In my individual project I will start by a brief description of the case in order to present the situation and the facts, then I will continue with an analysis of the cultural differences that impacted the joint-venture and I will end by presenting my recommendations regarding a better preparation before a joint-venture process and what could have been done differently. 2. The business worldwide context Once with the liberalization of the markets a new phenomenon started to get shape: the global expansion.
For companies is getting more and more important to access foreign markets by acquisition, mergers or joint-ventures not only in order to increase their profits but also to survive and keep their market share. To successfully perform a merger or a joint-venture you have to study in depth several aspects of the market that you want to access: economical, political, legal and also cultural, which I call the ”invisible” one because usually in business is not really considered.
But as we will see in the case, sometimes the cultural factor is really important and ignoring it can lead even to failure. 3. Case Presentation In the fall of 1991,Corning, N. Y. -based Corning Inc. and Vitro S. A. , Monterrey, Mexico announced the agreement in order to establish a joint-venture that will generated sales of more than $800 million. The result: two separate companies in Mexico (Vitro-Corning) and in United States(Corning-Vitro). Corning will own 51% in the U. S Company while Vitro will own 51% in the Mexico Company, and each will own 49% of the company that the other controls.
Vitro Sociedad Anonima was founded in 1909 in Monterrey, has 40,000 employees and is the Mexico’s largest glassmaker, divested its glassware products to focus on two core segments: flat glass and glass containers. Prior to the joint-venture with Corning the CEO Ernesto Martens-Rebolledo declared that: ” We don’t want to lose our identity as a Mexican company with a unique culture and relationship with our employees, but we don’t want to be battered in the world marketplace either. ”
Corning was founded in the mid-1800s and it is known as one of the most innovative american maker of glass and is also known for the large number of joint-ventures that Corning successfully performed for more than 73 years. Corning and Vitro are family owned companies. After the joint-venture was completed Vitro merged its tableware glass divisions with Corning’s consumer-goods cookware and dinnerware divisions and Corning transferred its Brazilian laboratory to Vitro-Corning, Vitro paid $131 million to close the deal. The two companies combined their technical know-how in order to become more competitive towards their competitors.
Also every company expanded their sales by adding their specific products to the products already existents in the catalogue of each company; we can see that in a declaration of Juan Manuel Holguin, chairman of Vitro’s Glassware Div: “As a result of our alliance, we have complemented the line of products in our consumer glassware business”. The business started well and for all the economists seemed to be the perfect match, Harley Shaiken(labor economist) declared : ”Mexico initially appears to be United States except that people speak Spanish”.
A team of Mexican managers went to Corning’s headquarters to discuss several business projects. The first contact with the American colleagues was pleasant, they friendly had shaken hands and everybody was wearing a suit. While they were visiting the headquarters they observed first the architecture, a modern glass enclosed building almost in contradiction with Vitro’s headquarters, often thought as Mexico’s Pittsburgh, with artwork, arched ceilings and antique reproductions.
During the discussions the Mexican managers were surprised by the speed the decision were taken, they didn’t understand how middle managers could take certain decisions without informing their superiors. In Mexico, the decisions are taken by members of the controlling family or top executives. They began to feel confused everybody was addressing them by the first name without using the usual ”licenciado”. They left New York with several questions unanswered and with their trust shattered.
On the other side a team of American managers visited the headquarters from Monterrey. The first impression was an unpleasant one, they arrived at 07. 30 to start the work but nobody was there, the program was starting at 09. 00. Once they started the discussions they felt that their Mexican colleagues were moving slow and always undecided about the decisions, they were waiting for a superior to approve them. For the Americans the launch break seemed to last an eternity, Mexicans having a long schedule with long launch breaks.
After passing through the technical issues the Americans didn’t understand the sales process which was taking too long. When a sale was made the product had to be delivered by the company and if all the papers where in order on delivery, the company representative was told to come back on another day with the invoice and is everything was in order another meeting was settled in order to collect the payment. After 25-months Corning handed back Vitro’s $130 million and called of the joint venture.
