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ShangGong Group Chinese Challenger Acquires German Premium Brands Case Solution

Solution Id Length Case Author Case Publisher
2197 1027 Words (5 Pages) Klaus Meyer, Daniel Han Ming Chng, Jianhua Zhu Ivey Publishing : 9B15M095
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It was suggested by the substantive body of research and theory that cultural differences in mergers and acquisition play an important role and can create obstacles if it's not considered while achieving the integration benefits from doing business overseas (Yue & Bender, 2011). Here when the Chinese firm SGG decided to acquire the German firms to deal with the international brands, ShangGong faced several challenges related to dealing with the people of Germany, their way of living and working, and there were lots of cultural differences which made it difficult for Chinese investors to deal with (Li & Hohmann, 2011). 

Following questions are answered in this case study solution

  1. Importance of Culture while doing business overseas

  2. Suggestions for Acquisition of different firms

  3. What if I am in the place of SGG?

Case Analysis for ShangGong Group Chinese Challenger Acquires German Premium Brands

Management is the one where things are getting done through other people. Understanding other culture people means understanding their background so that the past, present, and future behaviour can be predicted. There must be an appreciation of the culture of each other and attitudes of people should keep reviewing (Hostede,1994). Investing in a foreign country calls first for the respect of the people and appreciation of the local culture. Because without these entrepreneurial success is difficult to achieve. Once the culture and their people are similar to you, this approach will enable companies to create an intercultural competence that would enable them to combine cultural attributes in such a way that those people who concerned living and working together enriches their lives on a personal and societal level and also in the business world (Sohm & Klossek, 2017).

SGG is practicing Horizontal integration because it was merged with German companies similar to their industry which Sewing machinery like DA, Pfaff, KSL, and ShangGong. SGG purpose behind this integration is to compete in the Chinese Market with the international players. This method works when there is the same culture between two parties but in this scenario where China and Germany have a different way of doing work, the way they talk, the way they understand was totally different (Meyer & Zhu, 2015). 

By looking at the scenario that Germans firms are acquired by Chinese investors, so I would suggest going for both horizontal and vertical integration because vertical integration is when you acquire the production, or distribution part of another firm to provide them your competencies of doing work. And Horizontal Integration would be used to compete with the international and strong players in the market.

2. Suggestions for Acquisition of different firms

For acquiring four German Firms, I would suggest SGG to research on their management styles, cultural differences, relatedness, size of the firms, etc. Because as each organization has their own culture and the greater the cultural fit between Chinese and German firms, the better will be the integration and the greater chances will be there to achieve the acquisition goals. In this case, where Chinese are not that much fast, but they are fast in innovation and their technology but German finds this behaviour as the inability of Chinese to perform the task consistently and accurately. Whereas on the other side, Chinese respect the quality management of the Germans but at the same time they think that Germans are slow and fussy.

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