DaimlerChrysler for East Asia (Case #34, Notes)
As observed in a short period of time DaimlerChrysler’s Schrempp has enacted several strategic moves that, among other things, on paper increased the firms market share in Asia to almost 10%. Some of these moves, such as the “world car” development tie-up with Hyundai, also have the potential to pay off with new platforms to sell in markets outside East Asia.
However, several key questions exist. Has DaimlerChrysler sufficiently created a corporate culture that can absorb and succeed in such a vast expanse of cultures? Can DaimlerChrysler become a mass-marketer of medium and low-end vehicles while still protecting its great Mercedes Benz brand? Even if DaimlerChrysler efficiently combines its new global strategy, will it be enough to stave off competitors with similar strategies.
The lesson of the DaimlerChrysler merger and its subsequent foray into Asia is that to be an effective entity, and especially one born of a cross-cultural merger, a firm must focus initially on successfully integrating the new firm. That usually means putting people and products first, and empire building second. As the case strives to show, while DaimlerChrysler saw the gaps in their merger and made concrete efforts to plug them, DaimlerChrysler’s top management in trying to do so many things may have inadvertently created internal obstacles preventing the firm from achieving the inherent goals of their initial merger strategy. For example while creating an admirable strategy for Asia DaimlerChrysler has not address strategic topics such as production, branding and sales channels. And this is not just symptomatic of their problems in Asia. The new company has failed to work out the same strategic issues for America and Europe also.
A recent article in Economist re-enforces the perception that DaimlerChrysler may be attempting too many maneuvers at the sake of execution. The article alludes to problems associated by addressing “general issues rather than cross-border ones”. These issues will only be exacerbated when trying to integrate the firm’s East Asian strategy.
For example, DaimlerChrysler has yet to choose a central headquarters, instead it operates out of both Stuttgart and Detroit. Without a central decision making authority and the implied chain-of-command, it is inconceivable that cultural issues, let alone the nuts and bolts issues of automobile design, production, target market, and pricing will emerge seamlessly across four continents.
For DaimlerChrysler to succeed, and not just in Asia, top management needs to take several concrete steps to assimilate its new global entity. The first step would be to decide on a location for the firm. Since it is not a merger of equals, locating the firm in Stuttgart makes sense. (DaimlerChrysler is incorporated in Germany.) Second, to deal with the overall cultural issues a management round table consisting of top management from both Daimler and Chrysler along with several outside consultants experienced in cross-cultural mergers should meet to set overall guidelines in how the firm should be integrated and how sensitive cultural issues should be handled. The guidelines would serve as an overall framework to solve the endless turf battle disputes that arise in any merger. Hopefully it would also provide evidence of a commitment from the top to make the merger work while keeping the best of both cultures.
The next step would be to establish a working team made up of key people drawn from technical, financial, production, and human resources groups to outline merger integration goals and how to achieve them. The lack of expertise in small cars and in Asia precludes that Mitsubishi Motors be included in both the round table and the working team. This is the most essential part of the merger, for if DaimlerChrysler is to truly accomplish the synergies in new products and profits in an extremely competitive business environment that the merger promised, let alone an effective foray into the small car and Asian markets where neither was successful, a working level plan on actually integrating the different standards is essential. The lesson from this case is that a successful strategy can be eliminated by poor execution. In this case by attempting to do so much in such a short time that the firm is left directionless and distracted.
1. What are the strengths and weaknesses of DaimlerChrysler’s Strategy?
2. How should DaimlerChrysler-Mitsubishi brand itself in Asia?
3. What cultural issues will DaimlerChrysler have to overcome to succeed with its strategy?