Robert T. Moran

North American Industrial Mining

        In his office at North American Industrial Mining (NAIM), Mr. James Richardson, president of the company, reflected upon a troubling situation facing the company.  NAIM's relationship with a key German supplier, Wendland, had significantly deteriorated during the past few months and a serious conflict loomed on the horizon.  Across the desk, equally pensive, Robert Miller, vice-president of Operations, listened closely.

        "Rob," Richardson said, "I'm the person to either patch this thing up or break it up with Herr Wolfgang Wallenburg of Wendland.  This situation has dragged on for too long. I need information to deal with this conflict, but I have to go to St. Louis this week.  While I'm gone, I want you to listen around, talk to the people who know what's going on, and give me some insight into our options for resolving the problem. And, I need it by Monday."

        As he exited the office, Miller considered his next move. "Listening around a little" would require most of his time during the remainder of the week. A good start, he decided, would be to learn more about Germany and German society, because cultural differences seemed to be a significant part of the problem.  Next, he intended to interview the employees and associates who were familiar with the conflict with Wendland and its president, Herr Wallenburg.  Finally, by Friday, Miller would outline the alternatives available to Richardson and assist in developing a strategy for the upcoming meeting with Wallenberg.

German Culture

        Germany, Miller read in a brief country description, is a small country with a population of approximately 79 million.  The crowding of many citizens into an area the size of Montana and the exceptionally homogeneous nature of German society result in an environment characterized by strong pressure to conform to societal norm and to adhere to prescribed miles, both formal and informal.  Correctness, or the desire to act within the proper bounds of society, however, in no way implies that Germans are anxiously polite. In fact they do not hesitate to voice a dissenting opinion to other Germans or foreigners when they disagree.  However, while German culture deftly shapes the values and behavior of German men and women, much variation in character, temperament, and personality exists.

        Germans are described as a serious people, in both private and work settings.  This does not mean, however, that they lack humor, only that intense social pressure contributes to a reluctance to appear silly or frivolous.  German executives are characterized as highly disciplined, well-educated, neat, and orderly.

        Problem-solving in the German culture is conducted according to a precise process, beginning with thorough attempts at acquiring a full understanding of the relevant issues.  Conflict and controversy are viewed, not as disagreeable or undesirable, but as necessary to understand a situation clearly. German determination and perseverance result in a tendency to aggressively pursue and adhere to the implementation of an alternative once selected, even if strong evidence exists that the chosen solution may no longer be the most favorable course of action.  Germans may continue according to the chosen strategy, unless and until overwhelming evidence proving its undesirability is obtained.

        Fair, direct, industrious, and "perfectionists" are other labels assigned to Germans.  German directness and frankness are valued by friends and associates, though relations with the Germans are characterized by an absence of social "chit-chat," particularly noticeable in the work environment. German thoroughness in all things great and small is the antithesis of the casual, friendly and unstructured American informality, a difference sometimes responsible for conflict between the two cultures.  However, most Americans agree that, while considerable time and effort is required to establish friendships with German counterparts, the endeavor is worthwhile.

        Similarly, the German perception of Americans reflects both positive and negative behavioral aspects.  Many Germans perceive Americans as overly familiar, historically and politically naive, not particularly well-educated, narrow-minded, and too self-confident.  Balancing these negatives, however, is the impression of Americans as friendly, resourceful, energetic, innovative, and successful in business.  American society is respected for its resiliency and proven ability to bounce back from difficult times.

        Germans are meticulous in keeping appointments and adhering to schedules, an aspect of German culture that contributes to its reputation for efficiency.  This tendency to organize the time allotted for activities, in work or relaxation, to optimize efficiency, is accompanied by strict attention to schedules.  Thus, a German executive's day is well-structured and productive, although this passion for organization often prevents the typical German from acting spontaneously.

        Contributing further to a lack of flexibility within the German corporate environment is the organizational structure of German enterprises.  Highly compartmentalized, a facet that contributes to several organizational deficiencies, the German structure inhibits and sometimes constrains information flow.  Often, developments of great importance within an organization are known to only a few key individuals.  Thus, the ability to quickly and effectively respond to problems within the company and changes in the competitive environment is somewhat impeded.

         Privacy and security are important concepts in German culture.  Executive offices remain locked at night, with all working papers and reports secured in desks and filing cabinets at the end of each day.  Security is rigid and strictly enforced.

        In German society, statements, verbal and written, may constitute an unintended commitment.  Legally, if an individual can prove that a promise was made or even intimated, though a contract may not have been signed, it is possible to be held liable.  This is one explanation for German exactness in business dealings and for the less casual, more distant relationships among associates and partners.

NAIM and Wendland

        In 1977, North American Industrial Mining, operated nine mines and employed more than 10,000 persons.  NAIM contracts with Wendland, a German supplier, for the provision of PM2's and PM3's, expensive electronic equipment crucial to the mining process.  Relations with Wendland are severely strained at present as a result of continual problems with the PM2's and PM3's produced by Wendland's subcontractor, Medici.

        After submerging himself in his study of German culture, Miller telephoned John Radislav, a manager with Louisiana Engineering Company and an individual Miller regarded as capable of offering excellent insight into the conflict.

