The impact of cultural differences on cross-border mergers at the example of DaimlerChrysler

TABLE OF CONTENTS

Executive Summary

LIST OF FIGURES

LIST OF TABLES

LIST OF APPENDICES

1. Introduction
1.1 Definitions

2. Aims and objectives
2.1 Aims
2.2 Objectives

3. Literature Review
3.1 Mergers
3.1.1 Categories of mergers
3.1.2 Motives for mergers
3.1.3 Phases of the merger process
3.1.4 Key success and failure factors of mergers
3.2 National culture
3.2.1 Cultural dimension theories
3.2.1.1 Hofstede’s cultural dimensions
3.2.1.1.1 Comparative analysis of the German and American culture
3.2.1.2 Trompenaars’ cultural dimensions
3.2.1.3 Comparing models
3.2.2 Cultural clashes
3.3 Organisational culture
3.3.1 Integration process in cross-border mergers
3.4 The DaimlerChrysler merger
3.4.1 Economic situation in the automobile industry
3.4.2 Background
3.4.2.1 Daimler-Benz AG
3.4.2.2 Chrysler Corporation
3.4.2.3 Pre-merger situation in 1997
3.4.3 Motives and objectives of the DaimlerChrysler merger
3.4.4 The DaimlerChrysler merger strategy
3.4.5 Post-merger integration process
3.4.5.1 Functional integration and branding
3.4.5.2 Post-merger structure
3.4.6 Post-merger performance
3.4.6.1 Cultural differences
3.4.6.2 Different compensation policies
3.4.7 DaimlerChrysler’s further development

4. Proposed research methods
4.1 Primary research
4.2 Secondary research

5. Data analysis and evaluation
5.1 Analysis and discussion
5.2 Conclusions and recommendations
5.2.1 Recommendations
5.2.2 Conclusion

6. The end sections
i. Appendices
ii. References

Executive summary

Nowadays due to the fierce global competition, cross-border mergers are a well-known strategic option for companies to become global players.

Therefore internationally merging companies have to deal with the issue of cultural differences as both partners bring different national and corporate cultures into the new formed corporation.

Geert Hofstede and Fond Trompenaars are two famous researchers whose cultural studies provide the basis for a comparison of national and organisational cultural diversity between German and American people.

These cultural differences have to be considered during the post-merger implementation process as only compatible organisational cultures lead to successful mergers. Employees are at a great extent responsible for a merger’s success.

For a better understanding of these cultural issues, theoretical explanations and descriptions shift to the specific case of the DaimlerChrysler merger. It created one of the biggest automobile manufacturers in the world and changed the face of the automobile industry. This merger represents the complexity of resulting merger failures if the cultural impact will be underestimated.

Managers have to learn to create global organisations with shared values and purposes, while also take into account national differences of the organisation members (Shelton, Hall and Darling 2003).

The DaimlerChrysler merger provides a reference case for any international merger in the future.

The validity of Hofstede’s and Trompenaars’ research will be proved by a qualitative questionnaire which is addressed to people who were involved in any international merger.

LIST OF FIGURES

Figure 3.1.2 Merger motives

Figure 3.1.3(a) The progression of a merger

Figure 3.1.3(b) Risk involvement in different phases

Figure 3.1.3(c) The post-merger management process: Phases, actions and outcomes

Figure 3.1.4 Cultural fit

Figure 3.2(a) The ‘Onion Diagram’: Manifestations of culture at different levels of depth

Figure 3.2(b) Stabilisation of culture patterns

Figure 3.2.1.1.1 Five Dimensions Model: Federal Republic of Germany versus the USA

Figure 3.3(a) The cultural onion skin

Figure 3.3(b) Strategies of merging organisational cultures

Figure 3.3(c) Example for cultural analysis for identification of cultural differences

Figure 3.3.1(a) Cultural heterogeneity over time following a merger

Figure 3.3.1(b) Cultural distance over time following a merger

Figure 3.4.3 The DaimlerChrysler vision statement

Figure 3.4.4(a) Porter’s generic strategies

Figure 3.4.4(b) Merger strategy model

Figure 3.4.5 Phases of integration

Figure 3.4.5.1 Post-merger integration structure

Figure 3.4.5.2(a) Organisation structure after the merger in 1998

Figure 3.4.5.2(b) Organisation structure as of October 1999

Figure 3.4.6 Post-merger value of the DCX share (NYSE) compared to Dow Jones until 8th August 2005

