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 strategi
c leadership will be ascertained. How continental made staff to pursue and apply
entrepreneurship skills will be reviewed. Change process that happened in Conti
nental tires will be theoretically reviewed. A discussion about corporate respon
sibility will also be conducted. A rethinking about Leadership styles with empha
sis 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 t
yres. Competitors strategies is important and needs to carefully examined. For
example In Internet industry of the today many companies are making profits whil
e Yahoo is facing erosion in revenue and market share. One among the common reas
on 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 varieta
l strategic options (De Wit and Meyer, 2004). There are also theorists who argu
e that strategy should be charted during the operations of a company. Ansoff re
gards strategic choices and policies, an organisation adapt as process in decisi
on making process. First activity is goal setting, and then alternatives are fou
nd using analytical techniques and methods. Then strategy is chosen, sometimes d
uring this process modifications in original plans are also made. (:8-9). Kneeje
rk and down to business line of tactic is used by companies in order to stay wit
h competition in various times (Johnson et al, 2005). As per MintzBerg modern o
rganisations needs to improvise, acclimatize and spontaneously change strategies
to survive competition De Wit and Meyer, (2004). Schendel and Hofer (1979) sug
gested 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 in
ternationalisation and emergence of knowledge based opportunities has forced com
panies 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 enjo
ys a position of competitive advantage. Segmented approach is more used now days
. Entrepreneurship means to pin down growth opportunities for a firm and creatin
g ways to use it for commercial advantage of the firm). Mainly corporate entrepr
eneurship involves 1) creating new business plans / opportunisms as which firm c
an explore using its internal environment 2) pursuing constant changes to devel
op the organisation. Strategic leader can be seen as some on who leads the comp
any during a change process. Show of leader ship qualities like innovation, moti
vational abilities marks such a person apart in an organisation. A quality show
n by strategic leadership is that they have eye on future of the organisation, e
ven while they are constantly developing organisation and its current team they
keep thinking off new opportunities. Corporate entrepreneurship is about underst
anding the opportunities in the different environments of the organisation which
could lend a hand in organisational spreading out. This may well be some change
s 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 thr
ough innovation and dynamism. (Covin and Slevin, 1989; Drucker, 1985;
Lumpkin and Dess, 1996; Miller, 1983; Zahra, 2000). Many focal points off corpo
rate entrepreneurship and off strategic leader’s modus operandi are similar (Zahra
1991). Main three points in which corporate entrepreneurship abilities of a fi
rm can be poke about is by the inclusion of innovation, down to business attitud
e, 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 entrep
reneurship based approach in which company was searching for growth and expansio
n opportunities by merging other companies. When the change process was in its p
eak strategic leader ship was more in display with focus shifted to ,building t
eams reducing corporate level wastages and future planning through setting mor
e research facilities. Corporate entrepreneurship is about maturing a team of pe
ople with business risk taking mentality, enthusiasm and innovative thinking wit
hin a firm so that commercial venture gains by way of discovering new growth opp
ortunities. Strategic leadership is a leader taking charge deciding on strategie
s 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 was hindering growth process. Traditional organisations’ tend to
focus on a main product and do not take into account various other internal opp
ortunities which company can pursue. Continental was heavily dependent on its t
yre business units for profits. Company was trying to expand more but focus
was on acquiring rival brands rather than focusing on diversification these
failed in creating immediate profits. Mergers and acquisitions where done witho
ut scenario building. Scenario building is used to find positive and negative si
tuation which company can face in future Financial Times (2010). Acquiring of ri
val brands created a situation in which brands of same company where competing w
ith each other which company did not foresee. Tyre industry worldwide was facing
a fall in product demand which affected all companies including continental whi
ch went to losses after a long time. Tyre industry is almost totally a sub indus
try of vehicle industry, bargaining by these customers about prices was also neg
atively affecting the industry. Acquiring of rival brands created a situation in
which brands of same company where competing with each other. Some of non effic
ient 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 collective bargaining about prices which they
pursued. The core units were not cultivating aggressive approach for market expa
nsion bur rather just content current level of business activity. Despite Increa
se in the sales loss was happening as cost of running organisation was high. Kol
ind. L. (2006) argues that every company will sometimes reach a critical situati
on 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 rei
gns. Many share holders where actively supporting market competitor’s takeover bid
s. A change process in any firm involves defining the scope of change, getting s
take holder backing, closing the shutters of inefficient business units. The leg
acy of change is creating internal capacity for sustained growth .Accounting and
Business (2010). The scope of the change process in continental tyres can be sp
iel as creating a culture of innovation and research as also clear commitment to
the operational costs. Organisational reshuffle was much necessary for success
of this process which was introduced. Organisation was divided into profit unit
s and each unit had to show profitability. This was a key strategic change as un
its 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 uni
t in his or her charge. Expansion strategy by acquiring was thrust aside instead
new growth initiative of creating internal advantages by innovating and cost re
duction was planned. Change co-ordinators of company was aware that structural r
estructuring in the organisation was necessary to recuperate the enterprise to p
rofits. As a first step change document was put out this set the objectives of t
he change process. Research facilities were created to make company a technical
leader in the industry.
