Term Paper: Change Management and Lewin's Change Management Model

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Change Management and Lewin's Change Management Model

Mergers and acquisitions are often the spark that institutes the need for change management within an organization or within two organizations that merge. The merger of Daimler-Chrysler is an example of a marriage that did not work. This research will explore this merger and will Lewin's model for organizational change to explore of this failed relationship. The research will support the thesis that the failure of Daimler-Chrysler was in the initial stages of Lewin's model, particularly the inability to unfreeze the two organizations.

Lewin's change model is built on the concept that the organization knows that they have one shape, and they wish to change it into a different shape. In the case of Daimler and Chrysler, they had two companies that were a certain shape and they wished to combine them into a larger, new shape. In order to achieve the final shape, both organizations has the knowledge that they were two companies that had a certain shape and that they must institute changes to achieve both of their goals. However, it is not enough to simply make these changes, in order to make the changes become a part of organizational culture they must then re freeze them into the new shape (Mindtools, n.d.). Unless the two organizations are able to unfreeze, the initial change will never take place, and therefore the changes will not be permanent. This was the case with the Daimler-Chrysler merger.

Lewin contends that change and often means that some individuals that will benefit from the change and others will be genuinely harmed from it. It is important for people within the organization to feel highly connected to the organization and its goals throughout the transition. Otherwise, they will not be as likely to accept the changes (Mindtools, n.d.). In the Daimler-Chrysler merger, stakeholders played an important role in the merger. Major shareholders within the two companies were the workers union, and majority shareholders (Kadapa, 2008).

Both companies brought something unique to the table before they began to unfreeze their own companies. Daimler brought to the table their strong brand identity as an exclusive car manufacturer that was considered to be a status symbol (Kadpa, 2008). The Chrysler Corporation brought to the table well engineered cars that were targeted towards the middle class (Kadapa, 2008). When one uses Lewin's model, both of these car manufacturers had a different shape at the beginning of the merger. The idea was that the they could capture both market segments if they unfroze and combined into a new organization. The merger promised to create one of the largest car manufacturers in the world.

The merger was not only that of two major car manufacturers, but the merger of two labor unions as well. Daimler-Benz had its own labor union and Chrysler was affiliated with the American United Auto Workers (Kadapa, 2008). In order to achieve a successful merger, that car manufacturers would have to "unfreeze, their labored unions as well as their manufacturing facilities. One of the key disparities in the merger was wages of between the U.S. And German workers. The German workers felt that the U.S. workers were getting a larger portion than they were. They also felt that the CEOs were receiving a disproportionately large share of the wealth in the U.S. (Kadapa, 2008). U.S. workers would not agree to pay cuts. Yet, increasing wages for the combined workforce of 440,000 workers would not be feasible either and would lead to financial ruin of the company. The inability to unfreeze the labor unions was a key factor in the failure of the merger.

Another key difficulty in the merger was that both companies had two different business models and two different sets of ethics for stakeholders. The German car company catered to a high end premium market segment that is operated using a high cost, low volume business model. Chrysler, on the other hand, had to cut costs in every way possible so that it could provide low cost models to price-sensitive fuel conscious customers (Kadapa, 2008). Both of the compaies dealt with two different sectors of the market and in the end they were unable to initiate the changes necessary in order to form a solid company. This was not necessarily a failure of the companies themselves, but rather a failure of the inability to "unfreeze" their own business models. This differences in the group were irreconcilable, not because of the management and leadership involved, but because of the different market segments and the demands of the consumers. Market segment issues were a key point of contention that prevented the two companies from unfreezing in a way of that would allow them to reform and then refreeze.

One of the questions that must be asked in this attempt merge is why they were attracted to each other in the first place. They were in two different market segments, which would suggest that it would not work in the first place because of the different demographics of their customers. When the merger first began in 1998, Chrysler was a leader in profits and made more on each vehicle that than any other major carmaker (Muller, 2001). However, two years after the merger Chrysler was in a sorry state. Competition from Japanese auto makers such as Honda Motor Company, and Toyota Motor Corporation were driving factors of the economic downfall.

Chrysler built its business on running a lean operation. Daimler's business processes were not as efficient and Chrysler was not used to absorbing the excess that was a part of the way that Daimler did business (Muller, 2001). Neither company was able to unfreeze their business model and do business in the way the other was accustomed. It was their target market that prevented them from doing so and the business models that developed in response to this market that prevented them from the ability to "unfreeze" the business model and shape it into a new one that accommodated the new business that arose from the merger.

In 2006 Daimler-Chrysler announced that it would be instituting a new management style. This new management process would integrate the company's functions and focus on Asia and China rather than the new merged business. The focus was to integrate core processes and to encourage internal cooperation between the two divisions. The moves also promised to reduce redundancy and remove management layers so that the new business would be a more efficient operation (Daimler, 2006).

The new management style began in 2005 with an internal team that would focus on processes and concentrate on production, sales, and new model development. As a result of these improvements in operational efficiency, 8,000 employees would be reduced over a three-year time span of, as well as 20% of general administrative stuff and 30% at all management levels (Daimler, 2006). These actions were necessary in order to put the new business model into place.

When one examines the strategy from the standpoint of Lewin's model, it would seem as if this new management model was an attempt to restructure the corporation into a new entity. However, according to Lewin's model this should have occurred in the earlier stages of the merger rather than after the corporation had been running as a merged entity for five years. This attempt at restructuring failed because neither company had unfrozen its old business model. They continued to operate under both the new business model and the business models were not compatible. In 2006, when they finally decided to restructure the business into a new, merged entity, it was too late. The merged corporation had never truly gotten off the ground because this step as occurring after five years of operations and should have been part of the change management strategy employed when the merger was first suggested. If the merger had occurred in this order, then the new business model would have been part of the refreeze process. As a result of doing the steps Lewun's business model out of order, the Daimler-Chrysler never achieved the refreeze step and the corporate cultures were not successfully integrated into a new entity.

Conclusion

The Daimler-Chrysler merger is an example of how two technologically advanced and financially strong market leaders manage to fail in a deal of that would have made them a global giant. They were a cultural mismatch and neither one of them could unfreeze of their business model in order to the meet the demands of the other. The two companies were too different to be able to unfreeze and match the business model of the other. The lesson of this merger is that when two companies are entrenched in their market and have working models to meet the needs of that market, if the two markets are not compatible they are unable to unreeze their business in order to combine in a way that is functional. Not every merger is a good idea and the leaders in this merger should have… [END OF PREVIEW]

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