LU6 Case Study of Communication Gaps PDF

PBW3163: Multinational Corporations and Global Communication Lecture 9 – Case Study on Communication Gap in a MNC Professor Dr Ting Su Hie Learning Outcomes At the end of this lecture, you should be able to: 1.explain how MNCs expand using mergers and acquisition; and...

PBW3163: Multinational Corporations and Global Communication Lecture 9 – Case Study on Communication Gap in a MNC Professor Dr Ting Su Hie Learning Outcomes At the end of this lecture, you should be able to: 1.explain how MNCs expand using mergers and acquisition; and 2.describe the six levels of communication problems experienced by the Duracell-Nanfu merger.  How some MNC s expa nd  Mergers vs Acquisitions Why do MNCs want to pursue mergers and acquisitions [put simply, expand to other places]? Company merger – two companies of similar size consolidate – 2 get married and become one new company! No one party can be seen as the acquirer. Acquisition – One large company acquires a smaller company. One company takes a controlling interest (> 50%). May use name and system of either Company A or Company  Mergers vs Acquisitions M&A is a short cut for international companies to quickly establish a strong market position in countries with a ready and large market But some factors can prevent the success of the MNC after M&A. 1. Differences in national cultures (Hofstede, 1980) 2. Different nationalities working together (culture, language) 3. Structural differences (previously the companies have their own rules and regulations. In addition, their countries have their own tax systems, so the divisions in the companies Gao, M. havecommunication H. (2014). The six-tier different gap ways of doingcorporations for multinational many things) after mergers and acquisitions: Lessons learned from the case of Duracell and Nanfu. Global Business  Mergers vs Acquisitions Misunderstandings in communication and culture can lead to conflict (e.g., operational conflict), which results in financial losses. 90% of M&As in Europe fail to reach financial goals The main reason for failure – incompatibility of the two partnering corporate cultures Case Study Case Study of Duracell and Nanfu Merger Gao (2014) conducted a 7-year longitudinal study (2007-2013) of the Duracell-Nanfu merger to identify reasons for failure. They collected info from: (1)websites and all available sources; (2)interviews with 43 employees and customers in China; and (3)observation notes when teaching a course on intercultural communication as consultant. Battery Giants in the US and China: Duracell and Nanfu 2003 – Gillette Company which owned Duracell bought 70% stake in Fujian Nanping Nanfu Battery Co. Ltd. Gillette got an advanced manufacturing plant in China & over 3 million retail outlets throughout China & 40% of China’s battery sales 2005 – Procter and Gamble (P&G) acquired Gillette. But Gillette and P&G agreed to give Duracell  Duracell and Nanfu Gillette continued with the market segments of the 2 battery brands to maintain the strong positions of both brands.  Duracell and Nanfu But Nanfu wanted to expand overseas. Duracell said “no, you focus on the Chinese market”. Duracell did not want head-on competition from Nanfu.  Duracell and Nanfu Duracell: Buy high cost Nanfu: But we want to equipment from the US save money so that our using the remainder of batteries are cheap. the year-end fund! Many rounds of bilingual reports to US Duracell HQ Nanfu: We have no choice but to buy the expensive equipment. We do not want to challenge the “powerful” American bosses. [We didn’t use the equipment in the end! Wasted money!]  Six-tier Communication Gap  Six-tier Communication Gap Tier 1: Subtleness (China) vs Directness (US) (China) vs Tier 2: Modesty Aggressiveness Tier 3: Command(US)(China) vs Courtesy (US) Tier 4: Different connotations of same Tier 5:concept Obliging (China) vs Competitive (US) Conflict Management Styles Tier 6: Good will-based (China) vs  Tier 1: Subtleness (China) vs Directness (US) Indirect communication, subtle and ambiguous. What is most important Direct in is sometimes not said. communication (say The Chinese whether they agree or overanalysed what the disagree) Americans said. But they ignored or misunderstood subtle meanings that the Chinese try  Tier 2: Modesty (China) vs Aggressiveness Collectivism – (US) Individualism groups more – individuals important more than I important Chinese employees don’t than groups see Americans talk much about themselves modest Chinese and don’t offer much employees constructive opinions. (keeping quiet) Silence is golden. as humble, Chinese employees respect timid or shy. older, male and high status Americans people. So they listen to cannot see the American employers Chinese Tier 3: Command (China) vs Courtesy High power (US) Low power distance distance (hierarchical (horizontal structure)/ Accept structure)/ Treat American engineers felt inequalities each other as Boss commands – workers among peopleobey as uncomfortable equals with the So Chinese employees normal appear command language: rude and blunt to Americans “who are you to tell me when they use command what I should/should not language: do”. You should do this! Americans try not to Tell me as soon as possible! sound authoritative: When will you make a If I were you, I would decision?” … But the Chinese say they just I suggest … want to be clear! In my opinion, you  Tier 4: Different connotations of same concept Duracell managers felt that they limited Nanfu managers felt that the common topics American engineers and (everyday managers needed to learn things) to talk more about Chinese customs about during and respect the local culture business trips. + be with them instead of being in cities. Lunch? Tier 4: Different connotations of same But concept younger Nanfu employees knew American culture NBA Movies  Tier 5: Obliging (China) vs Competitive (US) Conflict ManagementCompetitive Modest and Styleswhen obliging are dealing with traditional values conflict American counterparts Nanfu was forced to buy the become even expensive equipment because it more was supervised by Duracell. aggressive Nanfu obliged. when Chinese Nanfu managers’ non- managers have confrontational management an obliging style + their perceptions of attitude. “imposing” American behaviour contradict their principles of non- competition.  