1) Summarise the events described in the case study. Highlight what you consider to be the essential issues. 2) Draw up what you perceive to be the cultural profile of each of the two protagonists involved in the account. Use only the cultural values which you regard as relevant to the case. Compare and discuss the profiles which you have produced. Then answer the question: Where are the conflicting cultural values? 3) (a) Determine the internationalization strategy of both Vechtel (Rotterdam HQ) and Brasseries Vechtel (Lyons), particularly with regard to the similarities and differences between the strategy of Rotterdam and that of Lyons. 3) (b) Using your answer to question 3a, try to answer the question 'Mergers and acquisitions: a strategic or cultural issue?' particularly in takeovers such as those described in the account of Vechtel's expansion 4) Make a critical evaluation of the negotiation process described in the account. Consider in particular: Styles of negotiation. Outcome orientations. 5) Examine the interaction between Courbet and Harmelen Find in the account the elements describing: Their frames of reference. The communication filters play a role in the interaction. Refer, for example, to the extent to which stereotyping is evident in the thoughts and words of the two protagonists.

Adapting an international approach to the local market CASE STUDY: VECHTEL 1. BEFORE THE MEETING The morning commuter traffic crawled through the suburbs of Lyons. Jean-Pierre Courbet sat at the wheel of his Renault, on his way to a meeting at Vechtel's headquarters. He had time, as usual, to contemplate his present situation. While doing so, he looked around at the name displays in the street and was encouraged by the ever-increasing presence of the Vechtel name among the myriad signs. He had an urgent meeting with Jaap Harmelen, Vechtel France's chief executive. The meeting had been hastily planned the evening before and the agenda was not too clear - Harmelen's secretary had been vague when questioned. Courbet thought he got on well with Harmelen, despite a feeling that Vechtel's headquarters in Rotterdam was always looking over Harmelen's shoulder. Vechtel had recently taken over the ramshackle group of breweries that Courbet himself had been trying to manage. Now the group was in the middle of a radical restructuring, and it was causing him and many of the old guard considerable pain. From time to time, Courbet wondered whether he had made right decision to stay on and help Vechtel in its mammoth task. Events in Spain were giving him doubts. For it was there that Vechtel had bought its way into a huge brewery and, from what he had heard, read and seen, the takeover was not going well. For a start there was a basic communication problem at local headquarters: key figures did not share the same language and were using interpreters a lot of the time. Some local managers had been fired, including a key marketing executive, and they had been replaced by Dutch expatriates. This was, in Courbet's eyes, a recipe for possible disaster. There were not too many communication problems in Lyons at least, thought Courbet. He himself could manage English, and his skills were improving by the day through contact with Rotterdam HQ. The younger managers were better trained and could more than cope. Harmelen himself was proficient in English and, perhaps more importantly, he could speak fluent French. On top of that he seemed to be a real Francophile, one who particularly relished France's dedication to food and drink. As for the present organisational upheavals, Harmelen seemed to be doing his best in a very difficult situation. There had been dismissals of some of Courbet's French colleagues, but Courbet thought this was inevitable in a reorganisation where there were many overlapping parts - a consequence of previous mergers between rival breweries who had been thrown into each other's arms. Technical and financial experts had been called in from other operating companies belonging to Vechtel, but some key positions were still held by the French. Jean- Pierre Courbet was still there, advising the chief executive and helping to keep the train running while the rails were being changed. But what was going to happen next? After taking over in Lyons, Vechtel had talked with great relish and persuasion about the power of Vechtel's brand name and the need to exploit this power as much as possible. This inevitably put a question mark over the future of some of the French brands the company was still promoting. Courbet realised there were too many of them and some rationalisation would eventually be necessary. So far, however, he knew of no concrete plans. There was one component in the French acquisition that Vechtel seemed to have problems with - Inter-HRC, the distribution company. As director of Inter-HRC, Courbet had spent a lot of time justifying the way it operated, particularly since the company was distributing its rivals' products as well as those of Vechtel. Up to now, Vechtel had been persuaded to keep its hands off Inter-HRC, but Jean-Pierre was not optimistic. After all, Vechtel had been quick to sell off the distribution arm of the brewery it had bought in Spain. Jean-Pierre Courbet could not help feeling that eventually things would go the way they had gone in Spain. Although he had heard that the Spanish operation was supposed to become the jewel in the Vechtel crown, he could not help feeling that the ruthless approach being taken there was a recipe for disaster. Would