Alcatel-Lucent Company: Case Study

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Introduction

Any company operating across country borders faces risks of cross cultural barriers. This is because the international company serves different customers and clients, as well as employs people from across two or more cultures. Multicultural environments present both advantages and disadvantage for multinational firms, because these differences can be tailored to result in a competitive advantage, but can also be a source of problems resulting in the failure of the company.

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Successful companies therefore begin with the recognition that cultural differences existing among its employees and customers, and then seek means and ways of reducing the effects of cross cultural issues, as well as turning it into being an advantage. The trick is that more than on e strategies will be required in the management of diverse cultures.

Efficient and effective management of multicultural environments require strategic approaches and leadership. It begins with identifying the causes of diversity, including differences among various individual employees and customers. The strategy is towards recognition of differences among regions and countries, as well as individuals. This paper explores the cross cultural issues affecting Alcatel-Lucent merger since it begun, and especially with its leadership. The struggle of Alcatel-Lucent to cross-cultural management following a cross cultural merger between the constituent companies has been reported in various media centers, and is exemplified herein as an essential case in the media touching cross cultural management. Drawing upon theories of cross cultural leadership, mergers and management, the paper explores the case study to demonstrate how performance of organizations can be affected following multicultural problems..

Introduction to Alcatel-Lucent Company

In 2006, a deal for cross cultural merger between Alcatel, a company based in France and Lucent, an American company was completed. Lucent had invested in telecommunications just as Alcatel, and the two combined to form the largest telecommunication company in the world (Pfanner, 2001).

Cross-Cultural Issues affecting Alcatel-Lucent

Cross cultural issues were highlighted even before the two companies merged, in that it would be difficult for Alcatel leadership to convince that it was justified to sell Lucent, which is prided about as one of the scientific legacies by the American people and one of the companies Americans had invested in widely, to a foreign-owned country. Lucent owned Bell Labs and this would increase pressure for better merger terms. Alcatel acquire of Lucent would see several jobs lost in America, and unequal distribution of these opportunities across these countries (Pfanner, 2001). Another issue of cross cultural interest was that both Americans and French show differences in ideas regarding a company that is in crisis, according to Holstein (2007). While the Americans would be concerned about cutting costs of business operation by right-sizing the company among other approaches, French typical approach would be to save on jobs by looking for assistance from banks and the government-owned bank. This was evident after the two companies merged. Each was reluctant of saving its compatriots from job losses, resulting in overall reluctances and misunderstanding about how to cut on jobs in the Alcatel-Lucent Company. A former board member of Alcatel admitted that the struggle affecting the company was cultural. According to Gunter, struggles were emanating from within when each begun defending its turf, and the company was hesitant to make tough decisions together to save business.

Discussing the merger issue between the two companies, New York Times, points out that France is reluctant to open up to foreign investment in its industries and sought to control investments to protect the national power monopoly.

Mr. Tchuruk had made offers for the merger, including having the office relocated to USA, although the company was registered in France according to Pfanner of New York Times. Lucent would be represented by three investment banks as compared to one for Alcatel (Pfanner, 2001).

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Cross-cultural leadership issues continued to dog the company even after the two merged. According to Holstein (2007) of (BNET), confusion existed regarding who was really controlling the overall company after merger. Alcatel’s Mr. Tchuruk Serge was reported as interested in a non-equal representative of the two companies in the overall company board, as far as struggles over who would control the board was concerned during the negotiations for merger. According to him, Alcatel should have had the greatest share of 58%, which would be fair considering that the company had more shareholders. Alternatively, Mr. Schacht of Lucent wanted each party to have eight members in the overall board.

As can be learned from the case study, cross-cultural mergers may excel initially when each side has its need and interest served well. However, problems are evident when tough times manifest. The business management may fail and cultural strains be increased from within, during such times, according to Holstein (2007). Clearly, management of cross-cultural mergers requires focus for everyone considering such a merger, and to save mergers such as Alcatel-Lucent. What is needed a better management and leadership for cross-cultural business mergers, rather than what Holstein (2007) proposes: that companies need to refuse cross cultural mergers with their business partners.

Analysis of the Cross Cultural Issue in Alcatel-Lucent

Hofstede (1980) discussed the differences existing among countries’ cultures with an investigation of the IBM Corporation. He postulated that these differences would exist in areas such as masculinity, long-term orientation, power distance and individualism. Hofstede found out that different countries had different values or scores on these five factors, a clear indication of existing differences. His research has been influential in proofing that cultural differences exist for various regions and countries. It has also been posited that subcultures exist among individuals in same countries, while Hofstede’s research has been expanded over time to show and explain differences existing among various individuals. This posits evidence that managers for cross-cultural organizations and cross-cultural mergers need to be prepared to manage these differences, which may result to failure or improved success for their businesses.