Figure 5.1(a) Analysis of fears caused due to mergers

Figure 5.1(b) Sufficiency of experienced integration process

Figure 5.1(c) Merger recommendations of respondents

LIST OF TABLES

Table 3.2.1.1.1 Scores of Germany and the USA in Hofstede’s dimensions

Table 3.4.2.3 Daimler-Benz and Chrysler figures in 1997

Table 3.4.3 Expected synergies from the merger

Table 5 Responses to questionnaire in number of responses

LIST OF APPENDICES

Appendix 1 Mergers

1.1 Number of mergers between 1950 and 1992

1.2 Value of mergers and acquisitions worldwide between 1990 and 2000

1.3 Mergers and acquisitions worldwide transaction volume 1999 until 15th December 2004

1.4 Merger types

1.5 Mergers and acquisitions by industry sector from 1995 to 2001

1.6 Sector market analysis and commentary

Appendix 2 Motives for mergers

Appendix 3 Synergy expectations

3.1 Top-line trouble: the biggest error is over estimating revenue synergies

3.2 Cost synergy estimation is better, but there are are patterns emerging in the errors

Appendix 4 Key dimensions of culture

Appendix 5 Hofstede’s cultural research

5.1 Hofstede’s cultural mapping

5.2 Hofstede’s five dimensions

5.3 Hofstede’s country description in terms of pairs of dimensions

5.4 Hofstede’s response to the criticism of his research

Appendix 6 Trompenaars’ cultural research

6.1 Cultural groups based on Trompenaars’ research

6.2 Trompenaars’ relationship orientations on cultural dimensions

6.3 Explanation of Trompenaars’ cultural dimensions

Appendix 7 Edward T. Hall’s model

Appendix 8 Comparison of German and American cultural assumptions and working practises

Appendix 9 Organisational cultures in change

9.1 Merged firm organisational identity

9.2 Assessing organisational readiness

9.3 Summary of empirical research on cross-border mergers as a dynamic learning process

Appendix 10 Economic breakdown of the German automotive industry in 1997

Appendix 11 Automobile industry

11.1 The decreasing number of car manufacturers in the automobile industry from 1960 to 1999

11.2 Chronology of mergers and acquisitions in the automobile industry from 1990 to 2000

11.3 Industry overview 1998

11.4 The worldwide biggest automobile manufacturers concerning their annual production (in 10 vehicles) in 2000

Appendix 12 Basic terms of the merger explained in the proxy statement of DaimlerChrysler

Appendix 13 The DaimlerChrysler merger

13.1 The DaimlerChrysler merger announcement effects

13.2 Share of Daimler-Benz and Chrysler of the DaimlerChrysler AG based on different characteristics

Appendix 14 Chronology of the DaimlerChrysler merger

Appendix 15 The legal structure and ownership structure after the merger

Appendix 16 Explanations of quantum skills

Appendix 17 Further general key factors leading to successful mergers

Appendix 18 DaimlerChrysler’s post-merger development

Appendix 19 DaimlerChrysler’s performance in 2005

19.1 Second Quarter Interim Report 2005

19.2 Key figures of DaimlerChrysler’s Interim Report from the second quarter 2005

19.3 Mercedes Car Group’s results in Q2 2005

19.4 Chrysler Group’s results in Q2 2005

Appendix 20 Questionnaire for the primary research

1. Introduction

In the last decade many companies on a global basis are ‘going international’ in order to become global players.

The opening of global markets (e.g. the establishment of the Single European Market and the ratification of the Maastricht Treaty in 1992) was a key driver for international mergers and acquisitions.

Companies form international mergers and acquisitions to achieve the competitive position of global advantage and local responsiveness as well as to grow rapidly. Mergers create synergies for all involved companies as various tangible and intangible assets will be combined whose value is greater than the sum of their individual worth (Devine 2002). Additional factors of production offering competitive advantage can be found (Vasconcellos and Kish 1998).

