Volvo and GeelyRecommendations for integrating two corporate cultures.docx

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