Vechtel make the same mistakes in France? Jean-Pierre had no illusions. Although the board of directors had expressed confidence in the future of its French operation, Jean-Pierre knew the venture was a risky one. He had heard that Arie van der Vecht himself, the son of the founder of the Vechtel brewery, had pushed for the takeover in France. This was seen as one of Arie's many whims - a capricious addition to Vechtel's portfolio of companies, one resulting from Arie's strong emotional attachment to France. In fact, Jean-Pierre had the feeling that Vechtel believed the venture in Spain would be more successful than the one he was helping to run in France. Courbet was now queuing to turn right into the street where the headquarters stood. Which direction, he thought, would his career take? Would he continue to have a role to play in reviving the breweries' fortunes? Or was he going to be set aside along with other relics of the old breweries? Jean-Pierre looked at his reflection in the rear-view mirror. 'You're not easy to get on with, are you?' he said to himself. 'The trouble with you is you're not afraid to speak your mind. Why don't you blah-blah like those other polished executives you've met?' Jean-Pierre cringed at the thought. He wasn't ever going to be like those graduates from exclusive top business schools (the grandes coles') who, as managers, still behaved as if they were analysing a business strategy case study. But he wasn't the blustering, domineering sort of old-style manager either: he simply saw no point in obsequious behaviour towards his new bosses. If he didn't agree, he said so. He wasn't looking for trouble; all that he wanted was the best for the company. And the first signs were very encouraging. Since taking over, Vechtel seemed ready to learn, were dynamic, open, willing to take the long-term view. But did they want Courbet to stay on? He had been the key instigator in their taking over the company, but he knew that sentimentality or gratitude for past good deeds was not necessarily a reason for keeping him on Spain had showed how mercilessly Vechtel could act. Why did Jaap Harmelen want to see him so urgently? Had the time come for Vechtel and Jean-Pierre Courbet to go their different ways? 2. FROM VECHTEL FRANCE TO BRASSERIES VECHTEL France: a beer-drinking country France may still have the image of being a country of heavy wine drinkers, but beer has come to play an increasingly important role in French drinking habits. During the 1950s and 1960s, there was a considerable increase in beer consumption and these years were the heyday of the many 166 small breweries scattered throughout France. From the mid-1970s, however, the increase in beer consumption levelled off and started declining. From then on, many of the small breweries were forced to merge and some even had to close. The majority of the breweries in France are to be found in two regions - Alsace and le Nord. As any visitor to Alsace will discover, the region enjoys a long history of beer making - there were already nine brewers established in Strasbourg in the fourteenth century. The region Nord - with the city of Lille at its centre - is equally proud of its brewing skills. It dominated the brewing industry until after the Second World War, but now its position has gradually become less prominent. Vechtel to the rescue It seemed to Jean-Pierre Courbet that he had been battling with the precarious financial situations of all the breweries where he had worked as manager. As general manager of Union du Nord, a group of smaller breweries reluctantly forced to work together to keep their heads above water, he had had to cajole them into merging with their main rival, Brasseries Lilloises, to form Groupe du Nord. Vechtel BV took over Groupe du Nord and merged it with Vechtel France to form Brasseries Unies. This company therefore comprised three components: Brasseries Lilloises, Union du Nord and Vechtel France (see Figure A3.2.1). Relations between the three were strained: Brasseries Lilloises and Vechtel France were both full of resentment about being managed by the 'patron' of the third component - Union du Nord - of the new company: Jean- Pierre Courbet. Brasseries Lilloises took great pride in its very rigorous approach to the brewing of its beer and was proud of its hard-working approach to the mtier. Now, it saw itself being run by the mercenary manager of the Union du Nord, who had fought tooth and nail to keep his own company afloat. Vechtel France, on the other hand, was proud of its role in developing the cult of the Vechtel brand in France and saw itself as Vechtel's torchbearer. Brasseries Union du Lilloises Nord Groupe du Nord Vechtel France 1990 Brasseries Unies 1990 Inter-HRC 1997 Intorhold (holding company] Brasseries Vechtel SA Inter-HRC Figure A3.2.1 The path to Brasseries Vechtel Apart from having to contend with internal friction, Vechtel also had to deal with a deplorable set of financial figures, an excessive number of breweries and an overloaded portfolio of brands. There was, however, one profitable company in the holding - the distribution company Inter-HRC. It was a major wholesale distributor in France and had around 70 subsidiaries scattered throughout the country. Despite it being a Vechtel company as well as an active promoter of Vechtel products, it also distributed the products of its competitors. 