Employees play an essential role for the success of merging companies, therefore it is crucial already to deal with cultural aspects as a component of the due diligence process. This creates an understanding of different national and organizational cultures for all involved cross-border merging companies. The national culture is an integral part of the overall corporate culture of the firm, which is applicable for all merging partners (Devine 2002).

The merger of DaimlerChrysler in 1998 which created one of the biggest car companies is used as an example in this study to underline cultural implications within the merging process of global players. Cultural difficulties occurred between the more ‘easy-going’ and more flexible style of Chrysler and the well structured and bureaucratic style of Daimler-Benz. This was the basis of different working styles, decision making and communication processes within the company.

This incompatibility of the two different cultural aspects was realized too late and became very difficult to be overcome. That is why at the end it was no ‘merger of equals’ but one company dominating over the other (Morrison 2002).

The complexity of the DaimlerChrysler merger shows the different aspects of cultural difference awareness. The reader of this study will get a deeper insight into the issues of culture and its importance to be considered in cross-border merger processes.

In this context further different national culture models will be analysed as well as the cultural implementation into organisations in general. Furthermore after presenting the merger process of DaimlerChrysler and its reasons, failures in management and cultural implementation by both companies will be discovered which caused the cultural clash, before and after the merger.

The DaimlerChrysler merger could serve as an example for future mergers in any industry concerning the avoidance of underestimating the cultural issues.

1.1 Definitions

The mergers and acquisitions terminology is often used as an interchangeable term, which is inaccurate.

In a merger, two or more companies consolidate to combine and share their resources in order to achieve common goals. The shareholders of the combining organisations often remain as joint owners of the consolidated entity. A new entity will be formed subsuming the merging firms (Devine 2002).

Acquisitions are characterized as the straightforward purchase of a target company while purchasing its assets or shares, whereby the shareholders stop being owners of the acquired firm. The acquired company becomes a subsidiary of the acquiring firm, which maintains control (Sudarsanam 1995).

When this will be done against the will of the acquired company the acquisition may become known as a takeover or more specifically a hostile takeover. When those bids succeed, a premium price is often paid (Thompson 2001).

As this study will focus on cultural issues based on the DaimlerChrysler merger, it will be only spoken of merging activities in this paper.

2. Aims and objectives

The Management of cultural issues in cross-border merger processes includes the identification of differences, its consideration and finally its effects in the collaboration of business partners. Therefore it is important that the management is aware of cultural impacts and it should analyse problems which may arise in intercultural co-operation. In this way cultural barriers of cross-border co-operation can be minimised.

Not cultural differences of business partners but the lack of understanding for these cultures is the reason for potential problems. These cultural differences can be successfully managed through a careful preparation of cross-border merger processes.

2.1 Aims

The aim is a well-structured and unbiased dissertation that comprises of valid research, investigation and analysis in order to create an overall understanding of the American and German culture and its differences for a successful cross-border merger.

The research shall be primarily based on secondary academic research which includes academic books, journals, websites and articles. A primary research in form of a questionnaire which will be forwarded to people who were involved in international merger processes should investigate how mergers are processed in reality and where there are areas of improvement for a more successful merger as mergers and acquisitions have statistically a high failure rate.

The dissertation should be easy to read as well as interesting for any reader, especially for any potential future employers, who are likely to deal with this subject in any sense.

A further aim of the dissertation is to give an analysis of cultural differences between the USA and Germany examined at the DaimlerChrysler merger as a case study. In this way it should be given a contribution for an improvement of knowledge about cultural impacts and therefore also to contribute to successful cross-border mergers.

2.2 Objectives

The dissertation will include research, analysis and investigation of the generic subject of cross-border mergers and appropriate cultural issues.

The theoretical part will have three different sub objectives.

Firstly, to give the reader an overview about the types, reasons and synergies of mergers as mergers play an important role for many companies in order to survive on the highly competitive marketplace.

Secondly, a consideration of the definition of culture and a comparison and summary of the different national cultures of the USA and Germany based on different famous cultural dimension models, e.g. from Geert Hofstede, Fons Trompenaars and Edward T. Hall and their comparison afterwards.

