2.

Problem,Causes and Negative Effects

The problem that Martinez Construction Company faced in Germany was related to the
financial position of the recently acquired construction firm,which proved to be not at all profitable as a report showed,6 months after the contract was signed.

Causes
1. Choosing Juan Sanchez,manager of the Barcelona branch of Martinez Construction to act as the negotiator for the company with THA despite him being unfamiliar with German business practices 2. Miguel Martinez,projected manager,lacked practical managerial experience 3. The THA was not properly managed because little thought was given to the immensity of the job. No guidelines were issued, which later led to charges of dubious deals, and limited funds were made available to run the agency. 4. the THA had insufficient or no information about the financial positions of the companies it was supposed to sell. In some cases, it could not ascertain what companies were to be sold. 5. The speed of the sale was the most important issue to the THA. 6. CULTURAL DIFFERENCES: The Germans prefer not to mix business with pleasure. They didnt seem to have time to get to know Juan personally. Rush and urgency to complete the sale was the focus of their approach.
The Spanish dont place to much importance on punctuality.As a result,the fact that Juan and Miguel arrived late for their first meeting upset the THA representative In addition,the Spanish like to take time in order to get to know their business partners,which is not the case of Germans ;so when Juan Sanchez suggested a tour of the city instead of immediately proceeding with the negotiations,he was reminded of the purpose of their meeting

The Germans prefer to remain reserved and formal during a discussion and so the THA representative disliked what she thought was an emotional outburst from Juans part,when he spoke his mind regarding the lack of financial information provided by the THA

7. The recent collapse of communism in the German Democratic Republic was reflected in the degree of initiative and responsibility demonstrated by the workers as East Germans did not have the same concept of work, or the same incentives, as did West Germans

8. In the German Democratic Republic everyone was considered to be equal as part of the communist ideology;however,the superiors were the ones giving the solutions to a problem.As a consequence,some employees were reluctant to actively participate in the formulation of ideas and implementation of new procedures and policies 9. The fear and distrust of management was also a result of the way things were managed under a communist regime:everything was done in the name of the state and whenever decisions were made they were based on either the welfare of the society or on political grounds 10. Large investments in plant modifications due to strict environmental and employee protection regulations 11. Other costly projects that had hot been foreseen during the negotiation process

Negative Effects 1. Short term

Workers could be layed off Already cash flow problems were beginning to arise so the German subsidiary might have begun to be a burden for the Spanish construction company

2. Medium and Long-term Financial problems could affect and ultimately even destroy the company