cultural dimensions (Hofstede, 2010).

3. An Appropriate Framework for this Analysis?

In the last decades, there has been a noticeable development of organizational theories and frameworks to understand organizational culture. Well-known theories besides Hofstede’s cultural dimension (Hofstede, 1980) are Edgar Schein’s organizational culture theory (Schein, 2004), strength of culture (Deal and Kennedy, 1982), the characteristics of excellent companies (Peters and Waterman, 1982), Trompenaar’s 7 cultural dimensions (Trompenaar and Hampden-Turner, 1998) and the GLOBE project (House, 2004).

Unquestionably however, Hofstede’s cultural dimensions initiated a row of quantifiable intercultural studies. Trompenaar’s dimensions and the GLOBE project for example, are mere advancements of Hofstede’s theory (Hofstede, 2010; Hill et al., 2012). Edwards (2015) refers to these studies as ‘hofstedian’ approaches, which clearly relates them to each other. If one wants to analyse a certain event in a cultural perspective the focus or the analysed event should determine the appropriate framework. As mentioned in chapter 2, this work wants to analyse the cultural influences on the merger of Arcelor and Mittal Steel. Referring to this particular merger, which involves globally operating companies, using a framework which focuses on cultural differences seems to be the only appropriate approach to extract the cultural influences.

The most popular theories of this nature are, as mentioned above, Hofstede’s cultural dimensions, Trompenaar’s 7 dimensions and the Globe project. Certainly, each of these frameworks would be expedient to analyse the merger of Arcelor and Mittal Steel. Nevertheless, this analysis will be conducted with assistance of Hofstede’s cultural dimensions. This choice is justified with the fact, that Hofstede’s work is considered to be the first one of its nature (Hofstede, 2010; Hill et al, 2012). As his study is the root of the subsequent “hofstedian” (Edwards, 2015) frameworks, a major part of academic criticism and evaluations address him, rather than Trompenaar’s dimension or the GLOBE framework.

Thus, even if it seems like that Hofstede’s cultural dimensions have passed the test of time, they remain highly controversial, as there is also a large number of questioners (Williamson, 2002; McSweeney, 2002a, 2002b; Makarchenko, 2015; Schmitz & Weber, 2014; Jones, 2007; Baskerville, 2003; Magala, 2004; Bhimani, 1999).

4. A Brief Introduction into Hofstede’s Cultural Dimensions

4.1 What is Culture?

Firstly, when talking about culture, one needs to define what culture is. Although almost every scientist of organization theory uses a different definition of ‘culture’ (Hill et al., 2012), it is inevitable for this analysis to adopt one. Hofstede (2010: 6) describes culture as ‘the collective programming of the mind that distinguishes the members of one group or category of people from others’. A more comprehensive explanation of ‘mental programming’ and Hofstede’s assumed ‘onion metaphor’ can be found in appendix B. He further elaborates, that these ‘mental programs’ (Hofstede, 2010: 5) are patterns of thinking, feeling and potential acting, which were mainly developed in the early childhood.

4.2 National culture

As mentioned before, culture belongs to certain groups of individuals. Different groups can have different cultures but they can also have the same or a similar culture. An individual can be a part of various groups and thus can be part of different cultures at the same time. It is therefore possible, that one has multiple cultures on national, regional, religious, ethnic, gender, social class, and organizational level (Hofstede, 2010).

To reach the aim of this analysis, the national differences need to be understood. Hofstede (2010: 25) argues, that ‘managers and leaders, as well as the people they work with, are part of national societies’. To understand them, their social environment, their way of life and their history need to be understood. Only then, we can understand the managers who doubtless play a major role in shaping an organizational culture (Hofstede, 2010)

4.3 National culture Differences and the Hofstede’s Cultural Dimensions

Hofstede’s study of national differences was conducted with data, which he collected from IBM subsidiaries in 64 countries. The origin of the data were attitude surveys which were conducted mainly through self-questionnaires and employee interviews. With these data, Hofstede applied quantitative analysis and summarized the cultural differences into dimensions. The sixth dimension, which is the newest dimension, was added in 2010 (Hofstede, 2010). The 6 dimensions are briefly defined in the chapters 4.5.1 to 4.5.6. These chapters will also illustrate some extremes of the dimensions in table format.

