Strategic Command is thought as the capability to shape the organisation's decisions and deliver quality value over time, not only personally but also by inspiring and managing others in the organisation. (Lynch, 2009).
The emphasis of strategic control is sustainable competitive edge, or the enduring success of the business. (Hughes & Beatty, 2005)
How to lead so that others will observe.
How to shape culture.
How to structure and influence decision making. (Lynch, 2009)
In view of these meanings and key characterisitcs, strategic authority in the Global Plastic & Tire Industry generally speaking and Continental AG in particular is seen as the ability of a commercial leader to construct long-term value for the stakeholders associated with an organisation.
In the context of Continental AG, Dr. Hubert von Grunberg exhibits Strategic Management by first acknowledging the fact that all was not well at Continental. Aginst the backdrop of rising sales, gains were slipping, to the point of your loos in 1991. The drive to increase sales and keep maintaining a posture in the Global Market using aggressive pricing was detrimental to the immediate and long-term physical condition of Continental.
This was quickly followed by an obvious 10 point recovery plan declared in December 1991, the route was clearly established for the change through encouragement of Entreprenuership and tactical alliances, and an objective of making sure profitabilty in 1992.
The next step in the turn around was the identification of the individual sections and making each unit responsible for success. In this technique, no preson or process was considered immune to review, and the next restructuring of the Organisation from an activity focused sturcture in 1991 to a Market focused composition in 2001 further depicts tactical leadership.
Entrepreneurship is a way of considering, reasoning and acting that targets the id and exploitation of opportunities from a broad general perspective typically influenced by the command of people or small groupings. (Lynch, 2009)
Corporate Entrepreneurship is often called Intrapreneurship and is defined as Enterprisers can be found starting organizations, operating organizations and employed in organizations as employees. Inside the latter circumstance they are usually called intrapreneurs, i. e. inner business people. (Thompson & Martin, 2005)
The key concern is the recognition and utilisation of opportunities for earnings. Given the research study, Entrepreneurship is inlayed at the central of the restoration plan of Continental AG.
The research study goes on to state that the Car tire as a product had typically expended ground breaking capacity. Despite this the dedicated focus on technological leadership is an important Entrepreneurial component.
The first example is the main element idea of Dr. von Grunberg that Complete sytems will be the dominant company to the Automobile Industry in the short and medium term. The establishment of Automotive systems as section to develop these designed sytems pre-empted the possible relegation of Continental as a second supplier acquired it remained a pure Tire manufacturer.
The recognition of Rubber lifting belts alternatively product also shows high entreprenuerial capacity, as Continental was already a Global head in the Car tire industry whose most important input is Plastic. This opportunity and subsequent alliance with Otis, a global head in the elevator industry resulted in substantila supply contracts.
Given the illustrations above, it is evident that all Entrepreneurs are Strategic Market leaders, however the same can't be said for the reversal, ie. All Startegic Market leaders are not necessarily Entrepreneurs.
1. 2 Critical evaluation of Continental's Plan for Strategic Change at the start of the 1990s.
Strategic change concerns changes which take place over time to the strategies and targets of the organization. Change can be steady or evolutionary or even more dramatic, even cutting edge. (Thompson & Martin, 2005)
Lynch argues that it's important to distinguish Proper Change form Organisational Change - (Lynch, 2009). Organisational change undoubtedly happens throughout the daily businesses of an company whereas Strategic Change is a planned and excuted group of events and activities which move an organisation in direction of achieving its obviously defined objectives. This involves substantive changes beyond normal exercises and the induction of new habits of action, perception and attitudes. (Schein, 1990)
Tichy identifies four main causes of Strategic change, namely Environment; Business Human relationships; Technology; People. (Tichy, 1983). The situation facing Continental AG in 1991 was a substance combination of all the four causes. The primary cause was the Environment as Wheel market was saturated; Car Manufacturers were moving down prices; Technology was plateaued and consequently a New Innovator was appointed. The cause of the problems can be narrowed to complacency, and irresponsiveness to advertise demands.
Hannagan explains that Strategic change can be incremental where in fact the organisations' underlying worth and beliefs aren't radically changed or transformational where a major paradigm switch occurs in the ethnic assumptions. Whether it is incremental or transformational, strategic change is concerned with changes which are necessary to maintain the link between the organisation and its own environment such that it remains competitive and able to meet the needs of its customers. (Hannagan, 2002). Given the range of the down turn at Continental AG, a hybrid blend of small incremental changes and quantum jump transformational proper changes were used to make a way to recovery.
The plan for Strategic change undertaken by Continental AG can be divided in to the sections discussed below.
