Adopting an International Approach to the Local Market - Assignment Example

Adopting an International Approach to the Local Market Introduction A firm becomes international when it extends its activities or manages to sell its products into overseas markets (Kessapidou & Varsakelis, 2002, p. 268). The more a firm is involved in overseas markets, the greater the level of internationalisation. A successful internationalisation process requires a firm to adapt effectively to cultural settings of the target overseas markets through a process known as localisation (Nordea, 2003, p. 68). The purpose of this paper is to examine the process of takeover of French breweries by Vechtel, a Dutch brewery, during its internationalisation processes. First, the paper examines three phases that occurred after Vechtel took over a French company. It further observes the extent to which stereotyping is evident in the thoughts and words of the Jean-Pierre Courbet and Jaap Harmelen, and the impact that the culture of these two individuals had on the success of the takeover of the French company. A brief comparison of the strategies adapted by Vechtel (Rotterdam HQ) and Brasseries Vechtel is given. An explanation is given of how these strategies are reconciled and how the two companies arrived at a common goal despite the existence of differences in their respective national cultures. Finally, the paper explains how the overall process of internationalization of the Dutch company could have been improved. The purpose of including the above information is to identify cultural issues that organisations involved in international takeover may encounter and to reflect how the cultural issues can be effectively managed to achieve success in the internationalisation process. Phases of internationalisation Three distinct phases of internalisation occurred after Vechtel took over the French company. The first phase involved creation of an atmosphere for cultural integration and effective communication. Vechtel made a radical restructuring of the management system. Some employees who had been working for the French company were dismissed and some replaced with experts from other Vechtel operating companies. However, some key positions remained with French employees, including Jean-Pierre Courbet’s position. Most of the key management personnel understood languages used by Dutch and French and thus, there were minimal communication problems. As Schraeder and Self (2003, p. 513) note, this phase was necessary to reduce communication problems and to create an atmosphere for cultural integration in the organisation. The second phase involved reorganisation and integration of the functional structures and control systems. To deal with excessive financial number of breweries, deplorable sets of financial figures and overlapping parts in the new organisation, Vechtel closed some breweries and its revised brand range. This step was essential to create the identity of Vechtel as a brand within and outside the target market (Schraeder & Self, 2003, p. 513; Riad, 2007, p. 41). During the third phase, Vechtel evaluated the expected and actual outcomes of the acquisition. Based on past experience, Vechtel revised the management structure through consultations, which increased involvement of Dutch employees in the organisation. The Dutch chief executive in the French branch, Jaap Harmelen, was replaced with a Dutch, Jean-Pierre Courbet. This phase helped to further enhance compatibility between the cultures of Vechtel and the French company. Generally, the three phases were essential in establishing cultural fitness between the two merging companies. Poor culture fit may contribute to failure of mergers and acquisitions that appear to be suitable and strategic as in the case of the merger between Monsanto and American Home Products which failed due to difficulties in trying to integrate the diverse cultures (Schraeder & Self, 2003, p. 513; Stahl & Voigt, 2004, p. 53). Extent of stereotypes in the thoughts and the words of Jean-Pierre Courbet and Jaap Harmelen The thoughts and words of Jean-Pierre Courbet and Jaap Harmelen in the case study show that they have preconceived notions about the cultures of both Vechtel and the French company. Jean-Pierre Courbet felt that after the acquisition of the French company, Vechtel was most likely going to fire key French management personnel and replace them with Dutch employees, as the company had done in Spain. He thought that among other problems, this would lead to communication problems comparable to the case of Vechtel headquarters in Spain where key figures in management used interpreters. He thought that the dismissal of Dutch employees would lead to upheavals in the new company. Though Courbet was a key player in the takeover of the French company, he felt that Vetchel would probably do away with him just as it had done in Spain. Given that the takeover in France was pushed by the son of the founder of Vechtel Brewery, Courbet felt that this single reason significantly reduced the chances of the new company succeeding. As he expressed during a meeting with chief executive Jaap Harmelen, Courbet felt that Vechtel was going to interfere with the operations of Inter-HRC, a distribution company whose sales included products of Vechtel competitors, as it had done in Spain. Generally, Courbet had a view that Vechtel was possibly going to apply a poor strategy as it had applied in Spain, which would result in failure. Jaap Harmelen was the chief executive of Brasseries Unies, after which he became a board member for Vechtel. During the deliberations for Vechtel to take over the French Schaefer brewery, Jaap Harmelen expressed that he had developed confidence in Courbet and for this reason, gave backing and support to Courbet’s plans. Thus, he had preconceived notions regarding Courbet’s capabilities. Effect of cultures of Jean-Pierre Courbet and Jaap Harmelen The cultures of Jean-Pierre