Tier 6: Good will-based (China) vs Rule-based Chinese put faith in (US) Americans personal stick to relationships agreed-upon (Gentleman’s word). rules and Duracell did Business second procedures (signed agreement) not approve May make decisions luxury that do not follow company rules in order to cars because Chinese managers wanted avoid losingto buyand face a the US luxury companyavoid car - direct would bring company business because of the class- confrontations. rules do not conscious society. Duracell required allow. managers to write many reports, so Nanfu managers felt that they were not trusted.  6 Tier Communication Gap Tier 1: Subtleness/Bertapis vs Directness Tier 2: Modesty/Rendah diri vs Aggressiveness Tier 3: Command vs Courtesy Tier 4: Different connotations of same concept Tier 5: Obliging vs Competitive Conflict Management Tier 6: Good will-based vs Rule-based Gao, M. H. (2014). The six-tier communication gap for multinational corporations after mergers and acquisitions: Lessons learned from the case of Duracell and Nanfu. Global Business Languages, 19, Article 7. Overcoming Cultural Barriers Overcoming Cultural Barriers in MNCs Staff from the MNCs can be trained so that cultural barriers can be overcome. With increased intercultural sensitivity, there is more openness to learning. In fact, differences in practices (ways of doing things), beliefs and values can lead to learning and innovation. The learning is the KNOWLEDE TRANSFER. If Duracell had listened more to the Nanfu management, the new parent company can gain new ideas. Don’t just impose own corporate culture unconditionally. Nanfu had local market knowledge of Chinese employees, consumers and lifestyles, and Duracell and Nanfu could have complemented each other  Duracell and Nanfu In conclusion, Gao (2014) suggested that: 1. MNCs can have informal activities so that employees from both companies can build good networks. Remember the importance of the informal networking for good info flow. Informal occasions: Friday afternoon lunches, birthday parties, weekend picnics. Teams for common projects – chance to develop a sense of closeness and trust, and to overcome unspoken bad feelings 2. MNCs can appoint mid-level managers who are culturally sensitive.  Duracell and Nanfu “divorce” Remember? 2003 – Gillette Company which owned Duracell bought 70% stake in Fujian Nanping Nanfu Battery Co. Ltd. 2005 – Procto & Gamble acquired Gillette. 9 Sept 2014 - Procter & Gamble sold its stake in Nanfu. CEO A.G. Lafley wants to streamline operations and focus on core brands (50% of 160-190 brands). 4 Dec 2014 - CDH Investments (a China company) acquired Nanfu from P&G (79% stake) 4 Dec 2014, CDH acquired Nanfu from P&G! https://www.globalprivatecapital.org/newsroom/cdh-investments-to-acquire-nanfu-battery-from- procter-gamble-asia/ CDH and Nanfu seem happy with each other Nanfu retains No. 1 position in China's alkaline battery sector, taking an 80% share in the Chinese market. https://www.businesswire.com/news/home/20181113006292/en/Nanfu-Retains-No.-1-Position-in-China %E2%80%99s-Alkaline-Battery-Market CDH and Nanfu seem happy with each other CEO Jiao Zhen said, "Since 1999, the CDH team has been working closely with Nanfu Battery and maintained a very Ding Ximing, good relationship with the general manager of management team in the past 15 Nanfu Battery, said years." The investment demonstrates CDH's "CDH Investments is ability to work with world-class multi- a trustworthy national companies, such as P&G, to business partner of pursue unique cross-border Nanfu. As the leading investment opportunities. Nanfu's leading private equity investor position in China's large and stable alkaline in cross-border M&A battery sector, combined with consistent and general consumer revenue, efficient cost structure and strong sector, we are free cash flow makes the Company an ideal confident that CDH target for a leveraged buyout. will help Nanfu to once again make http://usa.chinadaily.com.cn/business/2014-12/04/content_1902  What about Duracell? 29 Feb 2016 - Berkshire Hathaway acquired Duracell in an all-stock deal, consisting of USD4.7 billion worth of P&G stock. P&G invested $1.8 billion in cash into Duracell, and Berkshire Hathaway gave P&G back 52 million shares. Sept 2016 - Duracell announced plans to move its executive team and 60 employees from Cincinnati in Ohio to Chicago. 2022 – Duracell HQ is in Bethel, Connecticut. Finally, Work Value Today: Be open to differences This does not mean that other people are better or they are worse. It is just recognising that “we” and “they” are different. We try respect other people’s values and differences. This will reduce a lot of misunderstanding and conflicts, and lead to better relationships in life and at work.