Management - After the Break-Up - The Troubled Alliance Between Volkswagen and Suzuki - Case Study Assessment Answer

Management Assignment

Assignment Task

After the break-up: The troubled alliance between Volkswagen and Suzuki, which is attached, and provide a response to the following questions:

• Based on the information provided in the case, what type of international strategy is being pursued by Volkswagen and Suzuki?
• What are the main advantages and disadvantages of this form of internationalisation for Volkswagen and Suzuki?
• The authors of the case suggest that a was one of the main reasons for the failure of the organisations to work together effectively. Drawing on the work of Geert Hofstede, explain the main similarities and differences in national culture between Germany and Japan. Provide examples from the case to illustrate how differences in national culture contributed to the problems in the relationship between Suzuki and Volkswagen
• Hofstede’s model of national cultural differences has attracted much criticism (for a comprehensive critique of these criticisms, see McSweeny, B. 2002. Hofstede’s model of national cultural differences and their consequences: A triumph of faith, a failure of analysis.Human Relations, 55: 89. Provide a brief summary of the criticisms of Hofestede’s model (no more than 500 words). Given these criticisms, how confident are you that Hofstede’s model can be used to analyse the cultural problems in this case?<

All answers should be referenced appropriately, and a reference list provided at the conclusion of the assignment. Answers should be clearly labelled.

The international strategy that the companies adopted at the time of contract depicts that both of them entered into alliance while having a set of specific requirements from each other. Both the parties had different aspirations and for that they entered into partnership. Thus the international strategy ultimately aimed at becoming global leaders by using available resources with each other (Best, 2014).

The international strategy that is used by Volkswagen and Suzuki has their own advantages and disadvantages to respective companies. Here is detailed information about the advantages and disadvantages.

Following are the advantages of internationalisation for Volkswagen:

• VW would get advantages of the strengths of Suzuki in small cars. The position of Suzuki is very dominant in Indian market when it comes to small cars and this will be very beneficial for VW.
• It will allow the company to use management resources, jointly develop fuel efficient cars and share auto parts to cut down production costs.
• Entering into Asian markets will become easy when Suzuki’s support will be there with VW.

Following are the advantages of internationalisation for Suzuki:

• Suzuki will be able to achieve economies of scale and will be able to deal with cut-throat competition prevailing in the automobile industry.
• It will also allow the company to use management resources of VW, jointly develop fuel efficient cars with VW and share auto parts to cut down production costs.
• The goodwill of the VW is very strong and this will also benefit Suzuki in international market.

In this manner the major advantages of such international strategy to both the companies is that both will be able to make optimum use of available resources and with that they can jointly bring changes in the international sales (Juul, 2013). With such alliance the revenue of both the companies will increase and both will be able to make a dominant position in the market. At present there are many strong players in automobile sector and if the will work individually then there are less chances of development but jointly they can become world leaders in automobile industry. Thus the advantages of the international strategy are numerous to both the organisations. Along with various advantages there are a number of disadvantages of this international strategy as well to both the companies. These disadvantages are mentioned below.

Following are the disadvantage of International strategy to Volkswagen:

• The company could not get the support that it desired from Suzuki and due to that its investment into international strategy was merely a burden on it. The resources of the company also suffered along with the employees and its capacity. Thus the major disadvantage to the Volkswagen is that its infrastructural planning got affected due to the non-working of this strategy.
• Along with that the cultural un-match resulted into changes in policies and these changes had a significant impact over the working and functioning of the company. In this manner such international strategies are not useful for all types of companies and besides providing benefits they tend to affect the company negatively like this case.
• The unclear understanding between the companies generally arises in such international strategies and did arouse in this case leading to the failure.

Following are the disadvantage of International strategy to Suzuki:

• Like Volkswagen, Suzuki also suffered a number of disadvantages. Due to this international strategy the media war between the companies increased and this has also affected the goodwill of the company in Indian market (Morschett, 2015). It affected the overall industry share of the company.
• Sometimes such international strategies do not equal rights to both the partners and this also happened in the present case. The company claims that it wanted to have equal rights but Volkswagen did not give them equal rights and this is the major disadvantage of the present international strategy.

