A Strategic Analysis Of Daimlerchrysler Merger
Introduction
A merger, theoretically, is when two companies agree that they want to go forward as a single company, rather than being separate entities. In reality, however, a merger is just another way of saying politely that one company has bought another with the CEO or Chairman of the new company concluding a merger of equals. This is exactly what happened between the Chrysler, the smallest but most efficient of America's Big Three car producers, and Daimler-Benz, Germany's most profitable car company backed by the world-leading Mercedes brand.
Rather then concentrating on the official version of culture-clash in DaimlerChrysler cross-border merger, as one of the main most important failure reason, I will focus more on the corporate strategy mistakes behind the whole merger story. In other words, while putting strategy and misleading vision at the core of the problem, I will analyze the culture-clash in Daimler-Benz and Chrysler merger, as more of the outcome than actual cause of the failure.
Theory vs. Practice: The reasoning behind the merger
What are the main forces driving a company to merge with a competitor? Higher industry profile, sharing of R&D costs, product assembly synergies, increased diversification, competition avoidance, fixed costs cutting through increased buying power or same divisional conjugation, economies of scale, etc. Mentioned merger reasons perfectly matched - at least on the paper- the two companies, back in 1990s, with the $36 billion pairing, which was the biggest ever in the industry (economist, 2000). Strong cash flows and high profit margins in both companies, if combined, offered even more cost-cutting in parts sharing, marketing, administration, etc. Moreover, Chrysler and Daimler-Benz had almost no overlap in their product lines, which guaranteed no competition within the separate company's divisions. During so-called "marriage of equals" in 1998 (see...
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