Thirdly, a consideration and an analysis of corporate culture differences and its cross-cultural integration process by the management.

This theoretical part will be followed by an illustration of the exemplary experience made by DaimlerChrysler during its cross-border merger.

The reasons for this merger will be identified as well as synergies resulting from this merger as a potential source of value creation.

Furthermore there will be an analysis of success and failure factors as well as a consideration of cultural fit concerning this big ‘merger of equals’.

A central point will be the effects of cultural differences on the working process of Americans and Germans. Therefore on the one hand their values, beliefs and visions, e.g. their internal communication, their teamwork and their leadership styles will be analysed and on the other hand their organisational structures, e.g. their planning and decision making processes, will also be analysed.

Moreover the primary research will be evaluated and analysed. The results of this survey and secondary academic research will be applied to the DaimlerChrysler case study. It will be considered if the theory was applied at the DaimlerChrysler merger.

Finally, some recommendations and conclusions will be suggested as to what should have been done differently in order to reduce the occurred difficulties at the DaimlerChrysler merger.

3. Literature Review

3.1 Mergers

The highly competitive environment let firms no choice but to expand further in order to survive in the market. Therefore markets increasingly consolidate into global enterprises (Tavakoli 2000).

Mergers offer a good possibility to eliminate competition and controlling markets. It is also more and more used as a means of defence against possible take-overs (Sudarsanam 1995).

Mergers are a way of corporate expansion and growth as well as the achievement of certain strategic and financial objectives. They are an alternative by internal or organic capital investment. It means two different companies with different corporate personalities, cultures and value systems come together (Sudarsanam 1995).

In the past mergers occurred in different waves, which means there were periods with low merging activities and there were other periods with very high merging activities. Thus in the UK there were upcoming waves in the 1920s, 1960s, 1970s (Meeks 1977) and the biggest ones in the 1980s and at the end of the 1990s (Sudarsanam 1995).

Merger activities reached peak levels in terms of value and size between 1995 and 2000 which decreased again in 2001 due to the unstable economic situation. In 2000 merger activities reached a number of $3.5 trillion worth of announced bids which decreased in 2001 to $1.9 trillion (Devine 2002). This merger mania could be noticed on a global scale (Sudarsanam 1995).

Please see appendix 1 for statistics of merger activities.

3.1.1 Categories of mergers

Mergers have been classified into three different categories: horizontal, vertical and conglomerate which had a different level of emergence in the past (see appendix 1).

3.1.2 Motives for mergers

According to Ohmae the only reason of strategic planning and why companies merge together is because they want to achieve “a sustainable edge over its competitors” (Grant 2002, p.17).

Regarding the motives of mergers, one has to distinguish between financial or value-maximising motives and managerial or non-value maximising motives, although in practise the two are often combined (Cartwright and Cooper 1999).

The following table should give an overview of the different merger motives although they are not complete (Arnold 2002).

Figure 3.1.2: Merger motives

illustration not visible in this excerpt

Source: Arnold 2002, p.87

Motives for mergers are among others:

1. Synergy
2. Powerful market position and reduction of competition
3. Economies of scale
4. Internationalisation of transaction
5. Access to geographical market and/or product market
6. Profits from taxation
7. Risk diversification
8. Bargain buying
9. Elimination of inefficient management
10. Manager motives and hubris
11. Free cash flow
12. Motives of third parties

Please see appendix 2 for a detailed explanation of above merger motives.

“A stock market boom makes mergers much more attractive because it is relatively cheap to acquire other companies by paying for them in (high valued) shares” (BBC 2003).

3.1.3 Phases of the merger process

There is a contrary opinion about the speed of changes during the merger process. Tavakoli (2005a) considers both sides: he argues that a quick speed of change causes many mistakes and a slower change causes fewer mistakes but a higher degree of uncertainty. Ernst and Young (1994, p.1) declare that “an acquisition based on an underlying strategy is much more likely to succeed than one that results from an impulsive reaction to an attractive opportunity”.

During the merger process there are three different merger phases, which are 1. preparation, 2. negotiation and transaction; and 3. integration.