Change in Command - Appointment of Dr. von Grunberg. The implementation of an turnaround strategy necessitated a change at the helm of the company. This led to the visit of a fresh chairman of the Professional Board.
The first rung on the ladder towards achieving profitability was identifying reduction making units right down to the tiniest possible element. In this case the segregation of a number of divisions into smaller models. This is witnessed in the parting of the substitute tire business that was profitable from that of the loss making original equipment business.
A further step in the turnaround strategy was the conversion of Common service functions into income centres. Human Source of information and Information Technology, which were shared services across the company, were eventually separated into split commercial entities. This was a specific departure from the thinking where support functions are cost centres.
Despite the conceived stagnation and exhaustion in the ground breaking potential of the Car tire as something, the heavy emphasis on Technological excellence, Development and Integration shaped an additional main factor in the change strategy. The harmonisation of Research and Development in a central location and the allocation of a share of all profits to R&D is a manifestation of the.
Entrepreneurship - The conviction that Continental AG gets the capacity and capability to identify opportunities in the market and take benefit of these to improve profitability was visible in the tactical move towards moving beyond the traditional center product of Auto tires and into a full systems supplier to the Automobile industry.
2. 1 How Continental AG fostered Strategic Innovation to achieve progress in efficiency from 1991 to 1999 in view of Porter's Value Chain
A organized way of examining all the activities a firm performs and how they interact is essential for analyzing the resources of competitive advantage. In this chapter, I introduce the value chain as the basic tool for doing so. (Porter, 1985)
Every organization is a collection of activities that are performed to create, produce, market, deliver, and support its product.
Value Chain as described by Porter (1985) consists of 5 Most important activities, specifically Inbound Logistics, Businesses, Outbound Logistics, Marketing & Sales and Service. In addition a Porter's Value chain has 4 Support Activities i. e. Organization Infrastructure, HRM, Technology Development and Procurement.
Continental AG achieved progress in production by fostering tactical innovation in several its value string activities. These are briefly enumerated below.
The reorganisation of Continental AG's Infrastructure by means of Decentralisation of its Bureaucracy and restructuring the company from a task oriented structure into market oriented one.
The creation of Business Unit Value chains for Traveler Auto tires and Commercial Tires, consequently merging Manufacturing and Marketing of each and giving each unit Specific revenue responsibility.
The change of Support activities of IT and Human Source into specific Business Device Value Chains and eventually impartial business entities.
Revisiting and bettering procurement of important inputs, metal cord being a key example. The resulting cost savings in costs greatly improved profitability. This required expansion of the procurement process to ensure quality, and so displays the advantage of making a linkage between your value chain of Continental and its supplier.
Remarketing and setting of competing purchased brands into complementary positions predicated on quality and application. This is seen by placing Continental as reduced brand and Barum as budget, similarly marketing Uniroyal as the rainfall wheel and Semperit as the wintertime tire.
Development of Technology, so when necessary acquiring another Company (Teves) to give attention to Automotive Systems competency as opposed to manufacture of Wheels only. This allowed Continental AG to produce competitive benefit through differentiation.
The development of a Modular MANUFACTURING FACILITY where the bottom model of auto tires is mass produced, but enabling some customisation and diversity is proof Innovative functions.
2. 2 Comparison of "Corporate Governance" and "Corporate Interpersonal Responsibility" methods of Continental AG with those of Goodyear Wheel and Silicone Company
Corporate Governance is thought as the responsibility of your firm's plank of directors. The directors have a fiduciary duty to the shareholders, who are the corporation's owners. (Sompayrac, 2006)
Corporate public responsibility (CSR) can be explained as the "financial, legal, ethical, and discretionary objectives that population has of organizations at confirmed time". (Carroll & Buchholtz, 2003)
In line with the above definitions, Commercial Governance focuses on the reliable and prudent execution of Organisation's responsibility to its shareholders as its legal owners, whereas Corporate and business Social Responsibility specializes in the Organisation's responsibility to all its stakeholders, of whom the owners are a section. The stakeholders includes shareholders, employees, customers, suppliers, government, society at large and the surroundings.
As elaborated in the organization Governance Portion of Continental's annual article for 2009 (Continental Firm, 2010), the Supervisory Plank and Executive Table are equally responsible for the governance of the business. The Supervisory Plank comprises of twenty members, 1 / 2 of whom stand for shareholders' and 50 percent elected as Employee reps. The Supervisory Mother board advises and supervises the Exec Plank, oversees the proper implementation of plans, approves decisions of materials importance and appoints the Executive Mother board through and with the consent of the Total annual General Assembly of Shareholders. The Chairman of the Exec Board serves as the principle Executive Official of the Company
The Goodyear Wheel and Plastic Company Corporate governance rules provide for a Mother board of Directors comprising of nine to twelve customers elected at the Annual General Assembly of Shareholders of the Company. The Chairman of the Plank at Goodyear may, but do not need to be, the CEO of the business. (The Goodyear Car tire and Plastic Company)
Prominent similarities in the Governance types of Continental and Goodyear will be the functions of Audit, Compensation and Remuneration, Appointment and Governance are vested in the Supervisory and Exec Panel at Continental and in the Board of Directors at Goodyear. Both Companies have wise guidelines regulating the do of the people who serve on these boards.
