This paper examines a case study sprouting mergers of two firms Alcatel and Lucent technologies.
This paper provides an insight into the French and American cultures taking into consideration the parent company cultural imbroglio. Alcatel, an American company, was previously owned by the technological giant, the AT&T group. However in the year 1996, the company parted ways from the group of AT &T and merged with the French company, Alcatel. Alcatel, headquartered in France, provides hardware-software services to the telecommunications sector involving service providers and enterprises. On the 1st December, 2006, Alcatel- Lucent merged to explore greater productivity by utilizing jointly owned resources, products and services.
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Cross-cultural barriers hindered Alcatel-Lucent’s strategic advantageover its competitors. In this paper, the Alcatel- Lucent merger will be critically analysed with help reference frameworks and cultural tools such as Hofstede’s dimensions, Trompenaar’s theories on culture and related articles from newspapers. In the recent years, companies have been adopting the strategy to expand their markets globally with different strategies such as mergers and acquisitions, strategic alliances, licensing etc.
However, companies trying to achieve synergetic benefits often fail in their process of expansion due to the cultural problems revolving between the host and home countries. Introduction Alcatel-Lucent, headquartered in Paris, France, is the Telecom giant with over 77,000 employees in its payroll a with annual revenue generated as reported in the financial report standing at a staggering 16. 98 billion Euros. The merger of parent companies Alcatel and Lucent was anticipated to be the ‘shining star’ of mergers and was aptly phrased as a merger of equals (Sutherland, 2006).
This paper discusses the importance of cultural differences and indicates the problems that can be create when different cultural interaction occurs between different strata’s of organizations.
Short Brief about different cultures
Culture can be considered to be a vast word having no unified idea that can summarize the true essence of it. Some scholars and researchers define Culture as a part of our environmental conditioning, usually distributed among members of similar nations, regions and areas. This case study is used to communicate the study of cross culture and its related problems.
In regards to job environment, the French Culture believes in providing security for the members of the society. The Culture is competitive yet assertive but however is risk averse and consumes too much time to take decisions to deal with a situation. On the contrary, the American Culture is easy going and flexible. Americans believe in quick decision making with a “win-lose” approach and as a result accept uncertainties in a positive manner. In a recent article, Holstein (2007) stated, that the two parent companies addressed the issue of crisis taking measures differently.
In times of crisis, the Americans believe in reducing costs through scaling down job opportunities whereas the French have a supportive approach towards their employees with the government acting as the back bone to resolve such issues making the process of decision slow but unaffected by the crisis piling on the company with additional operational costs. The inclination of the American Culture is towards achieving short term goals such as profit making, however, the French culture denotes a negative aspect of doing business with haste.
The French decision making processes are long and tend to measure each step taking important aspects into consideration.
The Dutch anthropologist, Trompenaars , conducted a research over 10 years and eventually publishing his work in 1994. Expatriates in an organisation can benefit from his dimensions by having knowledge on the managing tasks in different cultures (Trompeenars et. al. , 1997).
Universalism vs Particularism
According to Trompenaars, Universalism and Particularism are terms used to denote a culture which is governed by rules and relationships.
In the words of French (2007), rules are flexible in particularistic societies and relationships are given more importance than rules. Trompenaar’s classifies of USA as a universalistic society bound by rules. Hence, Lucent as a company believes in developing rules, codes and standards that can be applicable to everyone in every situation without any modification. In USA, negotiation takes place in written agreements, shows that a formal procedure is to be followed to do business. However in a particularistic culture, the type of relationship determines the business.
Whereas the French culture is average in Universalism indicating Alcatel, the French company is neither too particularistic nor too universalistic and rationally develop inter personal relationship and trust bearing in mind the expected standards (Gesteland, 2005).
Affective/Emotional vs Neutral
Affective and Neutral are terms used to represent emotions with in a culture. In affective cultures individuals tend to show their emotions explicitly in public like the American culture. However Neutral cultures believe in implicit behaviour towards their emotions.