Figure 3.1.3(a): The progression of a merger

illustration not visible in this excerpt

Source: Arnold 2002, p.901

It is remarkable that the first and the third phases’ importance are often neglected while the second is the one which the managers spend their most attention on, although the first and the third phase involve the most risk factors.

Figure 3.1.3(b): Risk involvement in different phases

illustration not visible in this excerpt

Source: Habeck 1999, p.16

The due diligence phase which characterises the process of investigating the facts about the merger target should start early to ensure the gathering of relevant information at earliest possible stage.

The movement at every stage from the co-operation to collaboration and commitment including the first contact, the signing of the deal and finally the integration process contains some challenges. It is important that the merger purpose is clear and that the vision is translated into a clear set of objectives which should be communicated to shareholders, analysts, employees, suppliers, customers etc. (Devine 2002).

In this way a future vision will be created combined with reduced anxiety and stress for all involved people as well as the reduction of resistance to change (Risberg 1997).

Furthermore a trustful relationship at business and personal levels should be created. In this sense J. Walter Thompson’s Mr. Mädel (taken from Devine 2002, p.47) states: “The other company really want to see who is their partner. If there is a rapport developing, if there is mutual understanding and a feeling of trust and honesty, then you have laid a really strong foundation. If you don’t have that, you will probably gain little from the acquisition.”

Finally it is also important to gain the support of important shareholders and stakeholders (Devine 2002).

Figure 3.1.3(c): The post-merger management process: Phases, actions and outcomes

illustration not visible in this excerpt

Source: Quah and Young (2005), p.67

“Phase one demonstrates the pre-merger, phase two the slow absorption, phase three the very active absorption and phase four the total absorption” (Quah and Young 2005, p.67).

3.1.4 Key success and failure factors of mergers

Mergers should be carefully planned in order to enhance their chance of being successful (Huang and Kleiner 2004) as well as being conceived as part of the strategy.

Central is the concept of strategic fit, which means being consistent with the “company’s goals and values, with its external environment, with its resources and capabilities, and with its organisation and systems. Lack of consistency…is a source of failure” (Grant 2003, p.16).

Professor Paul (2004) supplements additional the cultural fit which is often neglected in merger activities. Ideally there should not be a gap on a cultural basis between the two merging companies.

Figure 3.1.4: Cultural fit

illustration not visible in this excerpt

Source: Paul 2004a, p.9

Please see appendix 17 for some key factors which lead to a smooth and efficient merger process. Further recommendations in more detail applied to the DaimlerChrysler merger will be given under point 5.2.1 of this study.

Failures of mergers occur when above key success factors are neglected or insufficiently considered.

There is an immense challenge to consider cultural, political, psychological and geographical aspects in cross-cultural integration (Shelton, Hall and Darling 2003).

According to Engeser (2000) an investigation of the post-merger integration found out, that in more than 90% of all mergers unforeseen difficulties occur and that 62% of mergers fail because of these difficulties.

This result is also supported by a study from Watson Wyatt that out of 1.000 companies two-thirds failed to reach their profit goals during merger activities and 46% achieved their cost-cutting goals (Suh-kyung Yoon 2001) (see appendix 3).

A.T. Kearney found out that 58% of mergers failed to meet their stated goals, and only 42% managed to perform better than their competitors (Freedman 2002).

In addition 47% of senior management leave within the first year after the merger (Noe 2002).

3.2 National culture

Hofstede defines culture as “the collective programming of the mind that distinguishes the members of one human group from another…includes a system of values; and values are among the building blocks of culture” (Hofstede 1984, p.21).

Culture is learnt and passed on from generation to generation; it includes a system of values; it belongs to one group in particular and it “influences the behaviour of group members in uniform and predictable ways” (Mead 1998, p.4).

The manifestation of culture can be visibly described with the ‘Onion Diagram’, where values, symbols, heroes and rituals are exposed as the total concept:

Figure 3.2(a): The ‘Onion Diagram’: Manifestations of culture at different levels of depth

illustration not visible in this excerpt

Source: Hofstede 2001, p.11

Symbols which are words, gestures, pictures and objects are only commonly recognized by people who share the same culture.

Heroes are dead or alive, imaginary or real persons who have characteristics which are highly respected in a culture. These persons’ characteristics serve as model of behaviour.