Porter’s Value Chain: task( 3)

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

In porter’s view competitive advantage is crucial for company’s 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 h
appening 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 judic
ially used to gain advantage over business rivals. Raison d être of this is a clea
r arrangement of all the activities is essential for organisational success. Hum
an resource quality, efficiency of supply chain, materials, managerial efficienc
y, or merchandise can be the competitive advantage factor for a commercial estab
lishment. According to Michael Porter concentrating on one of these operational
activities and creating an excellence in it above the rivals can be defined as c
ompetitive advantage. Activities in a commercial firm can be understood better
if classified as supporting roles and primary utilities or core processes. Activ
ities which are profoundly connected with commercial activity of the organisatio
n (production, providing the product or services to the end user) come under cor
e 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 c
hain relationship process 2) new-fangled product/ service build up process 3) pr
ocess of completing the sales / service providing (this includes production and
delivery) and the last but equally important process of managing customers. Supp
orting activity provides vital back up or resources for the core processes to fu
nction more efficiently. Some of the support activities can be capital procureme
nt, human resources, and information systems management. In value chain each of
these activities and how firm co-ordinates all these commotions is analysed beca
use only when a successful symphony all these efforts happen firm can attain a p
rofit margin. While studying situation in Continental company in 1990”S through va
lue chain assessment the operational problems faced by company could be clearly
found. Co-ordination of the primary and secondary activities where not taking p
lace. Bureaucratic organisation precluded company from exploring new opportuniti
es. Companies profits where very much dependent on one product range tyres.
Company was in a situation where operational level innovation needed to be intro
duced in all levels of the organization. Operational innovation means company re
designing its prevailing way of work to do it more efficiently and with cost gai
ns. 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 efficienc
y was not thought off and no competitive bid which could attract new suppliers w
as in place. Supplier’s 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 lesse
r cost. These new suppliers where seen as strategic partners in business and eff
orts were made to get them involved from planning stage. This was clear indicati
on of how innovative strategy could be applied to solve company’s 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 strate
gies. The autocratic style of functioning was changed and a more participative m
anagement style off Human resource management was introduced. Committed team is
necessity for any change to happen. This was realized and a team was created fr
om 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 w
here young where and less experienced where encouraged to deal with complex and
high risk managerial situation. Even the students in graduate trainee scheme whe
re encouraged to come up with new ideas. Much effort was made to destroy the rig
id 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 strategic decision was any staff member who was not re
ady to be in line with this new change process had to leave the company. Many lo
ng time staffs who were experienced found it hard to muddle through the new cult
ure 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 t
o technology can be productive and for the first time a technology development d
ivision was formed. As per its growth strategy company adopted it was planning t
o 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 repor
t (2003). ). As many corporatists are facing bankruptcy and legal actions for un
ethical 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 th
e 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 governanc
e. 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 clearly communicated. If the main directors or share holder
s 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 corporat
e governance guidelines (code) of Germany German Corporate Governance Code (2010
).
