Joint Venture of the France Based Company Alcatel

A joint venture, according to Adler and Graham (1989),along with mergers and acquisitions, licensing and distribution agreements, and sales of products and services – critical aspects of all such interorganizational relationships, are face-to-face negotiations. This would mean the interaction between people. In today’s society, as the world becomes much more globalized than we could ever think of, with the fast growth of the internet industry, we are connected with people from another country at an instant. However, business to business deals and negotiations are still at a stage where face-to-face communication is still required. As interpersonal communication is brought onto the table, with the clash of different cultures as companies today all have the tendency to become globalizes and multi-nationalized, the understanding of another’s culture and cultural values plays an important role in the negotiation, and the interactions thereafter. As the proportion of foreign to domestic trade increases, so does the frequency of business negotiation between people from different countries and cultures. To successfully manage these negotiations, businesspeople need to know how to influence and communicate with members of cultures other than their own (Adler and Grahamd (1989)). Through the analysis of the case study on the joint venture of the France based company Alcatel and the U. S. based company Lucent Technologies, issues of cross-cultural management, the weakness and strength of an international joint venture, including the rights and wrongs of the particular case study will be discussed. As Shenkar (2001)said in an article, establishing a measure gauging the â€Å"distance† between cultures has understandably presented an even greater challenge. At the end, recommendations will be provided for future companies seeking joint ventures. Body The major differences between the initial negotiation in 2001 and the final successful negotiation in 2006 was the division of power. In 2001, in the original negotiation, the base company was Lucent, which was based in the US. Because it was a joint venture, the amount of power on Alcatel cannot be decided. Due to this inequality, the joint venture was called off in 2001. In 2006, as this inequality no longer stands between the two companies, it established the final negotiation of the joint venture, and at least in the beginning, both companies were satisfied with the negotiation. According to Barkema and Vermeulen (1997), differences in uncertainty avoidance and long-term orientation cause problems. Differences in how IJV partners perceive and adapt to opportunities and threats in their environment are more difficult to resolve. Cultural differences regarding power distance, individualism and masculinity are more easily resolved because they are mainly reflected in different attitudes towards the management of personnel, something firms can make explicit agreements about before entering the partnership. As Berkema and Vermeulen (1997) already said, issues on power distance, individualism and masculinity are considered to be more easily resolved cultural issues, and realizing the fact that if the joint venture between Alcatel and Lucent Technologies could not even solve the more easy problems, it is pointless to say the success of the negotiation. Since the merger in 2006, it is now the fifth year for the joint venture to be in business. With the resignation of Russo, the company is now led by The company is under the leadership of Chief Executive Officer Ben Verwaayen and the non-executive Chairman of the Board is Philippe Camus. Verwaayen and Camus joined the company in the third quarter of 2008 after Alcatel-Lucent's first CEO Patricia Russo and first Chairman Serge Tchuruk resigned. For 2008, the company posted revenues of â‚ ¬16. 984 billion and a net loss of â‚ ¬5. 215 billion (Alcatel-Lucent (2009)). As Powell and Dent-Micallef (1997) found in their article, ITs alone have not produced sustainable performance advantages in the retail industry, but that some firms have gained advantages by using ITs to leverage intangible, complementary human and business resources such as flexible culture, strategic planning–IT integration, and supplier relationships. The results support the resource-based approach, and help to explain why some firms outperform others using the same ITs, and why successful IT users often fail to sustain IT-based competitive advantages. Alcatel-Lucent has done what it was suppose to do a long time ago, which was to appoint leaders based on expertise, and not nationality. As the entire industry was going downhill during 2006, for the past few years, with the correct leadership of Verwaayen and Camus, the joint venture is in much better shape than it was before. As Tchuruk commented initially that the merger is â€Å"a giant transatlantic experiment in multicultural diversity,† the company has run into some major cross-cultural problems since its merger in 2006. One major issue is the fact that the appointed CEO of the joint venture could not effectively run the business, resulting in six quarterly losses, which led to the restructuring of the company, and a cut of 16,500 jobs in total. As the case study states, it was a poor decision to appoint leaders based on their nationality rather than skills. For the time that Russo was CEO, she struggled greatly to bring together a company that consisted of two entirely different cultures, especially when she has no background knowledge of any French language at all. In addition, because there was a lack of understanding between the cultures, the two companies, although formed as a joint venture, were literally pushed into each other out of desperation because of the down sliding industry. However, more importantly, it was the cultural clash that brought the JV into a poor state initially. As Adler, Doktor, and Redding (1986) wrote in their article, with the growing shift of business from the Atlantic to the Pacific Basin, East-West cultural differences are becoming increasingly significant. Research in developmental psychology, sociology, and anthropology shows that there are major differences among the cognitive processes of people from different cultures. In the era of the global corporation, cultural diversity has to be recognized, understood, and appropriately used in organizations. It is suggested that cross-cultural management would greatly benefit from comparative studies considering the impact of the cognitive aspects of culture on managerial practice. Moving forward as a combined company, the JV faces great competition from low-cost Chinese rivals, and as the internet technology is increasingly changing the industry, Alcatel-Lucent is faced with much deeper challenges as demand in the entire industry is decreasing tremendously. Yet one challenge would also be the challenge to integrate the French culture with that of the American Culture. As Shenkar (2001) pointed out, establishing a measure gauging the â€Å"distance† between cultures has understandably presented an even greater challenge. With the globalization of the firm into the Eastern side of the world, and with the JV servicing clients all over the globe, it is not hard to imagine the importance of cross-cultural management as the firm takes its role onto the global stage. In Ralston et al. (1993)’s research on onvergence/divergence of managerial values, the four Western-developed measures (Machiavellianism, locus of control, intolerance of ambiguity and dogmatism) and the four dimensions of the Eastern-developed Chinese Value Survey (Confucian dynamism, human-heartedness, integration, and moral discipline) were used to find that often times both culture and the business environment interact to create a unique set of managerial values in a country. It is the values of the management, the values of a company, that makes up the success of an industry. Conclusion Soderberg and Holden (2002) defines cross cultural management as a discipline of international management focusing on cultural encounters between what are perceived as well-defined and homogeneous entities: the organization and the nation-state, and offering tools to handle cultural differences seen as sources of conflict or miscommunication. However, in the business world today, with its transnational companies that face the challenges of the management of global knowledge networks and multicultural project teams, interacting and collaborating across boundaries using global communication technologies. There is the need for an alternative approach which acknowledges the growing complexity of inter- and intra-organizational connections and identities, and offers theoretical concepts to think about organizations and multiple cultures in a globalizing business context. Today’s world has become a big clash of all different types of culture. Not only it is seen in the business world, but this clash of cultures has become part of today’s society, and the whole world. This phenonmenon not only suggests more research topics for scholars, as Thomas and Mueller (2001) said in their study, that the relationship between culture and four personality characteristics commonly associated with entrepreneurial motivation. By demonstrating systematic variation in entrepreneurial characteristics across cultures, we raise important questions about the boundaries of international entrepreneurship research and the challenges of transcending them, in the real world, cross-cultural management is also becoming more important and is discussed and faced by many entrepreneurs in the business world. With the case study of Alcatel from France and Lucent Technologies from United States as an example, it has proven the fact that the importance of understanding the different cultures that one’s engaging in, and the importance of acknowledging cross-cultural management has become a requirement for any company leading to a JV or entering into a foreign country. Everyone country has its own unique culture, and every country has its own set of rules. In order to gain profit, in order to become globalized, one must take the time to learn about the culture, and go by their rules, because ultimately, in the business world, you are never alone.