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The importance of decision-making processes
Keywords: Automotive industry, Acquisitions and mergers, Change management
Times are tough for businesses at present and the car industry is no exception. Falling sales figures blighted the end of 2005 for the big three manufacturers (General Motors, Daimler Chrysler and Ford) as models like the gas-guzzling SUV fell out of favor with consumers feeling the pinch of rising fuel costs.
Merging for success
This is just one example of how the industry needs to be ready to overcome future challenges associated with changing tastes of consumers, market shifts and petrol premiums. So what are the strategies in place to overcome these potential stumbling blocks? Unsurprisingly the most popular course of action is mergers and acquisitions (M&A) or joint venture. And while this is nothing new (M&A was taking place in the auto industry as far back as the 1920s), there have been a number of high profile deals which signaled a clear return to this activity from the mid-1990s onwards. For example:
* Renault acquired a large stake in Nissan;
* Volkswagen snapped up SEAT and SKODA;
* General Motors purchased SAAB; and
* Volvo was bought by Ford.
However, while M&A often looks like the most tempting option at the outset, car manufacturers would do well to remember the much-publicized fact that over half of all mergers are doomed to failure.
Often this is down to problems during the crucial integration phase. This is a key time for both organizations and is also a period of great uncertainty. Frequently managers do not agree on how the process should be managed, and even when they do concur the act of merging systems, processes and even cultural attitudes is a time-consuming business. The success or failure of a merger can depend on the approach taken.
Integration approaches
There are four main integration approaches:
1. Absorption - high need for interdependence and a low need for autonomy. All boundaries are broken as systems processes and structures are consolidated. For example, when...