Intercultural Communication in Business: The BenQ Debacle
BenQ, a Taiwan Company, hit the news on June 2005, after acquisition of the long losing Germany phone division, Siemens. The acquisition gave birth to the controversial new brand BenQ-Siemens. Einhorn et al. (2005) explains that the acquisition, proved to be a big strategic blunder since the two companies were quite incompatible. This paper tracks organizational challenges posed by the acquisition of German Siemens. The paper applies literary approach in unearthing organization behavior challenges, which emanated from the acquisition. The paper’s focus is on leadership, cultural and communication conflicts, which were born out of the acquisition. The study result demonstrated that cultural diversity and communication play an important role in organization growth. Poor leadership and implementation of change strategies can worsen the state of already losing organization. The German Siemens and Taiwanese BenQ were hit by leadership failures and cultural disparities. Long after the acquisition, the organizations failed to attain sense of shared trust and identity (BenQ Press Release, 2006a).
BenQ failure was an important lesson to many companies. Many scholars have dedicated their time and efforts on BenQ acquisition to provide valuable information to managers engaging in mergers and acquisitions. Studies have indicated that effective international mergers and acquisitions can only take place when managers are aware of cultural values of the parties. Good leadership and communication must be in place to aid enabling change implementation and creation of cultural tolerant environment. Managers should have enhanced cross cultural communication strategy. Organization objectives and goals should be effectively communicated (Einhorn, Wassener & Reinhardt, 2005). Positive work values should be promoted for the benefit of all employees in the organization. Among the main failures in BenQ, Siemens’ merger was effective cross cultural communication strategies (BenQ Press Release, 2006b).
Introduction
Researches have indicated that Mergers and Acquisitions is one of the modes companies create value and strengthen their competitive advantages. Mergers and acquisitions enable companies govern advanced technologies and develop either horizontally or vertically. Since 1990s, mergers and acquisitions have increased in popularity. 1997, for example recorded higher value in mergers and acquisitions as compared to 1998. The total of mergers and acquisition deals between 1998 and 2000 was about 4 trillion. The figure surpassed the total deals recorded in the preceding 30 years.
Cross border has become a common trend in the 21st century, which aid companies in gaining competitive advantage in the international business. Mostly, cross border mergers and acquisitions are used to access resources allocation or market segments. China is among the countries, which lately has shown significant trend in cross boarder merger and acquisitions. In 2004, TCL acquired Thomson’s TV and later Alcatel handsets. In 2005, BenQ acquired Siemens phone section, the same year Lenovo acquired IBM PC division. Also in the same year, the Shanghai Automobile acquired Song Yong Motors. However, analysis of the cases has shown failure in accomplishing the synergy (Einhorn, Wassener & Reinhardt, 2005). Most of the companies have failed in the end. There are various reasons for the failures including diligence, poor inter-cultural management strategies, wrong change management strategies and poor strategic implementations. Among the challenges: poor acquisition leadership, intercultural management and change implementation strategies are the main cause of the organization failures. When two conflicting cultures, business models and ideologies are brought together organization failure, become evident. Without proper leadership and change management strategies intercultural conflicts becomes organization failure. As a result, companies from the Eastern Bloc should be cognizant of intercultural barriers that exist in cross border acquisitions with those from the Western Bloc.
Background
Taiwan holds many top tier electronic contract manufactures and venders. As the electronic market shrinks, Taiwanese managers are moving to low cost manufacturing strategies. The companies are also edging from contracting to build their own brands. The most convenient way of achieving the goal is acquiring an existing brand. In this case, this was Siemens.
Mergers and acquisitions operate between two cultures; home and host. The situation creates conflict of over cultural adaptation and communication processes. According to Hofstede (1988), cultural distances come with costs, difficulties and risks, which increase with widening cultural gaps. Among the major contributors to the differences are the national cultural barriers, legal systems, language barriers and regulatory challenges. Communication plays an important role in organization processes such as human resource management. Divergent communication and language barrier enhances cultural differences. Communication affects the entire working process and the individuals themselves.
BenQ opened its offices in 1984 as Acer Peripherals Inc. It was rebranded BenQ in 2001. BenQ is an acronym of the organization’s vision of Bringing Enjoyment and Quality to life. Initially, the company was a contract electronic manufacture. With time, it expanded to include major clients such as Nokia and Motorola under K. Y. Lee, as the chairperson. As a move to enhance his brand, Lee acquired the then ailing Siemens phone division. In his defense for acquisition, Lee said, “BenQ has been seeking ways to boost its economic scale and manufacturing capabilities to become a leading mobile phone player. We think Siemens is a partner that will be complementary” (Wang, 2005a, p. 1). Siemens also believed that selling away the phone division would allow the company to focus on the profiting operations such as automatic and power turbine equipment.