After the failure the Americans were willing to discuss what went wrong and learn from it while the Mexicans didn’t wanted to criticize anyone especially a partner and they focused on the fact that the marketing arrangement continues despite the break-up. Even the companies didn’t recognized an analyst, Francisco Chevez said ” The cultures didn’t match”. 4. Analysis of Cultural Differences Lack of understanding culture becomes nowadays one of the main reasons for failure of the joint ventures. It is critical to understand your partner point of view of management and a better understanding of the culture reduces the risk of failure.
It’s true that in the case of a failure is not only the cultural aspect that counts as long as cultural clash is avoided the chances to overcome the other obstacles are higher. In this case I’m starting from the assumption that Mexican and American culture have a lot of things in common but there are some differences that even are hard to trace they are significant and they can have disastrous consequences if they aren’t taken in consideration. Culture is like an ”ocean” we have to investigate first the surface and then to go to the bottom.
A lot of people underestimate the observation but cultural assumptions can be observed in architecture, greeting rituals, dress codes grouped under the concepts of artifacts and behavior. In order to discover the meaning of culture we need to start with observation. From the beginning of the case we can see the different architecture and design. As we saw in the case there is a big difference between the architecture of the two headquarters and the first conclusion is that the Mexicans are more oriented towards the tradition while Americans need a more functional space.
We can also imagine that for the building from Monterrey the presence of the architect is mandatory during the construction process while for the building from New York things can be done separately. Greeting rituals and Forms of address are related, in our case even the people shake hands the address form is different: the Americans are addressing by the name or even ”you” while in the Mexican culture the using of the name without the title in front can be viewed as an offense.
If the greeting ritual is the same on the same sides, a wrong address form can transform everything in an unpleasant experience. There aren’t important differences for dress codes and the type of contract between the two parties. The artifacts can help us in imagining the values and the beliefs of the company. Americans have a modern building because they wanted something functional so we can suppose that their main goal is providing wealth to shareholders and that lead to the fact that Corning is a task-oriented company.
So the people hired have to have the main values and beliefs. In the case of Vitro starting from the architecture we can say that the company is people-oriented because the building is favorable to harmony and consensus and we can suppose that the main goal of the company is the customer satisfaction. Further on we will pass to the basic assumptions that will guide us in the exploration of culture. For the basic assumptions I will use the cultural dimensions of Hofstede for the people from the two companies in order to see how people differ according to given cultural dimensions.
After a quick look of the two schemas (Exhibit1; Exhibit2) we can understand better the behavior of the two sides. If in the case of Masculinity (Mas) there is no real difference in the case of the other dimensions we have some important differences that we will discuss further on. We see that Power Distance (PDI) is much more on the Mexican side and we have the explication in the case; we saw that Mexicans are more hierarchical and the decisions comes from the top while the Americans have a higher degree of freedom in taking decisions.
For Individualism (IDV) the Americans are clearly the winners, they are used to take the initiative knowing that in the end they will be rewarded. The Mexicans have the tendency to belong to a group, to a collectivity they were a little lost in the Corning’s headquarters. Uncertainty Avoidance (UAI) is higher in the case of Mexicans practically continuing the previous two; they are being obedient and collectivists so it’s normal that they will take les risks in contradiction with the Americans that are disposed to ” Go for it”. In conclusion we can say that Hofstede’s measures are reliable for our case, by my analysis I just validated them.
But in business it is not enough, only to identify the key dimensions of the culture we have also to recognize which are the most relevant dimensions and then to define strategies in order to use them creatively. We can use the cultural spheres of influence (Exhibit3), we can see them as a data-base where we can search and find for example how relationships are managed in a particular department, company or industry. In our case I identified two spheres that can help us to understand the cultural differences that led to the failure: regional and industry.