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Global Corporate Strategy: Continental AG
Compare and contrast the meaning of 'corporate entrepreneurship' and 'strategic leadership'.
Corporate entrepreneurship is a term used to refer to the spirit of entrepreneurship of people within the company. In this instance, corporate entrepreneurship can be used to describe the attitude of many of the employees that worked for Continental. Corporate entrepreneurship is the "process by which individuals inside organizations pursue opportunities without regard to the resources they currently control (Stevenson, Roberts and Grousbeck, 1999). As a means of solving problems, a person with a truly entrepreneurial attitude would be able to gather the right resources to solve problems in as efficient a way as possible.
It would be in a company's best interest to foster an environment that encouraged corporate entrepreneurship. Because Continental did this, they were able to save their company. According to Bruche and Vogel, Continental liberated their company's "entrepreneurial energy" by taking a few different steps to help their employees feel more free to come up with and present their different ideas (Bruche and Vogel, 2001, p.1). Continental had gone from being first in their industry to a struggling company, and there were many reasons for this. "Internally, Continental was a monolithic, unprofitable company driven by managers that tended to administrative activities rather than taking initiative in the areas for which they were accountable," they say. This went on until they suffered a record less, which was a turning point for their company.
Somewhere between this crisis in 1991 and the year 2000, when Continental saw a record profit of $204.7 million something changed. A lot of it had to do with the fact that someone's entrepreneurial spirit saw fit to change the direction of things. Continental no longer specialized only in tires and core rubber products. As of their turnaround point in 2000, they were one of the leading manufacturers of automotive chassis.
In their case study, Bruche and Vogel suggest that maintaining that energy of corporate entrepreneurship was one of the real challenges faced by the company, but one of the most necessary steps in saving Continental. "To ensure the company's future survival, growth was no longer to be fueled by additional acquisitions but by successful innovations achieved by the company on its own strength and through its own entrepreneurial forces."
They go on to describe how Dr. Von Grunberg, a Continental employee, "reinforced his emphasis on profit and innovation" by presenting a 10-point program for success" (Bruche and Vogel, 2001, p.4). The roles played by employees like Dr. Von Grunberg in the success and rebirth of Continental are a prime example of the spirit of corporate entrepreneurship. Strategic innovation, a similar concept, also played a part in the revival of the spirit and profitability of Continental. In the end, change is one of the most important aspects of establishing a successful company, reviving a struggling company, and staying in competition with others in the same industry (Zahra, 1991).
Strategic leadership is a similar concept. Through the effects of strategic leadership, Continental was able to recover from losses that were in the millions. Strategic leadership is a term used to describe the role that Continental's employees, leaders to be more specific, were forced to take as a means of saving their company. In the article, "Achieving and Maintaining Strategic Competitiveness in the 21st Century: The Role of Strategic Leadership," authors R. Duane Ireland and Michael A. Hitt define strategic leadership as, " a person's ability to anticipate, envision, maintain flexibility, think strategically and work with others to initiate changes that will create a viable future for the organization."
In short, strategic leadership is a key component in giving a firm a "competitive advantage" (1999, p. 43). Strategic leadership played a key role in saving the future of Continental, and this was on the part of employees like Von Grunberg. Through a critical analysis of the current state of Continental as well as what it was that was causing the financial crisis, the leaders were able to turn things around for the company.
In her article, "Strategic Leadership: Moving On," Kimberly Boal argues that strategic leadership "involves the capacity to learn, the capacity to change, and managerial wisdom" (Boal, 2001, p. 515). It was through managerial wisdom that Continental was able to begin making changes.
Through the strategic leadership of Dr. Von Grunberg, things began to change. "When the changes got under way, the motto was 'cut the losses," von Grunberg is quoted by Bruche and Vogel as saying. "The basic assumption was that it was easier, and thus quicker, to do away with operations making losses than to raise those units doing well to an even higher level of profit." Once units were identified and broken down, a younger, fresher employee was sent in to revamp the unit (2001, p.4). Again, this technique was the result of strategic innovation on the part of von Grunberg. Subscribing to Boal's definition of strategic leadership, von Grunberg proved that he was able to adapt to change and implement new ideas and new leadership where necessary. He employed managerial wisdom to turn the company around, reassign tasks and change the direction of the business.
Critically evaluate Continental's agenda for strategic change at the beginning of the 1990s when the world tire industry was in the midst of a serious recession marked by considerable over capacities and a decline in vehicle registration.
At the beginning of the 1990s, Continental was in dire trouble. The world tire industry was in a recession and the company was floundering. The case study even mentions over capacities and a decline in vehicle registration, neither of which were making things any better (Bruche and Vogel, 2001, p. 2). Their agenda for change was a radical one at best, but it proved how strategic leadership and corporate entrepreneurship can be used to reinvent a company, allowing Continental to see more success in the automotive chassis department than they ever dreamed of when they were solely manufacturing core rubber products. With a decline in registrations and an overcapacity of core rubber products as it was, the seemingly risky decision of steering the company away from rubber products was a necessary one.
Automotive chassis specialization allowed Continental to make use of their existing, most profitable departments and make them work for the company. It was smart of their leaders to shift focus and stop operating a part of the business that was causing their business to be in the red.
By cutting their losses, focusing on the profitable areas of the company and eliminating the costly operations that yielded little to no profit or created a loss for the company Continental was able to redeem itself and get back to focusing less on administrative tasks, as Bruche and Vogel suggested (2001, p.2) and more on making the company profitable again.
Using information from relevant literature, and your own understanding of Porter's Value Chain; discuss how Continental AG fostered strategic innovation to achieve growth in productivity from 1991 to 1999
Porter's Value Chain is "based on the process view of organizations, the idea of seeing a manufacturing organization as a system, made up of subsystems each with inputs, transformation processes and outputs" (Cambridge University, 2010). In the value chain, each department is a part of a larger overall system. The various subsystems within this larger system have their own functions, and have their own set of materials needed as well as required input for desired output. Under the Porter's value chain, these various parts of an organization make the entire system functional, overall. In instances like those posed by Continental AG, one part of the system can be substituted out for another in the instance ts hat it is less functional than others. Instances like this can also help make it possible for other parts to be added in. This is what made it possible and logical to ramp down the production of core rubber products and ramp up the productive of the more profitable automotive chassis products that helped to dig Continental out of their rut.
As part of strategic innovation, the employees and managers of Continental AG examined various portions of Porter's Value Chain. They examined inbound logistics, operations, outbound logistics, marketing and sales, and service -- the five primary activities of Porter's Value Chain (Porter, 1985). They also examined and refined procurement, human resource management, technological development and infrastructure -- the five secondary activities of Porter's Value Chain (Porter, 1985).
Continental AG fostered strategic innovation as a means of achieving the record growth the company experienced between 1991 and 1999. They gave their employees a "longer leash" and made changes that helped to ensure managers were less focused on menial tasks, having more freedom to focus on the actual overseeing of company operations (Bruche and Vogel, 2001, p.2).
In short, Continental fostered an environment that fostered change as well as innovation and input from members of Continental's employee base as well as leadership pool to bring about this change. To…[continue]
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