.”BASICS” is an underlying document prepared by continental for explaining company’s
corporate ethics and principles Basic intention of the company is explained as g
enerating value for the share holders. There is one two boards for governing the
company one executive board which manages the firm and another supervisory boar
d which directs the executive committee. Supervisory board and its chairman basi
cally act as the protectors of share holder interests. Various committees functi
on under the supervisory board to help it fulfill it regulatory functions. One
committee is for auditing the company’s affairs, another committee headed by chair
man looks into appointments to the executive board. Major transactions needs to
be approved these regulatory mechanisms. There are two more advisory bodies deal
ing with mediation and nomination for assisting supervisory board, it is evident
that company has a clear set of rules and regulatory mechanisms to ensure healt
hy and ethical management thus protecting investors as well. Scenario planning t
o ascertain future risks is undertaken regularly and is updated through websites
. Company corporate communications section provides through company website usef
ul 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 nu
mber of representatives off shareholders who can sit in board and there tenure i
s restricted by internal regulations of the company. The main regulatory authori
ty is vested with governance committee and board of directors. Appointment of di
rectors is vested with governance committee and directors have to comply with “pol
icy on conflicting interests “. Their performance will be reviewed on yearly basis
; continuity of the contract will be based on their Performance. Company has a b
usiness conduct policy which directors are expected to strictly follow. If any q
uestion arises on transactions of the company audit committee has regulatory pow
ers look right through it Good year (2010). There are advisory bodies for (commi
ttees) auditing, employee remuneration, financial affairs, corporate governance,
and responsibility as a corporate citizen. German code was developed under Germ
an Government agency for corporate affairs for ensuring transparency and to incr
ease faith in German companies. German code has been criticized for more emphasi
s on supervisory boards. As watch dogs external auditors play a key role in cor
porate governance in many countries but in German code their role is minimal. Th
ere is a wide range of corporate laws and practices in United States which compa
nies have to follow.
Task5
As a corporate citizen company has a responsibility to the country in which it o
perates and also to its external and internal stake holders. This comes under th
e 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 i
n community programs, maintaining low rate of environmental pollution are some a
cts of corporate responsibility. Continental tires social responsibility concept
s are mainly based on CSR-guide lines a set of guidelines which company has deve
loped over the years. Company social initiatives are more like corporate social
marketing. Company provides a lot of opportunities for young people under variou
s training and also provides them fortunateness to work in company itself. This
is seen as part of corporate social initiatives. Company also supports social in
itiatives like road safety awareness programs, safe and healthy work place initi
atives and sports programs www.conti-online.com (2010).
(2010) .Good Year Company has also got almost the same kind of approach to its r
ole as corporate member of society; it supports mainly road safety programs, fue
l efficiency and many other community programs. . http://www.goodyear.com (2010)
From the company sources (website) it seems that company views creating new ener
gy 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 integr
al part of its efforts link with external stake holders. One of the main problem
s a good number of big companies face is lack of innovation from middle level st
aff. Main technological products which changed this century have not come from t
he big giants but form the small entrepreneurs who have dared to innovate and ex
periment. There is very little exception to this Peter Drucker (2007). As per De
ming one of the biggest roadblocks in progress of organization is the lack of le
adership. James R.E. etal (2005)
Organizational entrepreneurs or corporate entrepreneurs are managers within the
organization who show innovative thinking and risk taking capability. The presen
ce of these leaders takes the company to new economical heights. In continental
this was not happening managers where just concentrating on day to day activitie
s doing things as per set rules. One of the main decisions company took after ch
ange process was to divide into eight subsidiary companies. Company was to the e
xtent organizationally possible decentralized leaving only key sectors in centra
l 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 entr
epreneurs where identified and promoted up in the organizational ladder. Employe
es needed to feel that exhibiting entrepreneurial skills was necessary for survi
val in the company. A human resource policy was adopted which fired those who av
oided these new changes. Tremendous initiatives were taken to improve production
efficiency as well. Managers were asked to think differently and come with new
ways of doing things which will reduce cost. : De Wit & Meyer (2004).

Employees were encouraged to take risks and suggest improvements. High level man
agement usually directly reviewed such proposals and accepted good proposals in
a bid to increase employee confidence. When managers where not ready to change o
ld methods they were told by the chairman himself to come up with innovation pro
duction procedures. In order to set example Chair man himself took over the char
ge 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 profit
s and there was high hopes all around. Change management process was not yet ful
ly completed. Company had to show that change results where permanent. Change pr
ocess to move the company from a manufacturer to an automobile spare part provid
er had already started. Schmidt’S theory on leadership argues that leadership shou
ld be a continuous process. So Kessel had to maintain the same level of motivati
on and vigor as shown by his predecessor. Van Grunberg managerial style is simil
ar to change leader ship style. In this leader approves and makes in no doubt re
alization of the change process Tannenbaum etal (1973).

Dr Stephan Kessel used more off a purposive leadership. The employees and the ma
nagement 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 produc
t 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 organiza
tional 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 technologi
cal leader in the products in which it deals in. Concrete measure where made to
realize this. Since the change process started company had shifted to a corporat
e culture of more participative in management delegating more powers for decisio
n 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 inspira
tion encouragement and sense of purpose to all the staff in the company. Dr Step
han Kessel provided almost same kind of support. The new strategies and culture
which both leaders implemented has helped the company to claim strategic advanta
ges in the industry years after also.
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