Effects of Culture and Behaviour on Negotiation and Implementation Success. The Example of the DaimlerChrysler Merger

Essay, 2020

18 Pages, Grade: 75%




List of Abbreviations

Objectives & Delimitations
Case Study: The Merger between Daimler & Chrysler

Insights on National Cultures Based on Hofstede’s cross-cultural Research
Hofstede’s Work & the Relevance of his Theory
Power Distance
Uncertainty Avoidance
Individualism vs. Collectivism
Masculinity vs. Femininity
Long-Term vs. Short-Term Orientation
Summary of Cultural Differences between American and German Culture

German Long-Term Orientation During the Negotiation as a First Friction Point
Excurse to Applied Negotiation Techniques and its Effects
Differences in Individualism Show in the Compensation Scheme
Different Perspectives on Uncertainty Avoidance and Indulgence Lead to Hardened Fronts

Critique & Reflection on Hofstede’s Model
General Critique & Usefulness the Model
Alternative Models in the Discipline of Cross-Cultural Management


Reference List

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten


The automotive industry has been facing increasing problems over the last years and COVID-19 accelerated the situation. Changes in the industry are challenging the automotive manufacturers to defend their position and adapt to constantly changing conditions. Some manufacturers, such as PSA and FiatChrysler already announced mergers to be jointly successful in the future (European Commission, 2020). Since Chrysler was part of several M&A activities, it is interesting to take a look at past Chrysler mergers and consider which factors regarding cross-cultural management influenced the merger outcome. The example of the DaimlerChrysler merger will be used for this purpose.

Objectives & Delimitations

The objective is to analyse the DaimlerChrysler merger towards cultural differences and behaviour of both parties under consideration of cross-cultural management theory which had an influence on the failure of the merger by means of Hofstede’s cultural dimensions. The analysis will be conducted by using selected example scenarios answering the following research question:

“How did national - and to a certain extent organisational – culture and behaviour have an impact on the outcome of the negotiation and implementation success in the case of the merger between Daimler-Benz and Chrysler?”

Furthermore, the applied negotiation techniques will be briefly considered additionally to the aspects of cross-cultural management. At the end, the author is going to briefly reflect on the usefulness of the model and its critique as well as to give examples of other selected cross-cultural models and theories.

In this assignment, the focus is set on the analysis of the German and American cultural characteristics in the DaimlerChrysler case. There will be no analysis of other national cultures or under the consideration of other cross-cultural management or negotiation theories.

Case Study: The Merger between Daimler & Chrysler

On 7 May 1998, the German car manufacturer Daimler-Benz AG (Daimler) and the American Chrysler Corporation officially stated the merger between the two companies (Daimler, 2020) announcing one of the largest cross-border mergers in industry so far preparing the German company Daimler to expand its business in the United States of America.

Even though the deal between the two companies was officially described as a joint project to bring forces together and mutually compete in the market, there have been imbalances in favour of Daimler. For example, the statement of former Daimler-Benz CEO Jürgen Schrempp to the team involved in the merger was that Daimler had to be leading in the merger and must not take any inferior role. In the negotiation, the equality of both parties was committed, but later in the integration process stated as a case of misunderstanding. Furthermore, probably the most noticeable statement of dominance was the naming of the new company as DaimlerChrysler. The propositions of Robert Eaton, former Chrysler CEO at this time, to agree on a name paying tribute to the lead thought of equality in this merger, were consistently rejected by Daimler, stating that the name needs to be putting Daimler first or otherwise being a deal-breaker (Vlasic and Stertz, 2000).

The expected synergies from the merger could not be realised and in 2007 Daimler sold Chrysler as a to a certain extent battered unit to the private equity investor Cerberus Capital Management after nearly a decade of unsuccessful post-merger integration and gaps in mutual trust and alignment (Watkins, 2007).

Insights on National Cultures Based on Hofstede’s cross-cultural Research

Hofstede’s Work & the Relevance of his Theory

The Dutch psychologist Geert Hofstede was one of the first researchers to analyse the influence of national culture on management practices. Hofstede conducted comprehensive empirical research with more than 110,000 IBM employees from 72 subsidiaries all over the world clustering countries on value dimensions. Based on this data, one of the most important and influential models of cultural dimensions was developed (Minkov and Hofstede, 2011).

The fundamental version of his model describes cultures in four dimensions: Power Distance, Uncertainty Avoidance, Individualism, Masculinity (Hofstede, 1984). Hofstede (1991) extended the model with a further fifth dimension regarding long-term vs. short-term orientation which was followed by a final sixth dimension considering the dimension regarding indulgence vs. restraint (Hofstede et al., 2010).

Power Distance

Power distance describes the “[…] extent to which less powerful members of organizations and institutions […] accept and expect that power is distributed unequally” (Hofstede and Bond, 1988, p. 10). According to Rinne et al. (2012), cultures with a lower power distance provide a more equal distribution encouraging democratic participation. These traits can also be found here (the US score 40 and Germany 35) (Hofstede Insights, 2020). Hollmann et al. (2010) describe the German culture as more team-oriented but self-responsible than the American counterpart and the decision-making and negotiation process is based on the development of detailed plans.

Uncertainty Avoidance

Whereas there was a more similar characteristic in power distance, the U.S. and Germany differ in uncertainty avoidance with a score of 46 for the USA and 65 for Germany (Hofstede Insights, 2020). This describes degree of ambiguity or threat towards situations in the future which cannot be sufficiently depicted or planned (Hofstede, 1984).

German culture shows a tendency towards the avoidance of uncertainty. The behaviour is characterized by deductive approaches focussing on detail orientation and fact-based safeguarding as due to the low power distance Germans feel responsible for their decisions and compensate uncertainty by covering based on expertise and facts. Compared to Germans, Americans are more open towards innovation and novelties and willing to explore the implications of changes (Hofstede Insights, 2020).

Individualism vs. Collectivism

The third of Hofstede’s six cultural dimensions describes “[…] the relationship between the individual and the collectivity which prevails in a given society” (Hofstede, 1984, p. 148). Cultures in which the common interest prevails over the individual interest are called collectivist and vice versa (Hofstede et al., 2010).

The USA score 91, Germany 67 indicating that both cultures are individualistic. Regarding the American culture, the high score on individualism combined with scoring lower on power distance reflects “the American premise of ‘liberty and justice for all’” (Hofstede Insights, 2020). The American traits of informal communication, direct participation and consultation of both employees and their managers can also be seen in the case of DaimlerChrysler. For Germans, personal preferences have an influence on loyalty, duty and responsibility (Hofstede Insights, 2020).

Masculinity vs. Femininity

A high score for masculinity indicates that society is driven by performance, competition and success whereas lower scores express femininity, like care for the environment and quality of life. This system of value applies at work and in leisure time (Hofstede et al., 1998). Masculine societies value success and draw self-esteem from their accomplishments, like American and German cultures do. This is reflected by the comparably high scores of 62 (United States) and 66 (Germany) (Hofstede Insights, 2020).


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Effects of Culture and Behaviour on Negotiation and Implementation Success. The Example of the DaimlerChrysler Merger
The University of York
Cross-Cultural Managemnet & Negotiation
Catalog Number
ISBN (eBook)
ISBN (Book)
cultural management, negotiation, interkulturelles management, management, international business, daimler, chrysler, daimlerchryser, merger, m&a, mergers, verhandlung
Quote paper
Anonymous, 2020, Effects of Culture and Behaviour on Negotiation and Implementation Success. The Example of the DaimlerChrysler Merger, Munich, GRIN Verlag, https://www.grin.com/document/942587


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