According to French (2007), different cultures exhibit different behaviours when it comes to emotions. American people tend to deliver their disgust spot-on using verbal communication where as the French do so with sign language such as frowning and smirks. The US and French cultures are both alignedvery close to each other in terms of how emotional or neutral they are. Both of them are moderately average, which means people working in Lucent as well as Alcatel neither express their feelings too enthusiastically nor do they try to hide their feelings (Gesteland, 2005).
Specificity vs Diffuseness
According to Hampden (1998), Specificity is a term used to represent cultures where difference between work life and personalised life are applicable. In diffused cultures, the society is non- segregated as work and personalised life are closely interlinked. According to Guirdham (1999), the French are diffused in their cultural believes hence personal and professional life is considered to be a part of the culture whereas the Americans believe in keeping the two separate.
Achievement vs Ascription
Trompenaar describes cultures which believe in achieving status through performance with a generic belief that status can be gained and lost if performances are not measured accordingly. Ascribed status is where people believe that status is gained through inherent right and not according to what they perform in everyday life (French,2007). Achievement oriented societies formed by individuals who believe in achieving goals independently. For example the reigning President of the United States of America, Barrack Obama is an individual who became the president with his qualities and perseverance.
In Ascribed societies, people believe in the status and the background of individuals. This juxtaposes the idea that in France one can participate in politics only if their family has been inclined politically in the past. The American culture is achievement oriented thus at Lucent, social status or position of an employee is derived from his/her achievements. The employees in Alcatel could grow only if their business links with the superiors are concrete (Guirdham, 1999).
Sequential Time vs Synchronisation
The word, sequence, is used to describe time where events follow one another whereas in synchronised time, events are arranged at a parallel basis. Multi-tasking is the main feature of synchronisation. Lucent being a North American company follows monochromic time that is tangible and divisible. They view time as a narrow spectrum of distinct, consecutive segments. Hence they perform only one activity at a time with greater focus, keeping a strict schedule of appointments and showing a strong resistance from deviating their plans (Gesteland, 2005).
Whereas Alcatel being a Mediterranean country follows Polychromic time, for them time is indivisible and flexible. Time is viewed as a norm and people perform multiple activities simultaneously which makes them distracted very easily. For them appointments are approximate and can be changed at any point of time, schedules are not as important as relationships are.
Future vs Past Orientation
Lucent focuses more on the present and the immediate future than what has happened in the past. They concentrate on achieving result within a short p of time. In Alcatel, the present and future are valued by looking at events that occurred previously.
Any given situation is compared to the previous happenings. Time orientation does matter a lot when companies operate in different cultures. It creates chaos specially in taking long term decisions.
High vs Low context cultures
Lucent (USA)- as a company possesses the attributes of a low context culture where it relies on information explicitly provided, detailed communication and even higher detailed instruction at workplace. However at Alcatel (France), employees practice moderate levels of cultural context interms of communication, information and even instruction at workplace.
Alcatel being a French company practices very high power distance, which means a wide gap exists between leaders, subordinates and management decisions are made at the top level only without the consent of fellow employees. Hofstede’s Cultural Dimensions Dutch Anthropologist, Geert Hofstede defines culture as “The collective programming of the mind which distinguishes the members of one category of people from another” (Hofstede, 2001). Using his survey at the IBM involving employees from world over, he formulated the cultural dimensional framework.
High vs Low Power Distance
Power distance is related to a society which is divided into classes and ranks. In USA, ranks are least important to individuals as they believe in Equality. Organisational ranks often make employees feel uncomfortable and are not practiced widely. In France such distinction between classes and ranks are acceptable. Though high organisational ranked employees believe in respecting employees of lower ranks but make sure that the distinction is clear. In such countries it is wise for a subordinate to use terms such as ‘Sir’ or ‘Madam’.
Whereas, at Lucent- a US based company, power distance is relatively low. The gap between superior and subordinate is minimal likewise salary and decisions are made consulting with everyone, though organizational hierarchy exists but for convenience.
