“… .key factor for make or break in M&A deal: Culture clash” ( Accenture, 2000)
“ Cultural fit between an acquirer and a target is one of the most neglected areas of analysis prior to the closing of a deal……Without it, the chances are great that Mergers & Acquisitions (M&A) will quickly amount to misunderstanding, confusion and conflict” (Virani, 2007).
Geographical differentiation of the companies.
“ Organisational culture is commonly defined as the attitudes, values, beliefs, norms and customs which distinguish an organisation from others” – (Carnall, 2007).
How is culture formed?
Organisations history (the life cycle of the company)
Organisation characteristics, e.g. size, complexity, formalization (rules, politics and norms)
The founders and owners (exerting influence)
The environment (Juridical, economic, cultural and technological)
Doina et al (2008)
Types of culture
Networked, Mercenary, Fragmented and Communal (Goffee, 1998)
Comparison of Kraft’s and Cadbury’s culture *Adapted from Goffee & Jones (1998) This assessment of the company’s culture has been derived from various sources, including their website Types of Culture Characteristic Traits Cadbury Kraft Networked
Friendship & Networking
Networking throughout the organization
Performance and effectiveness
People working alone
Few links with colleagues
Aiming for goals outside organization
Shared values of sociability
A passion for the business
Sense of value in work
Implications of cultural change on Kraft and Cadbury Implications on Kraft Implications on Cadbury Strengthened Brand Damaged Heritage Drives higher performance leading to higher revenue Lower moral and performance Better control of the organisation Staff burn-out Better reputation Risk of losing benefits schemes to American procedures Efficiencies through alignment of procedures and processes Trust Issues Alignment of goals Weakened Brand
The impact of cultural change on Cadbury
Staff would be de-motivated leading to low morale, reduced of productivity and loss of revenue
Risk of resignation resulting from change of process, e.g. technology
Lack of trust leads to weak loyalty, and reduced open communication
Conflict leading to stress and increased emotion
Feelings of insecurity and uncertainty of the future
Risk of diminishing Cadbury’s brand
The factors needed to implement and sustain cultural change Cultural Change Drivers for change Drivers against Change Government Interventions Brand Loyalty, e.g. Consumer boycotting brand Strong leadership Good communication of change Good strategy and plan Good support from team Resources e.g. human and financial Employee resistance: Unions Bad press by the media Empathy and respect for acquired company *Adapted from Kurt Lewin (1943) Force Field Analysis
Strategy and Plan for implementing change *Adapted from Kotter’s (1996) 8-step Change Model in Burnes (2004) Kotter’s 8-Steps Plan Establish a sense of urgency
Examine the limitations of the existing culture and its impact on performance.
Communicate to Senior Management the need for the change.
Forming a powerful guiding coalition
Assemble a group from senior management and Union members to champion the change.
Use press coverage to maintain momentum
Seek internal and external support, e.g. Government to aid the transition
Creating a vision
Senior management to develop a new mission statement which incorporates the new culture and develop effective strategies to execute the vision.
Communicating the vision
Communicated new vision throughout the organisation and to consumers using different channels such as TV, emails, documentation, bulletins etc.
Provide constant two feedback during transition
Empowering others to act on the vision
Create the right environment to empower staff to act on the change
Identify any constraints and resource issues for the change to be implemented and removed obstacles
Ensure staff have the time to commit to the change
Strategy for implementing change Cont… Kotter’s 8-Steps Plan Plan for and create short term wins
Plan a corporate away day for Cadbury and Kraft staff to bond, whilst driving the message of change and the benefits
Inter-company positions changes to help merge culture
Motivate employees involved in the improvement through rewards
Negotiate new realistic terms and conditions, e.g. wages and pension
Consolidating gains and producing more change
Use the new synergies derived from the short term wins to ‘spring board’ long term changes, i.e. those yet to be confronted, such as tackling Union resistance and consumer loyalty.
Institutionalize new approaches
Articulate to the organisation the connection between new norms, behaviours and the organisation performance.
Document the new culture and organisations policies
Make sure new leaders that come on board adopt the new culture straight away.
The primary driver for mergers and acquisitions is revenue gain, however this approach rarely takes account of cultural differences which may inhibit successful adaption.
The analysis shows that Kraft needs to change the culture of Cadbury to take better control of the organisation and strengthen its brand. However, to achieve this it will require strong leadership, good communication and a well thought out strategy and plan .
One of the most complex and difficult hurdles to overcome will be ‘staff resistance’ , however a long term impact of the change could be more profound to consumer brand loyalty.
Early identification and involvement of stakeholders is pivotal
It would be advisable to do a culture assessment of the organisation prior to purchase
Cultivate cultural change, do not forcefully exert a new culture, rather allow it grow organically over time
Constant communication and feedback is key, this cannot be over emphasised!
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