Featured case: The Acquisition Experiences of KazOil

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The case

Who – the protagonist

Nurlan Ospanov, Head of Corporate Finance at KazOil.

What?

KazOil was an oil production cooperative based in the small town of Kyzyl-Orda. It had 5,000 employees and was the town’s main employer. Even after the demise of the Soviet regime, the Kazakh Ministry of Energy maintained control until 1996.

Why?

image of cells

When the company was bought by the Canadian corporation Hydrocarbons Ltd and exposed to a new corporate culture, management style and human resource strategies, it seemed to adapt more successfully than when China Petrol acquired the assets. Within two years, many of the local managers who had flourished under Canadian management left, citing reasons such as ‘non-professional Chinese management’.

When?

In 1996, just five years after Kazakhstan began its transition from the Soviet economy to a market economy, KazOil was sold for US$120 million by the Kazakhstan government to Hydrocarbons Ltd., a Canadian company. Hydrocarbons agreed to sell KazOil to China Petrol, a state-owned company, in 2005.

Where?

Kyzyl-Orda is in the Republic of Kazakhstan, the largest country in Central Asia. Kazakhstan was the last of the Soviet republics to declare independence.

Key quote

‘The Canadians really put things in order … We could see the effects immediately: no fatal accidents, a safe working environment, certain norms and behaviour … it definitely works!’ – KazOil employee

What next?

Nurlan knew the employees were becoming restless, struggling with a new reality under China Petrol. And despite his years of experience as a longstanding member of upper-middle management, Nurlan had often been ignored when he approached the Chinese management.

How could he motivate his employees to give their best? What kind of incentives could he offer them to stay at KazOil? More importantly, how could he communicate with the management team in a way that would bridge the seemingly imperceptible cultural barriers without being disrespectful?
 
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The authors

authors

Dana B Minbaeva and Maral Muratbekova-Touron

The authors explain the importance of a compelling protagonist and outline the learning objectives for the case.

Doubts, confusion and fears

Nurlan Ospanov is a long-time employee, local talent, and perhaps a rising star, but he is experiencing doubts, confusion and fears. By ‘pushing’ students into Nurlan’s shoes, they can share the complexity of the situation he is facing.

Culturally distanttwo business men

Interestingly, a more culturally distant company had greater success in achieving post-acquisition social integration than a culturally close one (China).

Students have the opportunity to challenge the simplistic assumption that national cultural differences affect acquisition outcomes in isolation from other integration-related processes. This takes students away from the convenient ‘just blame the culture’ claim.

The case shows that although both acquirers used social integration mechanisms, they favoured different types. While the Canadians invested in building a foreigner friendly social climate, the Chinese practised top-down control and relied on ambiguous communication.

Human resourcesTransitional economies

This case also stresses the importance of the dynamic aspects of culture. Culture is not static and cultural shifts are even more pronounced in transitional economies and emerging markets. Kazakhstan in 1996 at the time of the Canadian acquisition was very different from Kazakhstan in 2003 at the time of Chinese acquisition.

At the time of the second acquisition, not only was some kind of human resource management (HRM) in place in the acquired subsidiary, but more generally, the emergence of Kazakhstani HRM (a hybrid of old-style Soviet and Western-based approaches (US and European) had emerged. It was easier to introduce changes in the time of institutional vacuum, than when employees felt they ‘could not learn much from the new owners’.

Research-based

We always strive for research-based teaching. The case material came from data that was collected through a process of participant observation, interviews, and survey data that we collected over ten years. Respondents felt more comfortable talking about the issues in informal surroundings, for example, during coffee breaks, social gatherings, and around the water cooler. So we heard a lot of interesting stories that contributed to the final case.

About the authors

Dana B Minbaeva is a Professor of Strategic and Global Human Resource Management at the Department for Strategic Management and Globalization, and the Head of the PhD School in Economics and Management, Copenhagen Business School.
e dm.smg@cbs.dk

Maral Muratbekova-Touron is Associate Professor in the department of Strategy, Organizational Behaviour and Human Resources at the ESCP Europe Paris Campus.
e mmuratbekova@escpeurope.eu

 

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