Peninsular Insurance Report on Leadership Change

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Given the history of both companies, operations were centered in the Pacific rim, located near New Zealand and Africa.

The development strategy based on a model that exploited local offices around every country for expansion development and maximize the possibilities of supply their products.

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NZI in Malaysia

Following that strategic plan in Malaysia had created a peculiar situation since NZI New Zealand held a fully operational subsidiary named VZI Malaysia but also held a significant share (49%) of Peninsular Insurance Company. The rest (majority) of shares held by locals.

Although 1982 Malaysia was in a booming economy and rapidly growing, profits of NZI in Malaysia did not follow the growth of the local economy.

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The merger Plan

New Zealand headquarters attributed that weakness to the dual personality of the company in Malaysia and decided to combine operations within a single company to reduce costs and gain an operational development strategy that could follow the growth of the local economy.

Patrick Wale was appointed by the headquarters as the person responsible for coordinate merger operations. His selection based on the previous experience of having worked as NZI executive at Nigeria, South Africa, India and Hong Kong, so considered that he had the necessary experience to work in a different cultural environment.

The merger plan provides a transitional period of one year, during which merge operations had to be completed and then the new resulted scheme would operate under a single administration.

However the turnover rate for merge the companies was extremely slow and after two years operations were still in its early stages, and as time passes the project became more complicate.

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The Problem Unfolds

- The merger process of the two companies was run at slow progress in Malaysia.

- Business at Malaysia is strongly related to politics. The Malaysian government is doing politics using foreign companies.

- Malay bureaucracy provokes a huge delay on business dealings.

- “Respect Elders and Save Face” Asian Culture’s aspect is complicated things for western minded people. It’s difficult to do business on western style without offend someone.

- Ibrahim Nassan’s wife is interfering on conversations and merger processes.

- Tan Sri Ibrahim Nassan, a retired and former high ranked employee of Malaysian bureaucracy, suspected Wale was attempted to subvert his authority with his managers. Given the Power distance of the Malaysian culture it was a generates a conflict between him and Wales.

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Critical Review

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Merger Progress Delay

When Patrick Wale was appointed by the Home Office to oversee the merger of the two companies, he considered himself to be the right person to carry out this process because of his experience working in several countries. He had worked successfully in Nigeria, South Africa, India and Hong Kong, but this time he was wrong.

Despite all his experience, he was faced with a very difficult situation: While the initial plan provided 12 months for the merger of the two companies, however, after two years he stands in a situation that procedures for the merger of two companies where just at the beginning. Every month passed the whole process became more complex and more variables entered the complexity of the situation thus seems that Wale lost the control of the process.

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Malaysian Culture

The main reason for the delay is the diversity of Malaysian culture, which presents some very special political and cultural characteristics that makes it very different from other countries' culture Wale worked before.

Culture and history affect the business in Malaysia more than any other country, and far more than the Western way of running business including Hong Kong and several countries he had experienced.

Malaysia under the Economic Policy Plan (NEP) had chosen a completely strange way hinder the work of foreigners, to the benefit of local people for purely political reasons. The satisfaction of the local population was essential for maintaining the political alliances necessary to stay in power, which in any case where fragile and seeking balance of various nationalities forming the local population, especially after the recent civil war, which suffered the country in previous years. For this reason they brought obstacles and difficulties to foreign companies using as a tool the six-month permit for employment in the country that could be reduced or even withdrawn at any time. This creates a climate of insecurity, which hardly favors the fast and productive work.

Furthermore, the history and culture of Malaysia have imposed a communication style characterized by extreme courtesy and diplomacy. This causes considerable delays in setting up and running businesses, especially when foreign managers are unrelated to the Malaysian culture and the local communication standards.

According to these communications standards, elders are respected regardless of the position they hold. That means literally the oldest is the master to whom all must make use for tips even the head of the hierarchy of a company. Two of the ruling norms of Malaysian society is "Respect for Elders» and «Save Face». This related to the habit of Malaysians (and Asians) do not reflect their feelings at their face especially regarding to business.

Result of this formality of Malay, is the development of an extremely slow and complicated bureaucratic process. That combined with the fact companies are considered as political practice field for domestic consumption, this became a serious obstacle to business running and development.

Finally, a foreigner willing to do business in Malaysia should become as familiar as possible with the complex model of Malaysian business World, in order to be able to develop necessary steps and avoid pitfalls and traps to be effective and the business processes to be as smooth as possible.

As Malaysian culture was