167 Although the French were naturally suspicious of their new owners, they soon discovered that Vechtel's approach to the company was intelligent and not too interventionist. A Dutch manager, Jaap Harmelen, was brought in by the corporate headquarters in Rotterdam to run Brasseries Unies. He turned out to be a considerate director, one who displayed dignity and sagacity, someone who respected the various brewery cultures within the company despite the friction they were causing. He trod carefully, slowly creating confidence among employees as to the future of the company, despite the urgent restructuring now being planned. Harmelen was blown off course for a while, however, when it was decided to change the company's name - from 'Brasseries Unies' to 'Brasseries Vechtel SA'. The idea behind the change was to accelerate the integration of the loose elements in the company by creating a clear identity, a Vechtel identity, both within and to the world outside. There was a lingering resistance to the change at all levels of the work force, and Jaap Harmelen was told on many occasions, in very clear terms, what his employees thought of the new name. He could not expect an overnight change of name to create an immediate change of attitude. It was Mr Harmelen with whom Jean-Pierre Courbet had his urgent appointment. 3. THE MEETING Jean-Pierre Courbet walked quickly towards Jaap Harmelen's office. He was ten minutes late, but Harmelen's secretary offered him a cup of coffee, while Harmelen was finishing a phone call. Jean-Pierre was eventually shown in, cup in hand, to be confronted by his very agitated boss. 'Have you heard the news?' asked Harmelen as he firmly shook Courbet's hand and showed him a chair at the same time. Before Jean-Pierre could answer, Harmelen exclaimed, 'The management team at the Spanish brewery has been sent back to the Netherlands! Jean-Pierre was not surprised. He said nothing, but sipped his coffee. Staring into his cup he said, 'I suppose we sort of saw it coming. After all, they had sold their distribution network - you don't just sell an invaluable asset like that. If you do, you're bound lose market share.' 'Come on,' said Harmelen impatiently, you know they had a great range of beer brands - that should have been enough, shouldn't it?' Jean-Pierre looked at the clutch of beer bottles at the centre of the table. 'OK,' he agreed reluctantly, they had the Vechtel brands. But what about the local brands, Jaap? What did they do with them?' Harmelen got up slowly from the table and walked to his secretary's office, deep in thought. He returned with a jug of coffee. 'Vechtel's approach was all wrong,' he said while topping up their cups. "The company didn't understand the way the country was going. It wasn't up to the task. The management simply made too many mistakes. If the management is good, it will always find its way out of trouble'. Jean-Pierre looked him in the eye. 'You know,' Jean-Pierre said scornfully, 'they didn't have a single Spaniard in the management team. What's more, not one manager could put together more than three words of Spanish. They had no idea about the way the Spanish do things. No idea about their feelings of pride! You've got to show that you at least have some idea about Spanish culture when you're taking over a local brewery!' 168 'You're right,' sighed Harmelen. We're lucky here, you know,' added Jean-Pierre Courbet before Harmelen could continue. 'The management here takes us seriously - you listen to us! 'You're referring to Inter-HRC, the distribution company! Well, you were shouting so loud, we had no alternative but to keep it running! After all, as you say, the Horeca industry ("Horeca" being the Dutch abbreviation for the Hotel, Restaurant and Catering sector) is so difficult to segment - but the people running it do make up a considerable number of our customers in France - about 40,000 in all'. 'But that's not the only reason for keeping the distribution network,' Jean-Pierre responded. 'It's more complicated than that. You've got to go along to these pubs and bistros, chat up the people running them, shake hands with the new boss, get to know everyone personally. That's the way to get your beer sold in this country!' "That's what we should have done in Spain,' said Harmelen, clearly annoyed. After all, they're the same sort of people as in France. They expect the personal touch, good contacts with the brewery Harmelen pushed his coffee cup away and brought a smile to his face. Anyway,' he said cheerfully, that's not really why I called you in, Jean-Pierre. I know we've got a pile of things to do on the restructuring, but first I want to talk about you! elen Jean-Pierre felt his heart thumping fiercely. He gripped his coffee cup whi continued. "You know all about the bottom line, don't you, Jean-Pierre? Rotterdam wants as quick a turnaround as possible. We're still too top-heavy. We've still got to rationalise further. We can't just stop here'. After a long pause, he continued. There is, however, another, more important consideration: our market share. Rotterdam agrees with me that we've got to do everything to push it up. What's the point of it all if we start losing our customers? We've got to keep them and find new ones. That's our priority number one'. Jean-Pierre shuffled in his chair. He felt anxious and relieved at the same time. 'I want you to go after that market share,' continued Harmelen. 