The key differences observed between Corporate Governance at Continental and Goodyear are twofold. First, the bicameral composition at Continental, where in fact the Supervisory Board acts within an Advisory Capacity to the Professional Board. A single governance structure is present at Continental. Whereas a two level governance structure provides additional instruction, guidance and prudence, it also offers an additional coating of bureaucracy and associated bottlenecks and costs to the organisation.
The second difference discovered between your Governance structures is the existence of elected representation of the Employees in the Supervisory Plank, in a number equal to those of the Shareholders representatives. This presence ensures the engagement of Employees representation in materials decisions of the Company, and consequently offers better safety of the People Resource applied at Continental AG.
The Corporate Social Responsibility activities of Continental AG are summarised in the business's Annual Statement for the Financial Season 2009 (Continental Organization, 2010)accessed on the business's website. The main focus of the Corporate Responsibility Report is activities revolving around non-shareholding stakeholders. The Key areas of concentration are Employees, Environment and Acting Responsibly.
Complementing the Total annual Report, whose major goal is shareholders, is the BASICS of Continental AG. These driving a car principles have developed very little of their formulation as referred to in the event study to date as available on Continental's corporate website. THE FUNDAMENTALS cover the human relationships of Continental with Customers, Suppliers, Employees, Associates and Shareholders. This eyesight defining file has a far more holistic methodology towards CSR by encompassing the prospects of all stakeholders.
Goodyear Tire and Plastic Company, in contrast to Continental, will not report its Corporate Friendly Responsibility activities in its Annual Are accountable to Shareholders, but publishes another Statement for CSR (The Goodyear Wheel & Silicone Company, 2009), as on the company's website. This Statement outlines four stakeholders specifically, Consumers, Affiliates, Environment and Neighborhoods.
Both companies provide a high level of importance to Employee training and development through various initiatives, and the creation of your safe working environment with almost zero injuries. Identical emphasis is aimed to customer focus in the Continental BASICS (Continental Corporation, 2010)and the Goodyear CSR report (The Goodyear Tire & Silicone Company, 2009).
With regards to Environmental protection, both Continental and Goodyear have detailed policies for ecological and responsible behaviour. Continental information on its Carbon Management activities in its total annual report giving detailed information of its attempts to contain its Environmental impact. Goodyear studies its Environmental Impact in the CSR Survey and highlights its Energy and Drinking water Efficiency in its Production processes. Furthermore Goodyear emphasises environmentally friendly friendliness of its products by concentrating on fuel efficient auto tires and its own prototype tire made from renewable biomass.
It is also noticed that Goodyear has a more focused Community Proposal Plan in the areas that it operates. This includes visible support of charities through its aerial blimp, support for education, catastrophe relief and highway safety promotions. Whereas at Continental this facet is not very prominent and is bound to its Formula Scholar and Ambassador training and education programs.
Effectiveness of "Functional", "Organisational" and "Corporate" set ups in unleashing Manager's Entrepreneurial Energy.
The Functional structure in place at Continental AG in 1991 is explained in the case study and displayed in the illustration below.
Functional Structure of Continental AG in 1991
Distelzweig, 2006 argues that the practical framework as was in place in 1991 has distinct benefits and drawbacks. The advantages noted in this structure are efficiency and skill development, and the cons being the creation of your narrow departmental target at the price bigger organisational goals, and the challenge of coordinating geographically dispersed locations under the same function.
This structure required a considerable toll on management time and resources in overseeing day to day operational activities as elaborated by Bartlett and Ghoshal (1995).
Given the circumstance at Continental, this composition was largely focused on jobs and control, with individual units having minimal autonomy. Such a predicament of top-down control resulted in discouraging the development and cultivation of Entrepreneurship in Continental.
Organisational composition of tire functions in 1992
The metamorphosis of Continental AG from useful departmentalisation as described above for an Organisational model (generally known as Divisional or Multidivisional model) was initiated by Dr von Grunberg as he needed the lead role as chairman of the Professional Board. The initial transformation noted in the event research is the realignment of the Creation and Marketing sections of Tyres, into Traveler and Commercial Auto tires. This reassignment along the lines of Product Section allowed mangers for taking responsibility for his or her respective Product and consequently Market section.