High vs Low Uncertainty Avoidance
The term Uncertainty denotes societies that are risk averse and risk takers. In US, the culture believes in taking risks and with France, risk taking is not a wise decision and is often followed with monotonous long-term decision making. The French are known for high uncertainty avoidance.
Hence at Alcatel people prefer not to take risks unnecessarily, they usually are loyal to their employers and have long work records. The organization is structured with explicit rules and regulations with the employee (French, 2007). Therefore, Lucent as an organization is not well structured and people are eager to take risk, thus being flexible that makes them not loyal enough and are clear indicators of short term employees. As France is extremely cautious about uncertainty decisions, thus employees at Alcatel are extremely concerned about job losses.
In a recent article Sutherland (2006) stated that: “About 10 percent, or 8,800 employees, will be laid-off. Lucent could not answer which percentage of the job losses will be borne by the U. S. Company, but French laws tightly control when employers can fire workers”.
Individualism vs Collectivism
In Individualistic societies, individuals tend to look after their family and themselves. Organisational goals are based on individualistic performance and not on the group effort. Team works are performed with individual rewarding system.
Collectivist countries believe that the essence of good performance is based on team work. Individuals must sacrifice their personal interest for the benefit of the team. Rewards and bonuses are according to the team’s performance on activities. The French and American individualistic characteristics are common, causing a clash of cultures while working in conglomerate companies such as Alcatel-lucent. Individualism evolved when the two companies merged because the people started thinking of their own self interests instead of considering the company on the whole. This leads to chaotic asynchronous processes that are disruptive for productivity.
Masculinity vs Femininity
Masculinity and femininity are characterized by behaviours such as assertiveness, competitiveness, caring and loving. Masculinity is a composition of tough values whereas Femininity shows tender traits. Both the nations are masculine in nature but the roles of women in the two societies are very different. In USA, Women can reach the top layers of the organisation whereas in the France it is the other way round and men are given more precedence as the society male dominant.
In an article Holstein (2007) stated that: “One is that there is confusion about who’s in charge. Russo became CEO of the combined entity and Tchuruk became chairman. In American cultural terms, that means Russo runs the company. After all, she’s the CEO. But in a European context, and particularly a French setting, the chairman is the boss. Confusion at the top is deadly”. Masculinity is relatively high in Alcatel compared to Lucent. At Alcatel, people believe in competition, performance and male dominance.
Whereas at Lucent, people seek equal opportunity, better quality of work, solidarity over other factors including competitive behaviour. Patricia Russo, a successful business entrepreneur from the USA is an example of a Masculine dominant society where women scale the height of opportunities. According to Verwaayen (2008), decisions making in Alcatel-Lucent remains a crucial factor as the two companies have different reporting standards. In Alcatel the Chairman is the head who takes the final decisions relating to a company and in Lucent the CEO is the person who delegates decisions.
The two different distinct approaches have clearly confused the role of employees in both the companies. Verwaayen (2008) also stated that in mergers, long distances usually creates trauma as processes cannot be co-ordinated hence provides freehand edge to competitors. According Gubbins (2007), it is important for the government to have a top-bottom flat structured system so as to make the operations of the company smooth and efficient to survive the competitive environment. Cultural clashes were so evident that Patricia Russo, the chief executive decided to leave the company and stakeholders expected changes after his reign.
This can be analysed from the newsfeed of Alcatel-Lucent (2009) stating that: “We hope that a new CEO will be able to bridge the cultural divide between the Americans and the French and get all sides pulling together” (Cited in, Windsor, 2008).
As a part of the recruitment opportunities, Alcatel Lucent revamped its business training programs into sessions that integrated technical training with hands-on experience on security products and data transmission . Further emphasis on sales methodologies, reaching out to partners to engage with the end-users and to carve out solutions to address their needs. In order to convert innovative ideas into reality products or services, Alcatel-Lucent launched the Entrepreneurial Boot Camp housed in Belgium in the spring of 2006.