'Yes, you! I'm going back to Rotterdam soon, to sit on the board, and I want you to take over here!" Two hours later, after both had gone through the immense task that Jean-Pierre had been set, Harmelen and Courbet were walking to the caf opposite the company's headquarters. They'd been talking beer all morning and now it was time to remind themselves of that Vechtel taste- and to celebrate Jean-Pierre's appointment to the position of chief at Vechtel's French operation 4. SCHAEFFER FOR SALE Expansion After taking over from Harmelen, Jean-Pierre Courbet had quickly established his position. He had managed to calm the waters after the change of company name from Brasseries Unies to 169 Brasseries Vechtel SA. This was essentially due to the immense respect he had already acquired within Vechtel Vechtel was now in full control of Interhold, the holding company, and had successfully introduced its main brands into France. The country had become a strategic market for Vechtel, one in which the Vechtel Group had become a dominant player. Jean-Pierre Courbet was ever mindful of the question of Vechtel's market share in France and the need to improve it. Vechtel was doing well despite the tough competition. It was not yet market leader, but was rapidly improving its position, and was in fact beating its rivals in the Horeca sector. The own-brand beers sold by the large supermarkets were increasing in popularity, and this was putting pressure on all branded beers. How could Vechtel improve its position in the French market? The Schaeffer brewery, together with its subsidiary, Socit Mundolsheim, came into the picture. Schaeffer, a family-controlled company, was quoted on the French stock exchange. It was one of the top five French brewers and was based in Alsace, where Vechtel had made its entry into the French market. Schaeffer was renowned for its speciality Alsatian beers, which sold well in the premium sector. Schaeffer's Mundolsheim subsidiary had built up its business by brewing premier prix beers - made for supermarkets to sell under their own name. Long before the news reached the business press, Jean-Pierre Courbet had discovered that all was not well with the management of the company. Through his contacts in the brewery world, he learnt that there were two factions within the management who were at each other's throats. As someone who had experienced similar boardroom battles when trying to manage an alliance of very different small breweries, he knew that this might be the moment for Vechtel to strike. If his company was to increase its market share in one fell swoop, a takeover of a strife- ridden company such as Schaeffer might be the answer. Jean-Pierre realised that Vechtel had the power to manoeuvre. The mother company had plenty of cash in the bank as well as willing lenders. Moreover, it would be willing to invest the time needed to make the takeover a success. The other possible contenders in such a takeover would, he felt, be reluctant to pay what was sure to be a high price. They were so obsessed by the stock market that they would be unwilling to put their profitability at risk in the short term. Key to Jean-Pierre's plans was the future status of Schaeffer. Although the takeover was intended to strengthen the Vechtel brand, he did not want to see Schaeffer absorbed into Brasseries Vechtel, but to survive as a separate operating company within the Interhold holding. He advocated this step not just to allow the families running the brewery to keep some control after the takeover - a demand they would certainly put forward in the negotiations, but also to acknowledge in organisational terms the ever-increasing importance of speciality beers. Schaeffer was, after all, renowned as a brewer of special Alsatian beers. Jean-Pierre also believed that Schaeffer's Mundolsheim subsidiary - which had built up its business by brewing premier prix beers for supermarkets to sell under their own name - should be hived off and designated as a further operating company under the Interhold umbrella. Again, this was the organisation taking account of an area of the beer market -own-label beers - that was developing at a fast rate and putting the sales of national and international beer brands under pressure. 170 Deliberation As he put together this detailed strategy, Jean-Pierre knew that its realisation depended on his ability to convince the board in Rotterdam. He knew that the members had confidence in his judgement, but would still need to be presented with a solid case for the takeover. Courbet raised the matter with the board at one of their frequent and regular meetings. Their initial reaction was lukewarm, to say the least. The questions and comments were many and Courbet had to explain in great detail the context in which the takeover was happening and the need for creating separate operating companies. One member of that board was his old sparring partner, Jaap Harmelen, the previous chief of Brasseries Unies. Harmelen, who frequently confessed to one and all that he had become a real Francophile, gave gentle backing to Jean-Pierre's plans, adding supportive points of information where needed. Harmelen eventually called upon the members of the board to give Courbet the green light and to allow him to prepare detailed plans for the takeover. The board agreed. Jean-Pierre set to work on the dossiers. Not only would they have to stand up to Rotterdam's critical scrutiny, they would also have to go as far as possible towards meeting Schaeffer's financial demands. On top of all that, the dossiers would need to deal with the other concerns of the Schaeffer management and its employees. Schaeffer's family managers would be reluctant not only to lose control but also to see the Schaeffer tradition jeopardised. The