Literature Analysis
Acquisition can be a competitive advantage when it adds value and leverage to the target companies. Lee believed that acquiring Siemen’s handset division would improve its brand image and profitability in two years. Lee forgot that mergers and acquisitions could destroy shareholders wealth. For example, the Daimler-Chrysler merger significantly the market value to $60 billion. Daimler-Benz gained no expected value from Chrysler but only destroyed Daimler.
According to Stah and Voigt (2008), BenQ faced three main challenges in its acquisition. Cultural difference significantly contributed in the failure. First, there was a difficulty in integrating the Taiwanese headquarter and its German subsidiary. Second, BenQ was a small company acquiring from a big German company. As a result, complexity of management arose. Normally, it is large firms, which acquire smaller companies. Third, BenQ was a regional organization, which lacked the international business management strategies. Management challenges started soon after the acquisition (Stah & Voigt, 2008).
BenQ had only worked with Philips, a regional company, which was much smaller than Siemens. The joint venture was small and faced no cultural challenges since they had common headquarter in Tapei, Taiwan. BenQ met a strong workers union uncommon in Taiwan. Other sources of failures were poor acquisition skills, the management failed to reconcile and integrate the R&D activities between the two organizations. Above all, cultural incompatibility played a big share in the acquisition failure (Graham, 2006).
When acquisition process is underway, both organizations are uncertain about the integration process. This increases tension among the management team as well as employees of the two companies. Cross boarder acquisition acquisitions present double-layered acculturation. Both firms not only need to adjust diverse national cultures but also organization practices, beliefs and values (Hofstede & Bond, 1988). Lee once admitted that breaking cultural barriers between the Taiwan based company and the Germans was very costly to BenQ. The Biggest challenge came from different perception of speed. Citing an example Lee said, “BenQ has a rather flexible, informal corporate culture, while the century-old Siemens’s corporate culture is centered on doing things by the book and following standard operating procedures” (Huang & Sun, 2006, p. 153). After the acquisition, the German subsidiary did not close until December 2005. Lee was held up as a result. Production of mobile handsets also met constant delays. These challenges increased the corporate tension between the mergers.
BenQ headquarters failed to share their work objectives and goals with their German subsidiary. Sharing objectives also presented a new challenge since each group had its own view of success owing to the cultural diversities. Instead of working as a team, the two companies worked almost as competitors. The organizations failed to find mutual understanding despite their expanding differences (Hinner, 2009).
BenQ case presented a conflict between the German and Chinese culture. According to Hofstede (1988), Chinese organizations are centralized in decision-making strategy, strong collectivism, group behavior and paternalistic leadership. As part of the Chinese society, Taiwanese share similar cultural perspective. Chinese culture is also routed on Confucianism. Countries with high collectivism powers treat their employees as family members. They value group harmony and social order. Collectivism nations have a utilitarian approach, aimed at generating the greatest good for the members (Hofstede & Bond, 1988).
Research Findings
References
BenQ Press Release. (2006a, August 24). BenQ reports net loss of NT$7.5 billion for first half of 2006. Retrieved July 8, 2010, from http://www.benq.com/press/news.cfm?id=1520&cat=0&year=2006
BenQ Press Release. (2006b, September 28). BenQ announces discontinuation of funding for its German BenQ mobile phone subsidiary. Retrieved July 8, 2010, from http://www.benq.com/press/news.cfm?id=1553&cat=0&year=2006
Graham, S. (2006, October 2). Siemens steps in to help BenQ workers. Associated Press Online. Retrieved July 8, 2010, from Lexis Nexis Academic Universe.
Hinner, M. B. (2009). Culture’s influence on business as illustrated by German business culture. China Media Research, 5(2), 45-54.
Einhorn, B., Wassener, B., & Reinhardt, A. (2005, December 8). No one said building a brand was easy. Business Week, 18.
Hofstede, G., & Bond, M. H. (1988). The Confucius connection: From cultural roots to economic growth. Organizational Dynamics, 14, 483-503.
Huang, C., & Sun, P. (2006, December 6). BenQ’s merger miseries: K. Y. Lee eats humble pie. Common Wealth Magazine, 148-154.
Wang, L. (2005a, June 8). BenQ to buy Siemens phone unit. Taipei Times, p. 1