Daimler Chrysler

DaimlerChrysler

Table of Contents

Introduction 3

Organizational Size, Life-cycle and Control 3

Organizational Structure 7

Cross-functional teams 9

Recent Product Innovations 10

Innovation Process 11

Conclusion 14

References 15

Introduction

In 1998, the merger between US-based Chrysler German-based Daimler Mercedes formed the company known today as DaimlerChrysler. The merger caused rapid growth as well as numerous challenges that the company still needs to overcome. Currently, the organization is in the elaboration phase of organizational growth, marked by the need for revitalization, more efficient decision making, and reducing redundancies in the organizational hierarchy. As it faces merciless competition of the automotive industry, the company is implementing structural changes geared towards making the company more efficient in its day-to-day operations, and allowing it to produce innovative products, thus setting it apart from the competition.

This paper starts out with a discussion of DaimlerChrysler's current phase of organizational development and some of the key challenges that the company is facing today, followed by a discussion of recent organizational structure changes aimed at overcoming these challenges. Next, we describe the use of cross-functional or "innovation" teams and how this approach can reduce organizational deficiencies at DaimlerChrysler. Finally, we conclude with a description of cutting-edge, innovative products that the company has produced recently, and the process of managing innovation and creativity at DaimlerChrysler.

Organizational Size, Life-cycle and Control

In 1998, DaimlerChrysler was formed as a result of the merger between Chrysler and Daimler-Benz, even though many stockholders did not wanted the merger to take place because Chrysler was not meeting its financial goals with its line of vehicles. These stockholders believed that the merger will further devaluate the stock. So Chrysler was faced with the internal problem of meeting profitability goals and not going out of business, as well as the external problem of many of the company's stockholders opposing the proposed merger (Wikipedia.org, 2006).

Right after the Daimler-Benz and Chrysler merger, the organizational growth was stable; yet the company went into a financial disaster soon after the merger, "greatly depressing the stock price of the merged firm and causing serious alarm at headquarters in Germany, which sent new CEO Jurgen Schremp to take charge" (Wikipedia.org, 2006).

In 2000, DaimlerChrysler was facing stiff competition and an incentive war which was forcing them to discount their vehicles. The large part of the company's competition, Japanese automakers, were able to obtain the competitive edge in production efficiency and ability to deliver innovative products to market in record time (Kano, Levinstein, 2006). In order to maintain its market share, DaimlerChrysler needed to revitalize the company by implementing a series of organizational and cultural changes.

In January 2001 the company has announced the biggest restructuring plan due to the high pressure of European and Asian auto makers. They planned to cut auto production by 15%, lay off 26,000 workers and idle six factories in North and South America hoping that cutting capacity will relieve the profit draining discounts (Ball, 2001). These changes were designed to primarily "stop the bleeding" of profit losses. Similar drastic measures have been implemented by other major automakers, namely Ford and GM, in order to compete with Japanese automakers (Loomis, 2006).

Despite the weak demand in many important markets of 2002, DaimlerChrysler achieved unit sales of 4.54 million passenger cars and commercial vehicles. The Mercedes car group had sales of 1.23 million vehicles and Chrysler car group's unit sales of 2.82 million vehicles gave DaimlerChrysler a good start towards financial well-being (DaimlerChrysler media services, 2006).

In the first half of 2004, DaimlerChrysler considerably expanded its business activities in the rapidly growing Chinese market posting record sales of 22,200 passenger cars (DaimlerChrysler media services). Throughout 2004, the sales of DaimlerChrysler passenger cars rose by 2.1 percent to 3,897,800 units, compared to 3,816,700 units in 2003. Although the group continued to face intense competition, the division was very successful in maintaining its strong position in the United States, where its sales grew faster than the passenger automobile market as a whole (DaimlerChrysler media services, 2006).

In 2005, DaimlerChrysler has reported a 3.8% rise in global car sales, with increases for both its Chrysler and Mercedes-Benz divisions. The increase is attributed to updating the product portfolio with the total of 17 new car models by both divisions and provides a foundation for "profitable growth into the future" (Rise in sales for DaimlerChrysler, 2005).

After the DaimlerChrysler merger in 1998, the company experienced many symptoms of organizational decline, which characterizes the elaboration stage of organizational development. As described in the "Organization Theory and Design" textbook, the organization shifts out of its original position with the environment, becomes slow-moving and less able to respond to competitive challenges. In addition, a company in the elaboration stage is typically over-bureaucratized and reformation and revitalization. DaimlerChrysler can be considered over-bureaucratized because many of its existing organizational structure are the legacy of the two companies and have been established long before the merger took place. DaimlerChrysler is dealing with the crisis of not meeting profitability goals and are currently looking to improve their position by cutting expenses and "offshoring" their assembly to India and China.

However, some of the cost-cutting measures are backfiring because they cause a decline in car quality, which hurts DaimlerChrysler brand reputation. An example