unions who would doubtless be involved in negotiations would do everything to prevent redundancies. Unemployment was their greatest fear: the number of unemployed in France was high and rising. In this respect, Vechtel was generally regarded as a good employer: it knew a cheque book in such a situation was not the only answer. Its approach was more philanthropic and long term. There was also the possibility that the French government might throw a spanner in the works by raising objections. It might regard the move as one leading to an unhealthy domination of the market and use this as a reason for applying its antimonopoly legislation. Jean-Pierre set to work using not only his own vast experience but also that of the Vechtel group: Vechtel had recently created working groups relating to key areas of the business: logistics, purchasing, marketing - where the expertise of the various Vechtel companies were brought together. The resulting synergy helped to create various initiatives across the Vechtel group. Despite initial resistance to Courbet's plans, the board gradually warmed to them. The weight of Jean-Pierre's experience in the French market and the tenacity of his conviction that the Vechtel organisation in France must develop in line with the market it was serving, made the directors think again Courbet presented his finalised dossiers to the board in Rotterdam and, once it had given its approval, the talks with Schaeffer could begin. The negotiation team consisted of Harmelen, Vechtel's lawyer and a Dutch banker. These were to be supplemented at certain stages of the talks by experts to discuss nitty-gritty details. Courbet himself did not want to participate actively in the process: he had no wish to get caught up in the intensive day-to-day, hour-by-hour negotiations. He wanted to keep a clear head and a clear overview of progress, so preferred instead to stay behind the scenes, discussing progress with his team during the many adjournments as well as talking informally to the other side. 171 EPILOGUE Jean-Pierre was quietly sitting in his office. He had spent much of the last couple of days hovering around as the final round of negotiations took place. They had reached the finishing line, almost. He looked nervously at the phone. Why were they taking so long? The agreement was all but signed anyway! He picked up a sheet of paper from one of the many piles on his desk. It was the organisational chart of the holding company Interhold, new-style. He drew a ring round the Schaeffer box, the one standing proudly between the Brasseries Vechtel and the other newly created company - Mundolsheim And there was also Inter-HRC - the grand survivor. In Spain, the company Vechtel had taken over had got rid of its distribution arm, and Jean-Pierre had felt under pressure to do the same in France. He had resisted. If he had not been able to make Vechtel understand the need to respect the French way of doing things, heaven knows what would have happened. In Spain, the Dutch managers had not taken account of the Spanish context and of the dominant Horeca sector. Fortunately, he had been more persuasive, perhaps more credible as well. In the end, they had listened to him; otherwise, things would have gone the Spanish way. Interhold Brasseries Vechtel Schaeffer Mundolsheim Inter-HRC International brands National brands Speciality beers (Alsace Discount brends Distribution of drinks 3 breweries 1 brewery 1 brewery Figure A3.2.2 Organisational chart for Interhold Schaeffer had to be bought, he mused, not just to increase market share but also to develop synergies, reduce costs and improve productivity. But there was another important factor: the people involved. Large brewers, he thought to himself, couldn't really handle specialty beers. A key for success was not only the ability to adapt to the market but also to adapt to a state of mind. Why not allow beer brands their independence? Certain schools of thought advocated mergers and acquisitions because they allowed for all kinds of economies of operation. But what was often lost in the process was that vital commodity - innovation. The people working in companies that had been taken over should be allowed to give full rein to their creativity and not just follow the corporate line. He thought back to that meeting with Harmelen where he had been told his fate. How time had flown by since then! Time, he thought to himself, is the essential component of management. It proves whether you're right or wrong. You can imagine what things will be like in 10 years' time, you can set your goal. But how can you reach it? It's not strategy that can make or break a company, it's the speed and manner of its implementation. Absorbed in his thoughts, Courbet jumps when the phone rings. As he listens to Jaap Harmelen at the other end, a broad smile spreads across his face. Mission accomplished! After putting down the phone a few minutes later, Jean-Pierre mutters to himself: 'Well, the only real way to get results is to use us locals! 172 The denouement The outcome was successful, if expensive, for Vechtel. The acquisition of a majority of the shares held by the families involved was agreed on, and Schaeffer agreed to recommend to its remaining (public) shareholders that they accept Vechtel's offer to buy the remaining shares. So Interhold acquired a majority of the shares held by the family and made an offer to purchase shares held by the public. The same procedure was used for shares held by the public in Socit Mundolsheim 173