Rituals are collective activities which are socially essential in a culture and which bound the individuals with collective norms.

These three determinants are subsumed under the term practices for being visible for outside observers and for being interpreted by insiders (Hofstede 2001).

There are differences and similarities between different cultures arising from a certain development of culture. Figure 3.2(b) illustrates a mechanism that ensures the preservation of cultural aspects across many generations.

Figure 3.2(b): Stabilisation of culture patterns

illustration not visible in this excerpt

Source: Hofstede 2001, p.12

Nevertheless the national cultural model has only limited value as it does not consider any subcultures of a nation. E.g. in the USA there are a number of subcultures such as Caucasian, Afro, Asian, Hispanic and Native Americans which form the overall American culture, too (Mead 1998). But the cultural analysis on a national basis provides an overall foundation of cultural understanding.

Successful international business relationships e.g. in cross-border mergers are highly dependent on a polycentric approach, where openness and understanding of other cultures will be developed (Morrison 2002).

3.2.1 Cultural dimension theories

Some researchers, e.g. Hofstede, Trompenaars and Hall (see appendices 5-7), have undertaken the attempt to provide an analysis of different cultural dimensions.

These cultural dimensions serve as a basis “for cultural interpretation and adaptation … to the comparative understanding of national and international management practise. Such knowledge can be applied to co-operative international ventures and to entry into new countries and cultures” (Morden 1995, p.16).

3.2.1.1 Hofstede’s cultural dimensions

Probably the most famous research of culture was undertaken by Geert Hofstede from 1967 to 1973 (Hill 2002).

His collected data is based on a survey addressed to over 116.000 IBM employees in over 70 countries worldwide. He found out that there are four cultural dimensions which summarise different cultures and explain how and why people from different countries behave as they do.

These four dimensions are:

1. Power Distance
2. Uncertainty Avoidance
3. Individualism
4. Masculinity.

Hofstede later added the fifth dimension:

5. Long-term versus short-term orientation (Hodgetts and Luthans 2003).

Please see appendix 5.2 for the explanation of Hofstede’s dimensions.

These dimensions help to explain cultural differences between different countries (Hodgetts and Luthans 2003). He was able to cluster different countries together and to show the correlation between the different dimensions (Morrison 2002) (see appendix 5.3).

However, there are some critical points to consider at Hofstede’s research. He assumes that there is a one-to-one correspondence between the countries and their cultures, but he neglects the fact there are also sub-cultures which form the overall national culture, too. Furthermore the research team contained Europeans and Americans and the questions they asked to the IBM employees and the analysis of their answers maybe affected by their biases and concerns as Hofstede confirmed Western stereotypes.

Moreover his research is based on employees from one company within one industry. IBM was famous for its strong corporate culture and its employee selection process which made it possible that the employees had different values as their cultures had where they came from. Additionally the lower social class of unskilled workers was excluded.

Finally it must be considered that cultures develop further during the time and that previous characterisation is not valid anymore in these days (Hill 2002).

Please see Hofstede’s response to those criticisms in appendix 5.4.

3.2.1.1.1 Comparative analysis of the German and American culture

Table 3.2.1.1.1: Scores of Germany and the USA in Hofstede’s dimensions

illustration not visible in this excerpt

(The first number in each case is the score (an approximate %), the figure in brackets is that country’s ranking.)

Source: Hofstede 1991a in McQueen 2005

Figure 3.2.1.1.1: Five Dimensions Model: Federal Republic of Germany versus the USA

illustration not visible in this excerpt

Source: Hofstede 1991a in McQueen 2005

Power Distance:

The USA scored with 40 on a medium level as well as Germany (the Federal Republic) did with 35 with a slightly lower score. The power distance index stands for the dependence between the subordinate and the boss.

Subordinates in the USA tend to have medium-level dependence needs as its score indicates. The leadership style of US managers is on a participative basis.

Due to the slightly lower PDI score of Germany there could arise some difficulties in international business relations. According to the lower PDI score Germany has wider spans of control than their American counterparts. German employees are more autonomous and they carry out a greater job discretion, too (Abdou and Kliche 2004).