Aimed at a constructive build of a global knowledge base where creativity blossoms, a business foundation like the Boot Camp is a grooming factory for all the budding business developers of the next generation. Alcatel-Lucent’s strategic security partnership with renowned financial sector reseller Abraxas Partners paves wave for new job opportunities showering prosperity in the near future (Alcatel-Lucent, 2008).
The primary objective of a merger is the integration of skills, resources, and business networks and their harmonic implementation.
Taking into account Cultural differences, mergers are drafted, and contingency plans are prepared in order to tackle such differences. When cultural differences arise at higher level of the organizational hierarchy, the execution of these pre planned contingencies become haphazard(Turner & Trompenaars, 2000). The analysis of this uber-merger case study has given us a clear insight in to the detrimental situations aroused by unsuccessful execution of mergers. The cultural differences seem irrelevant considering the fallacies involved with it are not redundant while assessing shifts in fiscal trends.
The persistent pressure enforced a moral obligation, convincing the American chief executive, Patricia Russo and the French Chairman, Serge Tchuruk to step down. (Ruitenberg,2008). The ignorance of demographic and geographic interests might have had a negative impact on the merger. Previous acquisitions and mergers may have misunderstood the merger as a change in organizational goals. According to Jolly (2008), Alcatel-Lucent’s current vision can be quoted as “CSR is about being a value driven company, where values are not words on pieces of paper but things we do automatically .
It’s about being a company that is inclusive and has respect for the individuals, respect for differences and respect for cultures “.
Mergers and Acquisitions have a tendency to confront various issues and involve constant reframing of policies. Differences can be resolved at the nascent stages of the Merger or Acquisition only. Alcatel-Lucent faces a challenge in restoring their longstanding relation with their previous collaborators like Bell Labs, Packet Engines and Xylan who might have experienced difficulties while the management underwent changes, so that they may continue providing and developing their services.
They also face the challenge of retaining existing customers especially those who might have endured inept services while the organization resolved its differences. The merger of the parent companies has taken a toll of time and the company has experienced positive development in turnovers, cultural integration thus reoccupying the held market share and brand goodwill.
Alcatel-Lucent’s design and consultancy service convolutes the vital processes necessary to ensure an integration of cost-effective, flexible network infrastructure.
Business Consulting, Operations Consulting, Applications Consulting, Security Consulting, Network Consulting & Design, Network & Service Optimization are Business units and processes that constitute this esteemed organization (Alcatel-Lucent,2008).
Conclusion and Recommendation
Complications usually occur when two companies from two different countries merge to benefit synergetic effects. In terms of Alcatel- lucent, the two parent companies follow an individualistic approach which motivates employees to work towards individualistic goals and often the objective of the company is not taken into mere consideration.
The essence of good successful business is to adopt a collectivistic approach giving the goal and the mission of the company at the top priority. Team work will motivate employees of Alcatel- Lucent to take decision jointly (Alcatel-Lucent, 2008). To bridge the gap between America and the France, it is important to reduce the distance by sending employees of each company onto expatriate missions. To understand a culture, it is important to stand in the threshold of the other. Managers in expatriate missions will gain better understanding of the French and the American cultures thus adjusting to the new inter-cross culture.
Leadership should be vested in hands of one and not many, therefore confusion at the top should be avoided by integrating processes with clear objectives. Employees should be made to report to only one superior. It is important for the company, Alcatel- Lucent, to use new technologies such as video conferencing to reduce communication barriers between the employees of the two countries. In this time of financial crisis, it is important to cut costs to sustain in the global business market. Top heavy structures in the company with higher pay packs to the employees could create operational loss.
In the reduction of financial position, the competitors would benefit by reaping advantage of the situation and overlapping it by way of acquisition. As the French are more protective about the job loss scenario, the company should take effective measures such as putting employee rolls stagnant thereby reducing its financial cost.
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