Importance of Culture Contexts and Language in International Mergers and Acquisitions

Introduction

Most international mergers and acquisitions rely on a number of factors for them to be successful. One of the key factors includes communication, which goes hand in hand with organizational culture (Cheng and Seeger, 2012, p.117). Major issues arise if these two factors are not considered, and these issues may have an adverse effect on the productivity of the merge. A review of the merger and acquisition between BenQ and Siemens reveals how mergers and acquisitions can be adversely affected by lack of communication and poor organizational culture among employees, using the Siemens case study and other research studies.

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Press Releases

The information contained in the press releases is important in identifying the contexts and the information that was being passed by Siemens. The first press release centred on the formation of the partnership and the agreement between the two companies on how they would operate. BenQ was to obtain the entire Siemens mobile phones business, which operated with 60,000 employees in the different parts of the world where Siemens had set up camp. Siemens, on the other hand, would buy shares from BenQ, the shares would be worth 50 million Euros (Siemens Press Release, 2005, 1). This press release clearly outlines the benefits that would be obtained from the merge. BenQ would expand its operations to European and Latin American markets that were initially owned by Siemens, use the brand name that Siemens had established and managed the manufacturing operations in 3 continents and in return, BenQ would provide Siemens with aid in research and development of their product and help the parent company return the profits it had lost due to reduction of sale (Siemens Press Release, 2005, 2). Evidently, Siemens was leaving its fate in the hands of BenQ as this was where their survival lay. The message was that BenQ had to manipulate available resources to ensure that the mobile phone business by Siemens would be salvaged from the constant losses. Siemens showed that is was ready to merge the cultures of both companies to ensure that they both profited from the merge. This was a clear indication of the ignorance of cultural problems that would arise between the two firms.

In the second press release, the Siemens CEO, Klaus Kleinfeld expressed his disappointment at the fact that BenQ in Germany was filing for insolvency despite the fact that Siemens had given everything to BenQ to ensure that it would find a solution for the mobile phone business that had been run by Siemens. It is obvious that BenQ was unable to manage the mobile phone business after one year, despite having received all financial resources from Siemens (Siemens Press Release, 2006a, p.1). This was a clear sign that the merger was going to fail and that Siemens would not benefit as it had earlier anticipated. At this point, it is clear that cultural context was becoming an issue since BenQ was not willing to risk the jobs of 3,000 people just to save one company. This is based on their belief in collectivism. The message by Siemens was that BenQ should have been more positively correlated with risk-taking and success, rather than having the negative correlation since the mobile phone business was not an assurance of constant profits.

In the third press release, Siemens had set up a coordinating office that would look into the applications of job-seekers from the BenQ to determine those who would qualify for different positions at the Munich department (Siemens Press Release, 2006b, p.1). This was the company's way of trying to incorporate the culture of the Taiwanese into the merger to increase its chances of survival. The message in this press release was that Siemens was ready to incorporate the Taiwan culture with its culture of equality and provision of individual opportunity into the merger to increase the chances of success of the merger (Cheng and Seeger, 2012, p.120).

The fourth press release centred on the plans that Siemens had for the BenQ employees who would apply for the jobs at Munich. The company provided 35 million Euros which would be divided to cater for employee training, placing employees and continuing education (Siemens Press Release, 2006c, p.1). Siemens was ready to show its financial commitment after BenQ filed for insolvency in Munich and was seeking to ensure that all employees at BenQ mobile unit would receive jobs upon registering with the Munich personnel at Siemens. This was Siemens' way of showing BenQ that it was ready to promote its culture of personal independence, to ensure that the Taiwanese employees also benefitted from the merge. Another message from this press release was that Siemens was willing to incorporate the Taiwanese culture into the merge to make it easier for the BenQ leaders to manage their own employees since they were having difficulties managing the German employees with their Confucian virtues.

The fifth press release was on the job placement of BenQ employees since Siemens had successfully secured the funds it needed for the job placements. Siemens had dispensed 35 million Euros after BenQ filed for liquidation (Siemens Press Release, 2006d, p.1). It is evident that Siemens had set aside enough money to finance the various operations that BenQ would undertake. The message to BenQ was that Siemens was ready to adopt the culture of collectivism by ensuring that all former employees of BenQ had jobs with Siemens.