        Radislav began with a brief summary of the history of Wendland:

A number of years ago after Mr. Hahn, the controlling owner of Wendland, died. Mr. Wolfgang Wallenburg took over.  At the time, the department heads failed to cooperate and work as a team, sales had declined significantly and product quality and labor problems were rampant.  In short, company was in serious danger of failing, but Mr. Wallenburg turned the situation around.

        The problems resulting in the conflict facing NAIM and Wendland can be traced directly to a contractual relationship between Wendland and Medici, a primary Wendiand supplier.  Medici, the developer of the PM2 electronic systems that NAIM purchases from Wendland, conducts 95% of its business with Wendland.  Also, Medici's control over the PM2 market further binds the two companies to one another.

        Though the two firms are highly interdependent, Medici's contract to manufacture the PM2's and PM3's for Wendland is now on the line.  The production problems causing the controversy center upon the persistent failing of the electronics in the PM2 due to moisture in the system.  A new model, the PM3, was developed at additional cost but did not fit the specifications of the previous system.

        However, negating the contract with Medici has proven extremely difficult. Essentially, Wendland is caught in a problem-ridden marriage to its supplier.  Subcontracting with another company to develop the electronics components would be prohibitively expensive for Wendland's customers and could result in the loss of important clients, including NAB4.  Still, the contract between Wendland and Medici is in danger of dissolution.

        In the spring of 1990, some time after these problems emerged, Wendland hired Mr. Fritz Kohl to solve the electronics issue, because he had assisted in solving similar problems for NAIM in the past.  During the process, Kohl, a technical genius though lacking in interpersonal skills, acted in a highly confrontational manner with Medici, furthering souring relations between Wendland and its supplier. Mr. Kohl, after burning the already fragile straw bridge between Wendland and Medici, was subsequently fired by Mr. Wallenburg.

        Recently, confrontations between Wendland and Medici have intensified. Medici has contacted customers directly, completely circumventing Wendland and resulting in threats of lawsuits by the company.

        To date, the defective PM2's have been repaired by a Wendland subsidiary, Western Mining Corporation (WMC).  Located in West Virginia, WMC is responsible for maintaining and repairing Wendland's products; however, the company lacks the capacity to repair the incoming PM2's quickly enough.  During the summer of 1991, WMC informed Wendland that it would be recalling all PM2's and replacing them with a new version of the PM3.

        From NAIM's perspective, the situation has become unacceptable and must be resolved during the meetings between Mr. Wallenburg and Mr. Richardson scheduled in the United States on October 23 and 24.

Key Player Profiles

        After his discussion with Radislav, Miller contacted Edward Copeland to expand the perspective he had partially developed through his conversations the previous day.  Copeland also was well-acquainted with Wallenburg through numerous dealings with him in various circumstances and previous visits to Germany.  His description of the situation and the individuals involved complemented that provided by Radislav.

        According to both Radislav and Copeland, Wolfgang Wallenburg is a methodical and purposeful individual.  Emotionally, he is stable and rarely defensive.  Though interested in and open to the opinion of others, Wallenburg is essentially an authoritarian leader with a reputation as a driven taskmaster.  Miller noted that this was a characteristic Wallenburg shared with Richardson.

        Wallenburg approaches decision-making tasks in a cautious manner, refusing to commit to a course of action without full and complete knowledge of all relevant circumstances and the related financial implications.  In particular, he evaluates options on the basis of economics and views cost as an important factor in selecting the best alternative.

        As head of Wendland, Wallenburg is credited for turning around a failing company that he at first knew little about and building it into a successful organization.   He is committed to manufacturing quality products, but the bureaucracy of NAIM makes this difficult and follow-up is lacking in Wendland at this time.

        After speaking with Radislav and Copeland, a profile of Herr Wallenburg as a dedicated and hard-working professional emerged.  At the end of his investigation, Miller concluded that Wallenburg had probably attempted to mend Wendland's relationship with Medici, but had simply been unsuccessful thus far.

        On the other hand, Miller was less sure about the motives of Medici's president. Karl Strobel.  Strobel, though brilliant perhaps to the point of genius, is insecure as a result of his failure to earn a German engineering degree.  In the past Strobel has been caught in ties by NAIM associates and, thus, is less than trust- worthy.

        James Richardson, like Wallenburg, is professional, dedicated and honest. However, in contrast to his counterpart at Wendland, Richardson is more emotional and prone to bursts of anger.  Miller fears that, given Richardsons' intense frustration with the problems caused by the defective PM2s, NAIM's president may further damage the relationship with Wendland, though, in Miller's opinion, it may still be salvageable.

Conclusion

        Though Miller felt that his research during the past few days had provided excellent insight into the conflict between NAIM and Wendland and between Wendland and Medici, he knew this was only the initial step in resolving the crisis.  Before Monday, he still had a number of issues to address. Could the relationship with Wendland be salvaged?  If so, how?  What assistance could NAIM offer to help Wendland solve its dilemma with Medici?  Miller sighed and said, 'There goes my golf game this weekend."

        Moran, Robert T. ( 1994). "Confrontation or Collaboration: Two Strong Executives ."  International Business Case Studies for the
                Multicultural Marketplace.  Eds., Robert T. Moran, David O. Braaten, and John E. Walsh, Jr.  Houston:  Gulf Publishing.