4.3.1 POWER DISTANCE

The dimension ‘power distance’ measures how the people of a certain culture handle the fact that power is unequally distributed within a group of persons (Hofstede, 2010).

Table 1 shows how the extremes of this dimension can shape an organizational culture:

Abbildung in dieser Leseprobe nicht enthalten

Table 1. Extremes of Power Distance. Adapted from “Cultures and Organizations”, by Hill et al, 2012, page 96. Copyright (2012) by Pearson Education Limited 2012

4.3.2 UNCERTAINTY AVOIDANCE

The dimension uncertainty avoidance measures how the people of a certain culture tolerate uncertainty (Hill et al., 2012).

Table 2 shows how the extremes of this dimension can shape an organizational culture:

Abbildung in dieser Leseprobe nicht enthalten

Table 2. Extremes of Uncertainty Avoidance. Adapted from “Cultures and Organizations”, by Hill et al, 2012, page 96. Copyright (2012) by Pearson Education Limited 2012

4.3.3 INDIVIDUAL VS. GROUP ORIENTATION

The dimension individual vs. group orientation, shows to which extent people of a certain culture only look for themselves as individuals or care about a group (a collective) in which they are integrated and feel loyalty for (Hofstede, 2010).

Table 3 shows how the extremes of this dimension can shape an organizational culture:

Abbildung in dieser Leseprobe nicht enthalten

Table 3. Extremes of Individualism vs. Collectivism. Adapted from “Cultures and Organizations”, by Hill et al, 2012, page 96. Copyright (2012) by Pearson Education Limited 2012

4.3.4 MASCULINE VS. FEMININE

The dimension masculine vs. feminine shows if a culture is more focused on achieving private goals like relationships or more focused on work goals like increasing earnings (Hill et al., 2012).

Table 4 shows how the extremes of this dimension can shape an organizational culture:

Abbildung in dieser Leseprobe nicht enthalten

Table 4. Extremes of Masculinity vs. Femininity. Retrieved from “Cultures and Organizations”, by Hill et al, 2012, page 96. Copyright (2012) by Pearson Education Limited 2012

4.3.5 SHORT-TERM VS. LONG-TERM

The dimension long-term orientation stands for the ‘fostering of virtues oriented toward future rewards’ while it’s opposite the short-term orientation is defined as ‘fostering of virtues related to the past and present’ of a certain culture (Hofstede, 2010: 239).

Table 5 shows how the extremes of this dimension can shape an organizational culture:

Abbildung in dieser Leseprobe nicht enthalten

Table 5. Extremes of Short-Term vs. Long-Term orientation. Adapted from “Cultures and Organizations”, by Hofstede, Hofstede, Minkov, 2010, page 243. Copyright (2010) by Geert Hofstede BV.

4.3.6 INDULGENCE VS. RESTRAINT

Hofstede (2010) defines indulgences as ‘a tendency to allow relatively free gratification of basic and natural human desires related to enjoying life and having fun.’ And adds the definition of restraint as ‘… opposite pole restraint, reflects a conviction that such gratification needs to be curbed and regulated by strict social norms’. This dimension describes primarily personal/private behaviour.

Table 6 shows how the extremes of this dimension:

Abbildung in dieser Leseprobe nicht enthalten

Table 6. Extremes of Indulgence vs. Restraint. Adapted from “Cultures and Organizations”, by Hofstede, Hofstede and Minkov, 2010, page 297. Copyright (2010) by Geert Hofstede BV.

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Details

Title
Cultural Analysis of the Merger of Arcelor and Mittal Steel with the Help of Hofstede's Cultural Dimensions
College
Northumbria University
Grade
1,7
Author
Year
2017
Pages
30
Catalog Number
V376521
ISBN (eBook)
9783668544239
ISBN (Book)
9783668544246
File size
1259 KB
Language
English
Notes
This assignment is about the implications of different organizational cultures, at mergers. The assignment uses different theoretical models and theories and applies them to the case of ArcelorMittal.
Tags
culture
Quote paper
Ender Gülcan (Author), 2017, Cultural Analysis of the Merger of Arcelor and Mittal Steel with the Help of Hofstede's Cultural Dimensions, Munich, GRIN Verlag, https://www.grin.com/document/376521

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