Finally, the sixth press release focused on the agreement between BenQ and Siemens to continue providing warranties for mobile phones that would be sold under the brand names "Siemens" and "BenQ Siemens" (Siemens Press Release, 2007, p.1). The press release also highlights the previous funding that had been provided by Siemens to cater for the needs of BenQ employees working at Munich. This press release displays Siemens' commitment to the merger, with reference to the interviews being carried out for BenQ employees. The message in this press release is that Siemens was willing to provide every available resource to ensure that BenQ would not be met with any difficulty.

Based on these press releases, it is critical to highlight the importance of cultural context and communication to the success of an international merger and acquisition, with reference to the Siemens case.

Cultural Context and Language

According to Majidi (2007, p.1), the success of an international merger and acquisition is dependent on factors such as psychological and cultural issues that are usually considered as secondary concerns. For this reason, many IM&As are never successful since they do not focus on the cultural gap that exists between the two firms involved in the merge, thus creating the large language barrier that eventually results in the failure of the IM&A. The geographical difference between the countries of the firms involved in the IM&A creates cultural differences that alter the dynamics of the merge, giving rise to issues like poor local adaptation strategy and corporate governance.

To understand the context of culture, Hofstede provides three dimensions which are useful in analyzing the importance of culture in a merger. This must be viewed from the perspective of national and corporate culture which affect the knowledge of language and its understanding and interpretation (Chmielecki and Sulkowski, 2016, p.48). National cultures differ greatly since different cultures abide by different philosophies and thus operate differently (Majidi, 2007, p.3). For example, the BenQ-Siemens merger was between firms from two different nations, Taiwan and Germany. These nations have different cultures based on their philosophies since Germany focuses more on individualism while Taiwan, like other Asian countries, focuses on the philosophy of collectivism. National culture also results in the creation of different national languages. Professor Halls presents tow theories of communication, the high versus low context and the theory of face-saving. These theories are also dependent on the philosophy adopted by an individual country. On the other hand, corporate culture defines how a given organization conducts different day-to-day operations in order to achieve the organizational goals set (Chmielecki and Sulkowski, 2016, p.48). This culture includes elements such as the style of decision-making, the styles of management, the willingness to adapt to change, the interaction of employees (Taneja and Saxena, 2014, p.70). In the event of an international merger, the two firms have to integrate the different national and corporate cultures and this includes the integration of different perceptions (Seeger and Kuhn, 2011). Firms with greater differences are more likely to fail in their merge due to the difficulty in the incorporation of different cultures. Furthermore, cultural differences alter the outcome of a merge by creating a conflict between the objectives of the merger, thus becoming a risk factor.

In the case of collectivism versus individualism, Taiwan focuses on protecting the rights of employees who are treated like family by the management of the organization (Hofstede, 1980, p.173). They are thus less inclined to apply formal integration measures to effect change if this means firing their employees. Germany has an individualistic culture that prefers to follow the rule of law rather than focus on relationships

When it comes to styles of leadership, the power distance is essential in understanding the method of leadership that will be used and the way the employees treat their authority (Hofstede, 1980, p.177). Asian countries have adopted the Confucian dynamism that focuses on high power distance, where power is unequally distributed and individuals of lower status have to behave in a particular way towards the people of higher authority. This is different from the Western countries that focus on the low power distance that is intent in promoting individual opportunity and equality (Cheng and Seeger, 2012, p.119). These countries allow those in lower positions to challenge those in authority to help in reshaping the goals and roles of an organization.

Power distance also affects the communication culture adopted by an organization. Professor Edward T. Hall states that the difference between high and low context cultures can be established using code versus context (Hall, 1976, p.23). In this case, the code represents the message being communicated, while the context represents the environmental setting in which this communication is taking place. In low context cultures such as Germany, more meaning is attached to words, hence communication is more direct and careless as a result of the individualistic nature of the people (Cheng and Seeger, 2012, p.121). These individuals involve more code and less context. On the other hand, high context cultures like Taiwan are thoughtful and indirect in their speech to avoid disagreements in cases where the information being passed is controversial. These individuals involve more context and less code. The intertwining of these cultures may thus make it difficult for the two cultures to interact and give rise to misinterpretation of messages.

Communication culture is also reliant on the concept of face-saving, which is important during times of conflicts and crises. Having knowledge of how different cultures react during conflict is an important aspect in M&As to allow one firm to understand the behaviour of the partnering firm during specific social instances that may arise during the merger.

When looking at the importance of culture and language in understanding messages in relation to the case study, it...