Courbet and Jaap Harmelen played a significant role in the successful internationalisation process. Though Jean-Pierre Courbet was suspicious of Vechtel’s intentions, he embraced the change and was ready to commit his efforts for a successful integration process. He was ready to give his opinions and advice that would lead to successful integration. Similarly, Jaap Harmelen’s culture enhanced the integration process. As indicated in the case study, the French works were suspicious of the intentions of the new owners. However, Jaap Harmelen a Dutch chief executive turned out to be friendly and respectful to the French culture and he displayed dignity and sagacity. Culture simply refers to values and norms held and shared by a group of persons or deeply held by an individual (Stahl & Voigt, 2004, p. 53). The full strength of culture is seen when divergent cultures are forced to become one as in the case of organisational mergers and acquisitions (Thach & Nyman, 2001, p. 147; Schraeder & Self, 2003, p. 516). Thus, it is an important element of mergers and acquisitions and as Lodorfos and Boateng (2006) note, it can be a make or break factor in the merger or acquisition equation. In fact, according to Lodorfos and Boateng (2006), a quarter of the mergers and acquisitions that take place fail as a result of difficulties in integrating the different organisational cultures. Thus, management of effective “human factor” in mergers and acquisitions is one of the most important aspects that lead to successful transition. Thus, the cultures of Jean-Pierre Courbet and Jaap Harmelen had a huge impact on the on the success of the takeover by Vechtel of the French company. Strategies of Vechtel (Rotterdam HQ) and the Brasseries Vechtel (Lyons) Both Vechtel (Rotterdam HQ) and the Brasseries Vechtel (Lyons) focused on strengthening the Vechtel brand in France. However, their approaches to realise this objective were different with Vechtel (Rotterdam HQ) adopting an internationalisation strategy while Brasseries Vechtel (Lyons) adopted a localisation strategy. After the takeover of the French company, Vechtel (Rotterdam HQ) restructured the new company to remove the overlapping parts. Some French employees from the acquired company were dismissed but some retained key management positions. Some of the dismissed French nationalists were replaced with experts from operating companies belonging to Vechtel. After the takeover, Vechtel’s (Rotterdam HQ) strategy involved revising of brand range and restructuring structural and systems. Generally, Vechtel (Rotterdam HQ) was pursuing an internationalisation strategy (Trompenaars & Woolliams, 2003, p. 29; Pahl & Richter, 2009, p. 11). On the other hand, Brasseries Vechtel (Lyons) was pursuing a localisation strategy. Brasseries Vechtel’s (Lyons) strategy did not focus on complete integration with the acquired company. After acquiring Schaeffer breweries together with its subsidiaries, Schaeffer, remained as a separate operating entity but under an umbrella of inter-hold. Brasseries Vechtel (Lyons) offered to purchase Schaeffer and its subsidiary but they would retain local human resources, manufacturing processes, brands and local supplier networks among others. Brasseries Vechtel’s (Lyons) move is called a localisation strategy (Trompenaars & Woolliams, 2003, p. 29; Pahl & Richter, 2009, p. 11). How the Internationalisation and localisation strategies are reconciled An internationally operating company cannot deny or regret the existence of international diversity, but as Hill and Jones (2009, p. 131) argue, this should be regarded as an opportunity that can be exploited. Each country’s unique circumstances will pose different challenges requiring the development of different competencies. Different national climates create different opportunities for different innovations. Thus, if a firm adopts an internationalisation strategy, taps into the target country’s opportunities, and leverages the acquired competencies, this can open opportunities and form a source of competitive advantage (Hill & Jones, 2009, p. 131; Carleton & Lineberry, 2004, p. 329). Naturally, these locally leveraged competencies and innovations would subsequently need to be adapted to specific circumstances in other countries. This balancing act requires an organisation to adopt a strategy that will optimally match the tastes and preferences of the target market in a foreign country (Hill & Jones, 2009, p. 131). Localisation is the most appropriate strategy in such a case. This requires localisation of strategic decisions, products, research and development (R&D); use of local supplier networks; deployment of local human resources; localisation of corporate image; and adaptation to local manufacturing processes among others (Appelbaum, et al, 2007, p. 195; Hill & Jones, 2009, p. 132). After a successful localisation strategy, a firm can then translate the advantages gained into a competitive internationalisation strategy. How Vechtel (Rotterdam HQ) and the Brasseries Vechtel (Lyons) arrived at a common goal Despite the differences in their respective national cultures, Vechtel (Rotterdam HQ) and the Brasseries Vechtel (Lyons) managed to arrive at a common goal. After negotiations, Vechtel managed to purchase majority of the shares of Schaeffer held by specific families involved. This helped to meet Brasseries Vechtel’s (Lyons) localisation target. Vechtel further offered to purchase the rest of the shares that were held by the public. An agreement was reached and eventually, they were transferred to Vechtel. That way, Vechtel (Rotterdam HQ) achieved its objective of acquiring more companies and increasing its command in the global brewery market. Thus, Brasseries Vechtel (Lyons) achieved its localisation goals while Vechtel (Rotterdam HQ) achieved its goal to expand globally. Making Brasseries Vechtel/ Vechtel Rotterdam more international For Brasseries Vechtel/ Vechtel Rotterdam