Daimler chrysler merger case study answers

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Strategic Management: An Organization Change Approach

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Implementation

( Chapter Seven (
Strategy Implementation:

An Organization Change Approach

Chapter Objectives
Introductory Case: Where Has Chrysler Gone? The Daimler Chrysler Merger

Strategy Implementation

What is Strategy Implementation?
Type 1 and Type 2 successes and failures

The irony of strategy implementation

Implementation as a Change/Intervention Process

Implementation as a Learning Process

Implementation As an Internal Alignment and External Adaptation

Process

Synthesis: The Strategy Implementation Process

Key Implementation Elements

Organizational Structures

Leadership

Organizational Culture

Perfect Fit: Matching Strategy, Structure, Culture, and Leadership

Summary

Key Terms and Concepts

Web sites

Discussion Questions

Exercises

Experiential Exercise

Endnotes

Chapter Objectives

1. To develop an understanding of strategy implementation as a change process that aligns the organization within and without the organizational learning.

2. To establish an appreciation of the ways in which firms can successfully and unsuccessfully implement a strategic plan.

3. To recognize and be familiar with the differing levels of strategy implementation

4. To acknowledge the importance of striving for perfect fit between the firm, strategy, and the organization.

Introductory Case: Where has Chrysler Gone? The Daimler Chrysler Merger

Lee Iacocca was the miracle man of Chrysler. Leaving Ford in 1978, President Iacocca first secured federal loan guarantees of $1.5 billion dollars and made Chrysler profitable by 1983 with the introduction of the K car. By 1988 another miracle was needed and of course Lee delivered. After acquiring American Motors Corporation (AMC) in 1987 (primarily for its Jeep brand), Lee staked the company and his reputation on four major products: the minivan, Jeep Grand Cherokee, the LH sedans, and the Ram full-size pickup trucks. When Iococca left the company at the end of 1992, the company was heading back into the black. From 1993-1997 (before the merger with Daimler), the firm posted an average 5% net profit (ahead of its U.S. rivals GM and Ford) and had increased sales revenues by approximately 25%.

Then came the merger. By the year 1998, Chrysler had started to hemorrhage money. It went through $5 billion dollars in cash and lost $1.8 billion dollars in the second half of 2000 while the value of DaimlerChrysler stock dropped from $ 84 billion in 1998 to $39 billion at the end of 2000. Chrysler, now a unit of DaimlerChrysler, struggled mightily since the 1998 merger of Daimler-Benz and Chrysler, though it showed a bit of life in 2002. Granted, it would be premature to use the word revival. Chrysler lost $1.9 billion in 2001 but it did eke out a profit in the first quarter of 2002 and said it would break even by the end of the year. In April of 2002 its sales stopped falling, and it halted its market-share free fall.

But what had happened? Was the merger to blame? What was it that changed that took a seemingly-well-run company, and created so many problems? As problems became apparent, Daimler Chrysler fired Robert Eaton (Lee Iacocca’s successor) along with nine other major executives. It then brought in Dieter Zetche, who felt that Chrysler had carried considerable baggage and needed reorganization. Zetsche brought in his own management team to replace the fired top level executives. He then proceeded to lead a turnaround based on drastic cuts in purchasing costs and a renewed focus on quality improvement. Chrysler pushed ahead with new products such as the redesigned Dodge Ram pickup and Jeep Liberty SUV that had already been in the works. These tactics seemed to have been quite successful since after an adjusted operating loss of 148 million euros in the second quarter of 2001. As a result, Chrysler made a profit of 788 million euros in the second quarter in 2002.