The authors of the case suggest that there a culture mismatch and this is true as per the evidence of the case study. The major reason behind failure of the alliance is also attributed towards cultural mismatch. Due to the differences in the culture of both the companies they could not work together effectively. The differences in the culture of both the companies will be analysed using Hofstede’s cultural dimension. The cultural dimension of the Hofstede talks about five dimensions that are power distance, individualism vs. collectivism, Masculinity vs. femininity, uncertainty avoidance and long term orientation vs. short term orientation (Hofstede, 1990). Hofstede’s argue that every country has different set of values and morals and due to that their cultures are also different. The cultural differences also affect the business practices to a very great extent.

The Japanese and the German managers have totally opposing cultural background and due to that their approaches towards business are also different. It is analysed by Hofstede’s cultural background that Japan is very structured and highly traditional society. In Japanese culture there is a significant importance of personal responsibility, loyalty, politeness and group work (Shim & Steers, 2012). On the other hand the German culture is known for its thorough thought process and they are very structured about what they are going to do and when they are going to do it. The German are forward thinking and they are considered to be masters of planning. This can be visible from the case that the agreement between both the companies took place very early and they had huge long term plans specifically with respect to the years. For instance they said that by the year 2018 they will become world leaders.

In Japanese culture politeness is always honoured and the most important thing for them is respect. Suzuki felt several times that Volkswagen did not give them expected respect (Alvesson, 2012). It can also be added here that the pace of working of Japanese company Suzuki was slower while German culture is fast paced and due to that difference occurred. Thus German culture is characterized by clear and strong leadership with precise instructions. Their behaviour is also competitive long with their thinking and they focus on final performance that can be measured in numbers. But in Japanese culture vague instructions may also be provided by the managers and they avoid confrontation. These are the major points of cultural differences between Suzuki and Volkswagen.

After contrasting the two cultures it is very easy to locate points where they clashed. As per their cultural habit German takes faster decisions so Volkswagen planned the work and followed through execution but Suzuki wanted slower approach to decision making (Deal & Kenedy, 2000).

Furthermore, Suzuki thought that it could engage with Fiat for engine research but Volkswagen viewed as ‘breach of contract’. Here, If Suzuki would have communicated about this to Volkswagen then the partnership break-up between the two companies would not have taken place. With the help of open communication the companies could easily save opportunity cost that they lost in lawsuit. In this manner there have been a number of cultural differences between the two countries and the examples from the case also make it clear that the cultural mismatch is a dominant reason behind break-up of partnership between Suzuki and Volkswagen (Edgar, 1992). The prominent causes of break-up are detailed as differences in the understanding of cooperation and leading and the differences in the values of teamwork and the relationship outcomes for each other.

Amidst extreme popularity and acceptance of Hofstede’s cultural dimensions there are a few scholars who have criticised this on several grounds. The first and foremost criticism to Hofstede’s cultural dimensions is that it assumes that the domestic population of any country is homogenous. But it is not true. Most of the countries in the world are not homogenous. Along with that the Hofstede’s study just focussed on nations as units of cultural analysis but there is something more to it (McSweeny, 2002). The researchers have found that culture is fragmented across national lines and groups and there are often overlapping cultural boundaries. Not only is this but, it is also true that Hofstede’s dimensions and its research is west-centric. Due to that this might provide right information about western countries but for other countries this framework is not suitable. This also makes the framework small in its scope and applicability. The major criticism of this approach is that the study is based on only one company. The informants of the Hofstede’s dimensions research worked only with IBM. Thus, it is claimed by many that the study is outdated and it does not take into consideration convergence and rapid changes in the environment. A framework that is made out of just a single company cannot be generalised for a nation in a significant manner. Due to that the Hofstede’s cultural dimension cannot be considered as a precise and universal tool to understand the culture of different countries. Seeing these criticisms the use of this framework to understand the national culture or to understand the cultural differences of the present case study is not optimum. The inferences of this dimension cannot be used to analyse the cultural problems prevailing in the case. It is important to undertake more research to explore the dimensions proposed by Hofstede and they shall add some more dimensions to this framework to make this study a better one. But after going through this aspect of Hofstede’s culture dimension and analysis using this dimension cannot be considered as 100% trustworthy and reliable. This is because of the critique that Hofstede’s claims about the role of a national culture is very much determinism and due to that it can be linked to flaws in the methodology that he used.