cijoy global strategy

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Abstract:

This write up will be analysing strategies that can be used to bring back a loss making organisation

into profitability with specific emphasis on the strategies used by Continental tyres the organisation

of study during its crisis in 1991. Major variances and associations between corporate

entrepreneurship and strategic leadership will be ascertained. How continental made staff to pursue

and apply entrepreneurship skills will be reviewed. Change process that happened in Continentaltires will be theoretically reviewed. A discussion about corporate responsibility will also be

conducted. A rethinking about Leadership styles with emphasis on continental tires will be done.

Automobile industries global turnover has touched almost two trillion, www.oica.net (2010). This

has also triggered expansion in related industries also. This report also tries to analyse the strategies

used by competitors of Continental tyres. Competitors strategies is important and needs to carefully

examined. For example In Internet industry of the today many companies are making profits while

Yahoo is facing erosion in revenue and market share. One among the common reason for such

happenings is the choice of wrong technology. Porter E.M (1998). For a conglomerate to achieve

competitive advantage it needs to make use of varietal strategic options (De Wit and Meyer,

2004). There are also theorists who argue that strategy should be charted during the operations of acompany. Ansoff regards strategic choices and policies, an organisation adapt as process in decision

making process. First activity is goal setting, and then alternatives are found using analytical

techniques and methods. Then strategy is chosen, sometimes during this process modifications in

original plans are also made. (:8-9). Kneejerk and down to business line of tactic is used by

companies in order to stay with competition in various times (Johnson et al, 2005). As per

MintzBerg modern organisations needs to improvise, acclimatize and spontaneously change

strategies to survive competition De Wit and Meyer, (2004). Schendel and Hofer (1979) suggested

that to survive business needs constantly come with great new ideas. The last decade of last century,

which could be named decade off innovation, created new businesses based on knowledge

challenging conventional business modes and challenging conventional managerial decision

making Hoskisson (2008). Rapid internationalisation and emergence of knowledge based

opportunities has forced companies to think more unconventionally.Task 1:

Most corporate leaders are now planning in terms of making their firm Leader in the segment of the

Industry Company specialises in. Industry clearly leader enjoys a position of competitive advantage.

Segmented approach is more used now days. Entrepreneurship means to pin down growth

opportunities for a firm and creating ways to use it for commercial advantage of the firm). Mainly

corporate entrepreneurship involves 1) creating new business plans / opportunisms as which firm

can explore using its internal environment 2) pursuing constant changes to develop the

organisation. Strategic leader can be seen as some on who leads the company during a change

process. Show of leader ship qualities like innovation, motivational abilities marks such a person

apart in an organisation. A quality shown by strategic leadership is that they have eye on future of

the organisation, even while they are constantly developing organisation and its current team they

keep thinking off new opportunities. Corporate entrepreneurship is about understanding theopportunities in the different environments of the organisation which could lend a hand in

organisational spreading out. This may well be some changes in production, pricing strategies or in

any other operational strategy (Casson 1982 Venkataraman, etal 2000). Many academicians see

corporate entrepreneurship as the organisational spinal column which sustains establishment

continuity through innovation and dynamism. (Covin and Slevin, 1989; Drucker, 1985;

Lumpkin and Dess, 1996; Miller, 1983; Zahra, 2000). Many focal points off corporate

entrepreneurship and off strategic leaders modus operandi are similar (Zahra 1991). Main three

points in which corporate entrepreneurship abilities of a firm can be poke about is by the inclusion



of innovation, down to business attitude, and by business risk they undertake. When we analyse the

both terms from the perspective of Continental we can see that before 1990 it was pursuing an

entrepreneurship based approach in which company was searching for growth and expansion

opportunities by merging other companies. When the change process was in its peak strategic

leader ship was more in display with focus shifted to ,building teams reducing corporate level

wastages and future planning through setting more research facilities. Corporate entrepreneurship

is about maturing a team of people with business risk taking mentality, enthusiasm and innovativethinking within a firm so that commercial venture gains by way of discovering new growth

opportunities. Strategic leadership is a leader taking charge deciding on strategies and almost single

handedly implementing it.

Company continental schema task (2)

Much contribution to modern concepts of hierarchical rigid Bureaucratic firm was made by Max

Weber. Might be as a result most German companies have centralized mode of governance.

