Essays on Adam Opel AG (A) Adam Opel AG (B) (Harvard Business School) Case Study

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Adam Opel AG (A) Adam Opel AG (B) Adam Opel AG (A) Adam Opel AG (B) The experience of Adam Opel and GM presents many challenges that the business management had to deal with, especially in relation to the drastic political and environmental changes that occurred during the unification of East and West German to form a united Germany. While it was expected that the process of unifying both German states would have taken a period of at least two years, the unification came as a surprise to the business community.

Therefore, the process of hastening the unification of the two Germany states to be completed by the end of 1990, meant that the management of Adam Opel and GM had to take drastic business measures, so that it could fit into the new political structure (Uyterhoeven, 1993). The major political ramification of this union was in relation to the future of business investment operations in different parts of Germany, considering that there were major differences between the East Germany which was a more-communist oriented society, and West Germany which was more oriented to capitalism (Uyterhoeven, 1993).

This meant that the unification of the two different political orientations into a single political structure would then affect the businesses in both states, considering that the competitive nature of the west would be introduced into the East and worse still, at an earlier time than was previously anticipated. Therefore, the political changes meant that the Adam Opel and GM had to adapt a shift that would be compatible with the new political structure of Germany (Uyterhoeven, 1993). However, competition was the major influence that the political change brought about, forcing the organization to re-strategize on the suitable strategies that would overcome the competition created, one of which was the establishment of mergers and acquisitions, for the Adam Opel and GM to remain competitive in the market.

The social environment was not spared by the drastic changes that occurred during the unification of the East and the West Germany. With the creation of the united Germany, it was apparent that certain changes in the political control environment would also occur. In this respect, the strong control of the society that was being exercised by the Stasi, the law enforcement authority of East Germany had come to an end, meaning that the working class was now operating under pure working democracy (Uyterhoeven, 1993).

The centralization system that was effectively applied as the suitable business model for the organization was gradually breaking down, and in its place the workers in the factories and the masses in the streets were taking over power, putting the organization in a complex labor situation. This simply means that Adam Opel and GM would have to face more demands from the workforce, which would also be disruptive to the business of the car manufacturer.

The increased democratic space for the workers and the masses arising from the political change meant that the businesses would lose some of their authority over to the employees (Uyterhoeven, 1993). The effect is that there would be the need for more negotiations with the employee unions, which would also mean the incurrence of more economic expenditure by the business. The political changes brought about further legal constraints for Adam Opel and GM.

This is because; the company was forced to start negotiating for the merger and acquisition modalities, which brought some unique challenges. The company had to start negotiating with both the government and the workers organization. However, the most formidable challenge was the negotiation with the government of East Germany (Uyterhoeven, 1993). This was most especially because the East Germany government wanted the car manufacturing plant located in Brandenburg in West Germany, which was different from where Adam Opel and GM wanted the plant located.

The other legal challenge that was presented by the changes was the need for the engine licensing agreement, which would effectively determine the location of the plant location (Uyterhoeven, 1993). Further, the political and legal changes brought about the erosion of the market protection that GM was enjoying while operating in a closed market, instead, all the financial plans and predictions that would have been executed during the two year period in which a grace period was given for the unification of the two Germany states (Uyterhoeven, 1993). The economic environment was also highly influenced by these drastic changes that were unprecedented.

Following the sudden unification of West and East Germany, the issue of a common currency occurred; this had great financial implications on the business. First, the currency unification would create a disparity between the historical business financial reporting systems and the current ones. The previous system of reporting would require more adjustments before it could be effectively integrated into the new financial system that was brought about by the sudden political change (Uyterhoeven, 1993). The major implications of the change would be change in the value of the assets and liabilities of the organization, since the common currency would not equate the value of the assets and liabilities with the different currencies that were applied in the different Germany states, especially since the East Germany currency was lower in value.

