Volvo and GeelyRecommendations for integrating two corporate cultures.docx
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Volvo and GeelyRecommendations for integrating two corporate cultures.docx
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VolvoandGeelyRecommendationsforintegratingtwocorporatecultures
VolvoandGeely
-
Recommendationsforintegratingtwocorporatecultures
InterculturalManagement
Prof.Dr.MengFanchen
DiscussionPaperGroup8
ChristianLuhmann,PanWeiyin,ShiWeina,WangJing,YangMin,YaoJie,ZhongDonghui
TableofContents
1.INTRODUCTION
2.PRESENTSITUATIONOFVOLVOANDGEELY
2.1.CorporateCultures
2.2.NationalCultures
3.INTEGRATIONPROCESS
3.1.AreasforDevelopment
3.2.Recommendations
REFERENCELIST
1.Introduction
OnAugust2,2010ChinesecarmanufacturerGeelyAutomobileHoldingsacquiredSwedishVolvofromFordMotorCompany.Thedealarosegreatinterestaroundtheglobeasthetwocompaniesincorporatetwodifferentculturesandoperatewithindifferentnationalbackgrounds.Evenmergersandacquisitionsbetweencompaniesthatsharesimilaritiesincorporateandnationalcultureshavethepossibilityoffailure,astheexampleofDaimlerandChrysleremphasizes.Thus,Geely'sacquisitionofVolvorequiresgreatsensitivityandthoroughnesstowardstheculturalintegrationprocessduetotheeven-biggerdifferencesbetweenthetwocompanies.As"culturewillresisttochangethatmayoccurduetoM&Asorchangeincompany'sstrategy"(Hofstede,1980),integratingthetwodifferentculturesmayturnoutinadifferentwaythaninitiallyplanned.
Theaimofthisdiscussionpaperistogiverecommendationsonhowtocarryouttheculturalintegrationprocessandtopointoutareasfordevelopment.
Inafirststep,thepresentsituationwillbedescribed.AsGeely'sChairmanLiShufuannounced,hewantstokeepthetwocompaniesratherseparatedthantryingtoquicklyassimilateVolvoandtobuildacompanyunderonecommonculturalroof.Thus,thetwocorporateculturesofVolvoandGeelywillbedescribedseparatelyfirst,includingbrand,valueandbehavioraldifferences.Attentionwillalsobepaidtotherespectivenationalcultures,whichalsoplayanimportantpartinintegratingthecompanies.
Inasecondstep,themainpartofthisdiscussionpaperfocusesonhowtocarryouttheintegrationprocessofthetwodifferentculturesdescribedbeforeinthemostefficientway.
2.PresentSituationofVolvoandGeely
2.1CorporateCultures
Volvowasfoundedin1927,thus,havingmorethan80yearsofbusinessexperience.ThecompanyisnotonlyoperatinginitshomecountrySweden,butalsoglobally.Itisexperiencedinnegotiatingandcommunicatingwithsuppliersfromdifferentculturalbackgrounds,andcrossingboardersintermsofsales.
IntheirsurveyZetterberg,BuschandFrankel(1984)triedtoidentifytypicalaspectsofthecorporatecultureofVolvo.Surprisingly,employeesresponded,thatitishardtograsptheircompany'scorporateculture.TheycouldnotidentifytypicalVolvocustoms,ritualsorbasicvalues,butrathergavegeneralstatements,whichcouldapplytoanyothercompany.InsomesubsidiariesVolvo'sphilosophywastotallyunknown,whileinothersthephilosophyandvalues,asstatedinthecompany'svision,wereknown,butnotfollowedaccordingly.SomeemployeesevenquestionedwhethertheVolvovaluesshouldbefollowedbecausetheyseemedtocontradictlocalcustoms.
ThehierarchicalstructureofthecompanyisflatwithcentralizedorganizationalnetworksstronglyfocusingonitscompanyheadquartersinGothenburg.ThiscentralizationandfocusonGothenburgissometimesdescribedbyemployeesasasymmetricalandtoodependent,slowingdownbusinessoperations.Someevenmentionthatmanagingcorporatenewsispoor,andmostlylimitedtotheheadquarter.Therefore,itoccursfromtimetotimethatemployeeslearnfromcompanydevelopmentsfromthepublicmedia,ratherthanfrominternalinformationmeanslikereports,memosorothercommunicationchannels.
Volvo'smodeofoperationsisratherpassiveanddefensivethanactiveandoffensive.Thecompanyprefersreactingoveracting.Thisisalsoresembledinthestableproceduresandframeworksthecompanyisoperatingintoavoidrisks,makingVolvosometimesrigidandinflexible.
EmployeesnowadayssometimesrefertoVolvo'scorporatecultureastheVolvoWayemphasizingVolvo'sstrongconcernforpeople.
ChinesecarmanufacturerZhejiangGeelywasfoundedin1986.ThecompanylackedpopularityoutsideChinainthepastduetotheirtypeofcars,whichdidnotmeetsafetyandenvironmentalregulationsofsomeWesterncountries.UnlikemostChineseautomobilecompanies,Geelyisprivately-owned.ThemergerbetweenGeelyandVolvoissometimesreferredtoas"thesnakeswallowingtheelephant".ThisquotesymbolizesChina'snewmileageandthedifferencesbetweenthetwocompanies.Geelybeingalmost70yearsyoungerthanVolvoenteredthecarmanufacturingindustryin1997.ItsincomealsoappearstobecomparablysmallifyoucomparetheRMB4bnprofitofGeelytotheRMB100bnRMBprofitofVolvoin2009.