Continental also was no exception with a highly centralized management which washindering growth process. Traditional organisations¶ tend to focus on a main product and do

not take into account various other internal opportunities which company can pursue.Continental was heavily dependent on its tyre business units for profits. Company was

trying to expand more but focus was on acquiring rival brands rather than focusing ondiversification these failed in creating immediate profits. Mergers and acquisitions where

done without scenario building. Scenario building is used to find positive and negativesituation which company can face in future Financial Times (2010). Acquiring of rival brands

created a situation in which brands of same company where competing with each other which

company did not foresee. Tyre industry worldwide was facing a fall in product demand which

affected all companies including continental which went to losses after a long time. Tyre

industry is almost totally a sub industry of vehicle industry, bargaining by these customers

about prices was also negatively affecting the industry. Acquiring of rival brands created a

situation in which brands of same company where competing with each other. Some of nonefficient business units were staying invisible under the profits made by other units. Trends in

the share of the market and also profit volumes were showing a down wade pattern which

could not be uncared for. De rigueur was the change needs in the styles and functioning of the firm. Industry situation provided customers (vehicle industry) likelihoods for collectivebargaining about prices which they pursued. The core units were not cultivating aggressive

approach for market expansion bur rather just content current level of business activity.Despite Increase in the sales loss was happening as cost of running organisation was high.

Kolind. L. (2006) argues that every company will sometimes reach a critical situation where if

rigorous changes are not applied immediately and rigorously death of corporate will happen.

Continent was in verge of this Van Grunberg taken over reigns. Many share holders where actively

supporting market competitors takeover bids. A change process in any firm involves defining the

scope of change, getting stake holder backing, closing the shutters of inefficient business units. The

legacy of change is creating internal capacity for sustained growth .Accounting and Business (2010).

The scope of the change process in continental tyres can be spiel as creating a culture of innovation

and research as also clear commitment to the operational costs. Organisational reshuffle was muchnecessary for success of this process which was introduced. Organisation was divided into profit

units and each unit had to show profitability. This was a key strategic change as units hiding their

losses under others profits where no longer able to do so. Also every manager was given

responsibility and powers to bring profitability to unit in his or her charge. Expansion strategy by

acquiring was thrust aside instead new growth initiative of creating internal advantages by

innovating and cost reduction was planned. Change co-ordinators of company was aware that

structural restructuring in the organisation was necessary to recuperate the enterprise to profits. As



a first step change document was put out this set the objectives of the change process. Research

facilities were created to make company a technical leader in the industry.

Porters Value Chain: task( 3)

Source:://www.12manage.com/methods_porter_value_chain.html

In porters view competitive advantage is crucial for companys existence and which area of

operation of the company can be developed to gain this advantage can be finalised by studying all

operations using value chain analysis. Each activity happening inside the firm is adding some value to

the product or service offered by the firm. Value chain is used to find out how and which activity can

be judicially used to gain advantage over business rivals. Raison d'être of this is a clear arrangement

of all the activities is essential for organisational success. Human resource quality, efficiency of

supply chain, materials, managerial efficiency, or merchandise can be the competitive advantage

factor for a commercial establishment. According to Michael Porter concentrating on one of these

operational activities and creating an excellence in it above the rivals can be defined as competitive

advantage. Activities in a commercial firm can be understood better if classified as supporting roles

and primary utilities or core processes. Activities which are profoundly connected with commercial

activity of the organisation (production, providing the product or services to the end user) come

under core processes. The persons who work in these processes will need to interact with end users

frequently. Four key core processes in an organisation are 1) supply chain relationship process 2)

new-fangled product/ service build up process 3) process of completing the sales / service providing

(this includes production and delivery) and the last but equally important process of managing

customers. Supporting activity provides vital back up or resources for the core processes to function



more efficiently. Some of the support activities can be capital procurement, human resources, and

information systems management. In value chain each of these activities and how firm co-ordinates

all these commotions is analysed because only when a successful symphony all these efforts happen

firm can attain a profit margin. While studying situation in Continental company in 1990S through

value chain assessment the operational problems faced by company could be clearly found. Co-

ordination of the primary and secondary activities where not taking place. Bureaucratic organisation

precluded company from exploring new opportunities. Companies profits where very muchdependent on one product range tyres.