The exchange rate is yet the other factor that influenced the economic environment, through placing the East Germany at an advantage over the west, considering the fact that the currency of East Germany would be overvalued, while that of the West would not benefit from the same (Uyterhoeven, 1993).

The implication was that; the business entity in West Germany would lose value, while increasing the cost of doing business with the East. The technological environment was also influenced by the sudden change, and thus the way of doing business would not remain the same again. Computers had to be introduced into the operations, to enhance the efficiency of the business operations, so that the business would match the competitiveness of its rivals such as Volkswagen.

Thus, with the introduction of new technology, all these changes notwithstanding, Adam Opel and GM would also be required to bear the cost of training the old and the new employees, so that they could fit in the new business model of the west (Uyterhoeven, 1993). The dealers also required to be trained, so that they could be brought to the western standard, since the competitive nature of West Germany was higher, making the dealership in the west better placed for the business than those in the east.

In addition, the dealers were required to invest around Deutschemark million each, to meet the costs of buildings and equipments (Uyterhoeven, 1993). All these changes meant the need for further negotiations in order to find suitable dealers, who would bear the cost at the expense of being the competitor dealers. The drastic change also brought about a new business environment that was not anticipated before, or at least which was expected to have occurred a little bit later. In this respect, there was a more competitive environment surrounding the business operations of Adam Opel and GM, compared to the business environment in which the organization was operating in previously.

This business environmental change was highly influenced by the aggressiveness of Volkswagen to command the automobile empire, through the acquisition of other automobile subsidiaries such as Kombinat (Uyterhoeven, 1993). The businesses were caught by surprise, by the sudden change of the business environment into a more competitive one, when the initial plan was that the change would be implemented within a multi-year program, which would have prepared the business for the change (Uyterhoeven, 1993).

However, the problem was deepened even further, after the legal environment was not flexible enough to absorb the sudden changes in the business environment, and thus the plant establishment and the acquisition plans which were formulated to compensate for the drastic changes, were forced to delay by the lengthy negotiations. Thus, the political forces became the driving force, and the key actors in politics were performing in a rather hasty manner to effect the political changes, resulting in businesses being caught by surprise. Due to the "overnight" exposure of East German manufacturing to external, "global" competitive forces, the businesses were caught by surprise, by the sudden change of the business environment into a more competitive one (Billstein, 2004).

Thus, the give-and-take with GMs financial staff at HQ also became inevitable, considering that the economic environment was also highly influenced by these drastic changes that were unprecedented. The human factors also became so important that deep psychological insight and disciplined leadership again emerged as critically important. This occurred due to the fact that the social environment was not spared by the drastic changes that occurred during the unification of the East and the West Germany.

With the creation of the united Germany, it was apparent that certain changes in the human control environment would also occur (Billstein, 2004). The human factors change affected the centralization system that was effectively applied as the suitable business model for the organization. Thus, both psychological insight and disciplined leadership emerged as critically important for addressing the unanticipated change in the human factors. The value chain had been so disrupted that there was an urgent need to reconfigure it.

This is because; the company could no longer operate with the same dealership framework that was operating before (Billstein, 2004). The reconfiguration of the value chain meant that dealers required to be trained, so that they could be brought to the western standard, since the competitive nature of West Germany was higher, making the dealership in the west better placed for the business than those in the east. The environmental uncertainty become so great, that risk management became a key success factor. This business environmental change was highly influenced by the aggressiveness of Volkswagen to command the automobile empire, through the acquisition of other automobile subsidiaries such as Kombinat (Uyterhoeven, 1993).

Therefore, it became necessary for Adam Opel to bring in Japanese manufacturing techniques in these circumstances. Reference Billstein, R. (2004). Working for the enemy: Ford, General Motors, and forced labor in Germany during the Second World War. New York [u. a.: Berghahn Books. Uyterhoeven, Hugo. (July 28, 1993) ‘Adam Opel AG (A) and (B) TN’, Harvard Business Review 1-34

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