Individualism / Collectivism:

The USA has a very high score of 91 on individualism whereby Germany scores much lower with 67 on this dimension. This indicates that Germany is a collectivist culture which was confirmed by Ludwig Erhard by implementing the phrase ‘social market capitalism’ when he described the emerging German economy (Weber et.al.1998); and the USA is a very individualistic one.

The focus in a German company is on ‘family feeling’ and social responsibility, whereas the focus at US companies’ is on competition and individuality (Abdou and Kiche 2004).

Uncertainty avoidance:

Germany with the high score of 65 values predictability higher than the USA with the score of 46. Germany tries to avoid uncertainty. They prefer structured learning with clear objectives, detailed assignments and timetables. They also prefer tasks where they can find only one possible correct answer. Germans appreciate to be rewarded for correctness. Job descriptions and clear set procedures are usual in German companies as well as a high level of formalisation. German workers prefer to work according to rules.

German firms evaluate systems of control, rules and set procedures as more important than US firms. German companies also have a closer degree of supervision and their employees are more loyal to their firm than US employees are to their firm.

As US managers are more risk taking, they do not appreciate the unwillingness of any decision taken by their German colleagues without a deep analysis.

Relations between labour unions and management of companies are detailed written and German managers also accept trade unions. For German employees security is important as achievement is for US employees (Abdou and Kiche 2004).

Masculinity / Femininity:

Germany scored slightly higher with 66 than the USA with 62. But nevertheless both cultures are considered as being masculine oriented nations. They do not differ much in this dimension (Abdou and Kiche 2004).

A further analysis of the German and the US cultural similarities and differences concerning the DaimlerChrysler merger can be found in appendix 5.3.

Please see appendix 8 for a comparison of German and American work practises and cultural assumptions.

3.2.1.2 Trompenaars’ cultural dimensions

Fons Trompenaars also represented in 1994 a model with seven different dimensions of national cultural differences which are subject to international business (Hofstede 1996).

He used research questionnaires to over 15.000 managers from 28 countries and received approximately 500 responses from each nation which are usable for the analysis of the research. Five of the seven dimensions relate to how people deal with each other which can be compared with Hofstede’s dimensions. Two dimensions relate to time and the environment (Hodgetts and Luthans 2003).

His identified dimensions are:

1. Universalism versus particularism
2. Individualism versus communitarianism
3. Neutral versus emotional
4. Specific versus diffuse
5. Achievement versus ascription
6. Time
7. Environment

Please see the explanation of each dimension and Trompenaars’ relationship orientations on cultural dimensions in appendices 6.2 and 6.3.

Hofstede argued that there are some critical points about Trompenaars’ cultural study. He stated some valid points in his critique, but in general this criticism should be carefully considered as Hofstede is a competitive researcher on the same topic.

Hofstede raises some concerns about the methodology and the findings of Trompenaars, because they are not supported by his database. Thus his model’s content lacks of validity.

75% of the respondents of his questionnaire are managers and the rest is mainly female administrative staff.

His model contains a distinction of ‘left brain’ and ‘right brain’ countries which is concluded out of 9 countries as basis. The small number of this research is statistically insufficient for developing a multidimensional model and therefore not representative for an overall cultural analysis. The origin of Trompenaars’ first five dimensions derived from the ‘General Theory of Action’ by Talcott Parson and Edward Shils in 1951. Their study was very speculative and there has never been a supportive research that their dimensions determine human action. Furthermore there are no dysfunctional and destructive issues in their study. Therefore controversial elements which are central to cultural conflicts, such as power struggle, corruption, exploitation, aggression, anxiety and masculinity versus femininity, are hardly considered.

The other two dimensions of Trompenaars are taken from Florence Kluckhohn’s and F.L. Strodtbeck’s classification of five value orientations in 1961. Trompenaars only used two out of these five classifications for his study which is incomplete and insufficient.

Another critical point is that Trompenaars does not show scores for all countries used in his research, but this would be interesting for the readers to learn more about cultural diversity.

Additionally he found out data which correlate with Hofstede’s findings, but he does not find any correlations with outside data.

Summarizing Hofstede argues that Trompenaars’ model is a “fast food approach to intercultural diversity and communication” (Hofstede 1996, p.198).

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