Geely'semployeebasisisChinese,onmanagementwithChinesecharacteristics,understandingfortheneedsofemployeesandfocusingonstrongteamworkwithadiversenationalworkforce.Geelyseesitscorporateculturefoundedonentrepreneurship.Investmentsineducation,training,researchanddevelopmentaremadetofosterthesevalues.
2.2NationalCultures
TheVolvovaluesanditscorporatecultureareoftencharacterizedasbeingstronglyinfluencedbyitsnationalbackground.Thecompany'sphilosophyisdescribedasbeingtypicalSwedish:
people-oriented,methodical,thoroughandrisk-avoiding.ThisisalsoemphasizedbyHofstede'sfindings.HecharacterizedSwedishcultureasrelativelylowinpowerdistance(36points),verylowinmasculinity(2points),andveryhighinindividualism(79points).Individualismisadvocatedinthesociety,emphasizingtheequalityprinciple.Eachpersonisresponsibleforhisownactions,andeveryonehastherighttopursuetheirowneconomicinterestsandrights
Furthermore,itisofinterestthattheSwedishculturalvaluesdonotembraceeverysubsidiary,butthattherearedifferencesamongtheseacrossdifferentculturalbackgrounds.AlthoughBelgiumandDenmarkaregeographicalneighbors,Volvoemployeesinsubsidiariesinthesecountriessharedifferentattitudes(Zetterbergetal.,1984).ThereisnouniformSwedishcorporatecultureacrossthesubsidiaries.
AccordingtoHofstedetheChinesecultureischaracterizedbyaveryhighlong-termorientation,whichappliesformostAsiancountries.Itisalsorathercollectivisticthanindividualistic,emphasizingclosebondsbetweengroupslikefamiliesorotherrelationships,whichisdifferenttotheSwedishnationalbackground.InChinathecollectivegoalisvalued.Theminorityissubordinateandobedienttothemajority.Collectiveinterestsarevaluedabovepersonalinterests.China'spowerdistanceranking(80points)isabovetheworldaverage(55points),stressingtheimportanceofhierarchicalstructures.
HofstedeCulturalDimensions
3.IntegrationProcess
3.1.AreasforDevelopment
Firstitisimportanttounderstandthedifferencesinthetwocultures.Instrumentslikethe„cultureweb“canbeusedinordertocompareseveralcompanieswithdifferentindicesfordifferentdimensions.Thesedimensionsmayincludetheageofmanagers,salary,numberofhierarchicallevels,thedegreeofcustomerorientationorinhousecareers.Ourteamdecidedonfivedimensionsdisplayedintheculturewebbelow.
Hierarchicalstructuredescribestheamountofhierarchicallevels.OnecanobservethatVolvo'shierarchyisratherflatwithbottomupstructures.Geelyemphasizeshierarchicaltopdownstructures.
Internationalizationdescribestheglobalexperienceandinternationalconnectionsandinteractions.OnecanobservethatVolvohasmoreexperienceindealingwithothercultures.
Employeediversityreferstothediversityinnationalities,culturesandlanguagesamongthetwocompanies.Onecanobserve,thatVolvoincorporatesgreaterdiversitythanGeely,whichisprobablyalsorelatedtoitsgreaterinternationalization.
Informationflowreferstothelevelofparticipationanddelegation.Volvohasagreaterlevelofparticipationanddelegation,whereasGeelystickstotraditionalstructuresandtopdowninformationflows.StahlandMendenhallarguethatM&Asarehamperedbyfailuresininformationandknowledgeflowswhicharecausedbydifferencesandmisunderstandings.
Brandpositionreferstotheuniquepositionabrandtakesinthemarket.Volvoisrecognizedasoneofthesafestcarsintheworldandaddressesthefirstclasscarmanufacturingcamp.Geelyontheothersidestartedfromlow-endvehiclesinordertosurvive,andisstillinitsearlystagesofdevelopment.
CultureWebofVolvoandGeely
TheculturewebexpressesthedifferencesinVolvo'sandGeely'scorporateculturesandemphasizesareasfordevelopment.Inanextsteptheculturewebcanbeusedtoidentifystrategiesfortheculturalintegrationprocessandtogiverecommendations.
3.2Recommendations
AsdescribedaboveVolvo'sandGeely'scorporateculturesshowalotofdifferences.Differencesnotonlyincorporatecultures,butalsoinorganizationandmanagementstyles.ThisisprobablywhyLiShufuannouncedthatGeelyandVolvowillremaintwoindependently-managedbrands.Volvowillsticktoitsmanagementplanandwilloperatelikebeforeunderanewownership.Volvo'sproduction,R&Ddepartments,unionanddealerconnectionswillallstayliketheywerebefore.ThestrategyGeelyispursuingiscalled"culturalpluralism",wherebothculturesremainintact.Culturalshocksareminimizedandprocesses,networksandactivitiesremainintact.
Ourteamcametotheconclusion,thatthe"culturalpluralism"approachprobablyworksbestforVolvoandGeely,an
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