Hofstede indicates that there are differences existing among individuals across cultures, as far as shared values are concerned. Different individuals prefer some states of affairs to others, and this preference differs across various individuals (Hofstede, 1998). This is one issues coming out clear as far as merger between Alcatel and Lucent Company is concerned. For instance, American leadership prefers certain values to managing business in crisis, such as cutting down the costs and taking risky aggressive measures, while French culture would prefer leadership seeking help such as financial support during a crisis rather than cutting on job/labor costs. Leadership of a cross cultural organizations and the management of the same during a crisis can be regarded to as etics (universal comparable characteristics of culture) (Graen, Hui, Wakabayashi and Wang, 1997) in the case of Alcatel and Lucent merger. The fact that individuals have different values even for management purpose does not imply that mergers cannot be successful. In fact, success in mergers is highly dependent on how fast and well the organization and leadership can solve the internal conflicts, since cultural differences are inevitable. Furthermore, Alcatel had already carried out merger deals in the United States in the quest for internationalization, prior to this merger with Lucent. As can be seen in the case of Alcatel-Lucent, the management of the two constituent companies needed to understand the actual cultural differences existing between France and United States, as well as other countries before they merged. This is a very important thing as far as expansion to further international markets is concerned. It appears that the management partly aware of the differences, but sought to neglect them or work them out.

Leadership and who controls a cross-cultural merger is an important aspect of concern, since leadership influences performance. Power distribution is a major issue for cross-cultural mergers and leaders must seek to balance the power sharing and distribution amongst the stakeholders in order to be effective and avoid conflict. Power should be distributed amongst the parties in regard to the shareholders power, since management serves the interest of the shareholders.

Leadership at Alcatel-Lucent needs to be aligned to feature the needs of the stakeholders and there is need for establishment of workable criteria for merger. The company could also have considered having independently managed and run operations in various countries across the world, where it would be easier to incorporate cross cultural interests in leadership. As such, this criteria would have allowed them to put in place different layers and chains of command depending on the power distance scores between the various countries (Dickson, Deanne, and Jacqueline, 2003). This system would also have allowed the organization to solve issues touching on other cross cultural aspects rather than differences in power sharing and distribution in the organization alone. In addition, this would have allowed them to settle cross cultural difficulties which would emerge from their operations in various countries rather than USA and French. While hierarchical structures are fit in some countries, this structure is poisonous in some others. The type of leadership adopted (such as transactional, transformational, dictatorial) influences organizations regardless of who is in control. This is because participatory leadership in cross cultural context can involve employees and other leaders in decision-making and goal-setting (Sagiv & Schwartz, 2000).

Leadership conflicts such as those existing in Alcatel-Lucent merger can be solved also through having a flat organization structure, rather than having a hierarchical structure for the whole organization. Communication is also important in settling out leadership wrangles and conflicts before they affect company performance.

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It is important to consider that there is potential for cultures even across countries to change over time (Sivakumar and Nakata, 2001), meaning that management at Alcatel-Lucent need to be positive for the future rather than terminating the relationship. More specifically, these changes have been fueled by dynamics brought about by globalization forces.

Conclusion and Recommendations

Management of cross cultural mergers is an important aspect to their success. Cross cultural mergers must consider existing differences amongst individuals and various countries, and adopt efficient management practices to deal with cross-cultural differences. Efficient leadership of cross cultural mergers should be considered as the way out rather than refusing mergers, since there are opportunities that cross-cultural mergers can leverage on to perform better.

Alcatel-Lucent was faced with cross-cultural struggles before and after merger. The organization should have considered efficient leadership styles which eliminates conflicts of control, such as flattening the organization as compared to hierarchical leadership styles. In addition, the company should have considered putting in place independent entities in various countries, such that various entities have their management and control. This would benefit them in that they would be able to incorporate cultural differences in management styles across various countries.

References

Dickson, M., Deanne, H., and Jacqueline, M. (2003) Research on leadership in a cross-cultural context: Making progress, and raising new questions. The Leadership Quarterly, 14, 729-768.

Graen, B., Hui, C., Wakabayashi, M., and Wang, M. (1997) Cross-cultural research alliances in organizational research. In: P. Earley, and M. Erez (eds.) New perspectives on international industrial/organizational psychology. San Francisco, CA, Jossey-Bass. pp. 160–189.

Hofstede, G. (1980) Cultures and organizations, software of the mind. London, McGraw Hill.

Hofstede, G. (1998) A case for comparing apples with oranges—International differences in values. International Journal of Comparative Sociology, 39(1), 16–31.

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Holstein, W. (2007) Lucent-Alcatel: Why cross-cultural mergers are so tough. Web.

Pfanner, E. (2001) Failure of Alcatel-Lucent merger talks is laid to national sensitivity in the U.S.: Of pride and prejudices. New York Times.

Sagiv, L., and Schwartz, S. (2000) A new look at national culture: Illustrative applications to Role Stress and Managerial Behavior Conference presentations. In: N. Ashkanasy, M. Peterson, and C. Wilderom (eds.) Handbook of organizational culture and climate. Thousand Oaks, CA, Sage. pp. 417–437.

Sivakumar, K., and Nakata, C. (2001) The stampede toward Hofstede’s framework: Avoiding the sample design pit in cross-cultural research. Journal of International Business Studies, 32, 555–574.

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