to become more international, it needs to continue strengthening the Vechtel brand through buying more local breweries in France as well as in other nations (Hill & Jones, 2009, p. 132 & Appelbaum, et al, 2000, p. 654). As noted earlier, Vechtel should focus on adopting a localisation strategy in overseas nations. Once the localisation strategy is successful, Vechtel can translate the obtained advantages into competitive internationalisation strategy. That way, Vechtel will become more international. Shortening/Improving the first phase The first phase involved restructuring of management systems to create an atmosphere for cultural integration and effective communication. This phase could have been shortened or improved. Differences in organisational cultures and management structures are usually obvious and can be examined prior to initializing the takeover process (Trompenaars & Asser, 2010, p. 78 & Schein, 1990, p. 113). The differences recognized need to be acknowledged and incorporated into the pre-integration negotiations (Shook & Roth, 2011, p. 150). Thus, Vechtel could have reduced the first phase by examining the differences in culture and management structures in the French company and making an agreement during negotiation on how the new situation would look like. Employees slated for dismissal should have been determined during the negotiation stage and their benefits agreed on. This would have helped to shorten and improve the first phase. The takeover of Schaeffer The process of takeover of Schaeffer was optimal. According to Marks (1997, p. 271), once a target has been selected for alliance or acquisition and an appropriate takeover process has been agreed on, the task facing the acquiring company is to maximise benefits from the process. The most important ingredient to success in such a case is sensitivity to cultural differences (Marks, 1997, p. 271; Ulijn, 2010, p. 136). There are many differences especially in management style which are attributable to cultural differences. Managers thus need to make allowances for those differences in dealing with their target organisation. In order to maximise benefits from the alliance, it is also essential to build trust with the partner and make allowances to learn from them. This lesson can be drawn from successful strategic alliance between Ford and Mazda as described by Tallman (2007, p. 56). Managers of these companies engaged in meetings where they discussed not only matters pertaining to the alliance, but also took time to know each other better (Tallman, 2007, p. 56). Thus, a successful takeover process of Schaefer by Vechtel needed to incorporate the aforementioned aspects. Vechtel managers and experts set up frameworks of meetings with Schaefer executives, where they managed to build trust and facilitate harmonious relationship between the two firms. Eventually, Vechtel managed to purchase all of Schaefer’s shares and those of its subsidiary, including those that were held by the public. Thus, the takeover process of Schaeffer adopted by Vechtel was the best for that case. Influential elements in the process of takeover There are various cultural elements that are influential in the process of takeover. One of these is the willingness on the part of the target organisation to embrace the vision and strategy of the acquiring firm (Buono & Bowditch, 2003, p. 142; Gleich, et al, 2010, p. 10). Assessing how the key strategic personnel, who are business drivers of the target entity, will be retained or guaranteed continuity is also essential. It is vital to assess barriers that may exist to the emerging culture that might inhibit successful implementation strategies. Another important element is a communication plan which should be adopted to eliminate or reduce the likely incidence of anxiety to the change (Lejeune & Vas, 2009, p. 738). National culture also influences the process of takeover. Generally, there is need to asses whether the culture of the target organisation and is compatible with the culture of the acquiring firm. Conclusion In conclusion, the process of internationalisation takes place when a firm manages to sell its products in overseas markets successfully. The three phases of internationalisation that Vechtel underwent in its takeover of the French company are; restructuring of the management system, integration of the functional structures and control systems and revision of the management structure through consultations. Jean-Pierre Courbet and Jaap Harmelen expressed preconceived notions in their thoughts and words with regard to the process of takeover of the French company by Vechtel. The cultures of these two individuals facilitated the successful takeover of the French company by Vechtel. Though both Vechtel (Rotterdam HQ) and the Brasseries Vechtel (Lyons) focused strengthening the Vechtel brand in France, their strategies were different with Vechtel (Rotterdam HQ) adopting an internationalisation strategy while Brasseries Vechtel (Lyons) adapted a localisation strategy. These two strategies can be recognised as pursuing a successful localisation strategy and then translating the advantages gained into competitive internationalisation strategy. After adopting successful localisation and internationalised strategies, Brasseries Vechtel (Lyons) and Vechtel (Rotterdam HQ) managed to arrive at a common goal. Brasseries Vechtel/ Vechtel Rotterdam can become more international by buying more breweries in overseas nations and adopting optimal internationalisation strategies. The first phase of internationalisation after the takeover of the French company by Vechtel could have been shortened or improved through examining differences in cultures and management systems and incorporating these into the pre-integration negotiations. The strategy adopted Vechtel to takeover Schaeffer was optimal and thus, it was the best for that particular case. 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