Company was in a situation where operational level innovation needed to be introduced in all levels

of the organization. Operational innovation means company redesigning its prevailing way of work

to do it more efficiently and with cost gains. Hammer. M (2004).Porter says bargaining power of the

suppliers as one of the main things to be considered while analyzing a business. Supply chain

efficiency was not thought off and no competitive bid which could attract new suppliers was in

place. Suppliers bargaining power was high and so was the cost of procuring raw materials. New

change management team initiated special team to solve this and they came up with suggestion of

procuring raw materials from Russia at lesser cost. These new suppliers where seen as strategic

partners in business and efforts were made to get them involved from planning stage. This was clear

indication of how innovative strategy could be applied to solve companys problems.Another main where radical change took place was in innovation. Company was not encouraging

the employees to come up with new ideas or innovative growth strategies. The autocratic style of

functioning was changed and a more participative management style off Human resource

management was introduced. Committed team is necessity for any change to happen. This was

realized and a team was created from the staff on the basis of their ability and commitment.

In this style employees are delegated more powers and are encouraged to come up with new ideas.

A new human resource policy where entrepreneurship skills became the criteria for climbing the

organizational ladder was brought. Managers who where young where and less experienced where

encouraged to deal with complex and high risk managerial situation. Even the students in graduate

trainee scheme where encouraged to come up with new ideas. Much effort was made to destroy the

rigid hierarchy based decision making. Instead opportunities where created so that staff with good

ideas and innovative suggestion could present it straight to the decision makers. Another strategicdecision was any staff member who was not ready to be in line with this new change process had to

leave the company. Many long time staffs who were experienced found it hard to muddle through

the new culture and left the company, but this did not had much impact on operations.

Competitive advantage through technology development is not easy to be imitated by rivals easily.

Company realized that being leader in the market with regard to technology can be productive and

for the first time a technology development division was formed. As per its growth strategy company

adopted it was planning to diversify in product range so this division was also encouraged to develop

new products in different areas with diversification

Task4

Corporate governance consist of all systems, in-house regulations, interactions and modus operandi

which is by used by management for controlling purposes in a corporate scenario, but these same

corporate governance rules also define the limitations and ethical constraints in exercising the given

authority Owen report (2003). ). As many corporatists are facing bankruptcy and legal actions for

unethical conducts relevance of ethics based corporate governance is more implicit. Each company

has its own set off corporate governance rules. Robert .A. Monks and Nell Minnow tells corporate

governance is about asking the right questions, ensuring that cross verifications are in place to

ensure long term value for the company Robert .A. M etal( 2004). Corporate governance in a



company is defined by the largely by the environment in which company operates. There are various

codes developed across the relations world to understand the corporate governance. Corporate

governance is also about managing the relationship with Government, and with other corporate

also.

Major points of these are 1) Clear disclosure of financial results as per legal and ethical

requirements. 2) The plans of the company and role of each member of the board should be clearlycommunicated. If the main directors or share holders have any conflicting interest this needs to be

disclosed, this. Company should have an ethical policy which should be communicated to all the staff

and public. The corporate governance principles of continental group are based on corporate

governance guidelines (code) of Germany German Corporate Governance Code (2010).

.BASICS is an underlying document prepared by continental for explaining companys corporate

ethics and principles Basic intention of the company is explained as generating value for the share

holders. There is one two boards for governing the company one executive board which manages

the firm and another supervisory board which directs the executive committee. Supervisory board

and its chairman basically act as the protectors of share holder interests. Various committees

function under the supervisory board to help it fulfill it regulatory functions. One committee is for

auditing the companys affairs, another committee headed by chairman looks into appointments to

the executive board. Major transactions needs to be approved these regulatory mechanisms. Thereare two more advisory bodies dealing with mediation and nomination for assisting supervisory

board, it is evident that company has a clear set of rules and regulatory mechanisms to ensure

healthy and ethical management thus protecting investors as well. Scenario planning to ascertain

future risks is undertaken regularly and is updated through websites. Company corporate

communications section provides through company website useful investor information.

In Goodyear tires corporate governance mechanisms is based on corporate laws of United States

mainly and also by regulations of New York stock exchange. The number of representatives off

shareholders who can sit in board and there tenure is restricted by internal regulations of the

company. The main regulatory authority is vested with governance committee and board of

directors. Appointment of directors is vested with governance committee and directors have to

comply with policy on conflicting interests . Their performance will be reviewed on yearly basis;

continuity of the contract will be based on their Performance. Company has a business conductpolicy which directors are expected to strictly follow. If any question arises on transactions of the

company audit committee has regulatory powers look right through it Good year (2010). There are

advisory bodies for (committees) auditing, employee remuneration, financial affairs, corporate

governance, and responsibility as a corporate citizen. German code was developed under German

Government agency for corporate affairs for ensuring transparency and to increase faith in German

companies. German code has been criticized for more emphasis on supervisory boards. As watch

dogs external auditors play a key role in corporate governance in many countries but in German

code their role is minimal. There is a wide range of corporate laws and practices in United States

which companies have to follow.

Task5

As a corporate citizen company has a responsibility to the country in which it operates and also to its

external and internal stake holders. This comes under the corporate responsibility.

Corporate responsibility is more of corporate voluntary commitment rather than a legal or ethical

requirement Philip K (2005). Laws of the land, participation in community programs, maintaining low

rate of environmental pollution are some acts of corporate responsibility. Continental tires social

responsibility concepts are mainly based on CSR-guide lines a set of guidelines which company has

developed over the years. Company social initiatives are more like corporate social marketing.

Company provides a lot of opportunities for young people under various training and also provides

them fortunateness to work in company itself. This is seen as part of corporate social initiatives.



Company also supports social initiatives like road safety awareness programs, safe and healthy work

place initiatives and sports programs www.conti-online.com (2010).

(2010) .Good Year Company has also got almost the same kind of approach to its role as corporatemember of society; it supports mainly road safety programs, fuel efficiency and many other

community programs. . http://www.goodyear.com (2010)

From the company sources (website) it seems that company views creating new energy products as

also part of its social commitment. Companies on discussion both have good track record in

corporate responsibility and both view it as an integral part of its efforts link with external stake

holders. One of the main problems a good number of big companies face is lack of innovation from

middle level staff. Main technological products which changed this century have not come from the

big giants but form the small entrepreneurs who have dared to innovate and experiment. There is

very little exception to this Peter Drucker (2007). As per Deming one of the biggest roadblocks in

progress of organization is the lack of leadership. James R.E. etal (2005)

Organizational entrepreneurs or corporate entrepreneurs are managers within the organization whoshow innovative thinking and risk taking capability. The presence of these leaders takes the company

to new economical heights. In continental this was not happening managers where just

concentrating on day to day activities doing things as per set rules. One of the main decisions

company took after change process was to divide into eight subsidiary companies. Company was to

the extent organizationally possible decentralized leaving only key sectors in central control.

Chairman insisted that all the employees mainly managers should come up with

New ideas and find out growth opportunities or suggest value additions. This was not easy to

work as employees where accustomed to the old style. Corporate entrepreneurs where identified

and promoted up in the organizational ladder. Employees needed to feel that exhibiting

entrepreneurial skills was necessary for survival in the company. A human resource policy was

adopted which fired those who avoided these new changes. Tremendous initiatives were taken to

improve production efficiency as well. Managers were asked to think differently and come with newways of doing things which will reduce cost. : De Wit & Meyer (2004).

Employees were encouraged to take risks and suggest improvements. High level management

usually directly reviewed such proposals and accepted good proposals in a bid to increase employee

confidence. When managers where not ready to change old methods they were told by the

chairman himself to come up with innovation production procedures. In order to set example Chair

man himself took over the charge of one business unit and run it. De Wit & Meyer (2004).

Dr Stephan Kessel took over the company in 2001 company had begun to show profits and there

was high hopes all around. Change management process was not yet fully completed. Company had

to show that change results where permanent. Change process to move the company from a

manufacturer to an automobile spare part provider had already started. SchmidtS theory on

leadership argues that leadership should be a continuous process. So Kessel had to maintain the

same level of motivation and vigor as shown by his predecessor. Van Grunberg managerial style is

similar to change leader ship style. In this leader approves and makes in no doubt realization of the

change process Tannenbaum etal (1973).



Dr Stephan Kessel used more off a purposive leadership. The employees and the management had

now same goals to ensure that economic success of the firm was for long term. Re-engineering the

system was necessary to move from one main product to another. BASICS a key document was

prepared to better value creation process. Stake holder theory which stated all stake holders get

some value from organizational activities began to be implemented more. Company used its

Knowhow in the tire sector to become a major supplier of automatic chassis. In order to survive the

completion Kessel realized company had to be the cost leader and technological leader in theproducts in which it deals in. Concrete measure where made to realize this. Since the change process

started company had shifted to a corporate culture of more participative in management delegating

more powers for decision making and risk taking to middle level managerial staff. This culture was

more brought into action.

Van Grunberg was a dynamic leader who ensured company who gave a lot of inspiration

encouragement and sense of purpose to all the staff in the company. Dr Stephan Kessel provided

almost same kind of support. The new strategies and culture which both leaders implemented has

helped the company to claim strategic advantages in the industry years after also.

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