This structure evidences visible improvements above the functional structure as elaborated by Distelzweig (2006) in offering the divisional professionals autonomy for their device but may create some duplication of initiatives if key efficient tasks defined above.
Bartlett & Ghoshal, 1995 discuss that structure freed up time and sources of senior managers to activate in proper activities, but dispute that this structure was unable to generate and nurture new business opportunities internally. As each department in the organisation became individually in charge of its earnings stream and profitability, new projects were seen as unjustifiable capital and individuals tool costs, thus discouraged. Thus, necessitating development through expansion and acquisition.
This structure is seen to encourage a limited degree of Entrepreneurship among product managers, but given the price justification argued above still limits the level to which this energy can be unleashed.
Corporate structure of Continental AG in2001
At the convert of the century as Dr von Grunberg was handing on the reins of Continental AG the composition at the Company had progressed to the corporate model described in the event analysis and pictured below. This model was meant to maximise the utilisation of Entrepreneurial talent and energy in the company and drive it through sustained profitability, which have been achieved through an impressive turn around in the last decade.
Bartlett and Ghoshal (1995) advise that for a corporation to preserve its growth in the current times, an emergent management methodology is required. This approach is made up of a three coordinated central processes, specifically Entrepreneurial, Integration and Renewal Functions. The Corporate structure at Continental AG is at positioning with this model.
The Entrepreneurial Process is obvious in the modified structure giving each business product sufficient autonomy and creative space to identify and exploit opportunities. The creation of an Strategic Technology product is a key factor in the integration Process and allows diverse sections to collaborate towards making Continental a trendsetter in the motor vehicle Industry. The Renewal Process comprising of rationalisation and revitalisation aspects, where head units and ingrained cultures are challenged are evidences in the departure for a "hypercaution" towards a determination to take risks in business.
In finish, Schuler (1986) declares that successful Corporate Entrepreneurship will involve two importan factors, organisational composition and human resources. Human resources foster and facilitate technology and entrepreneurship and sustain this requires flexible organisational structures and policies. This has been continuously upgraded and optimally allowed in the progression of the structure through functional, organisational and lastly the corporate structure at Continental AG.
3. 2 Evaluating the effectiveness of Dr. Stephan Kessel's leadership skills.
Thompson and Martin (2005) explain that the features and skills of an efficient leader are broadly grouped in three categories, Drive, Judgement and Impact. Drive combines desire, ambition and potential. Judgement includes decision making, opportunity spotting, problem framing and analytical skills. Impact encompasses the effect on people's behaviours, sites and contacts. As well as the above categories, De Vries (1996) talks about that market leaders require architectural and charismatic skills to permit them succeed in their organisations.
Dr. Kessel was appointed to brain the then reduction making Original Equipment unit of passenger auto tires in 1995, and accountable for the go back to profitability of this device. He was later to perform the Commercial car tire device form 1997 and was appointed to the Exec Table. He was appointed Chairman of the Professional Table in June 1999 and relinquished his position in Sept 2001. (Continental Corporation, 2001)
The meteoric job, but short stint at the helm of the company as viewed through the zoom lens of the above things to consider may be examined as a merged tote of success and disappointments.
Assessing the Drive of Dr. Kessel, it is available that his ambition and ability are fairly successful with his leading the initial Equipment passenger car tire division to profitability and his following success at the Commercial wheel division, coupled with his tenure on the Executive Board. Murphy (2001) also opines that his acquisition plans may be referred to as too ambitious, thus being a damper on his management.
In assessing his Wisdom skills, Dr. Kessel's decision making and opportunity skills are an success in the earlier tenure of his authority. His commitment to keep on the road of Innovation collection by his forerunner Dr. von Grunberg and cultivating Entrepreneurship in the management of Continental AG are visible landmarks. However, his succeeding decision (not protected in the event study) to sell off of the Conti Tech section, which was unsuccessful and added his departure from Continental may be viewed as a let-down. (Murphy, 2001)
"Meeting today, the Supervisory Table of Continental AG, Hanover, appointed Manfred Wennemer (53) Chairman of the Exec Table. Wennemer replaces Dr. Stephan Kessel (47), who immediately relinquishes his seat on the Exec Board over variations concerning the proper orientation of the corporation. Kessel is departing from the business on very amicable conditions. " (Continental Organization, 2001)
The specific mention of differences in proper orientation, while partly reflecting on the Judgement conditions, can be viewed as failure to Influence the Supervisory and Boards to align themselves along with his strategic direction. This was an irreconcilable difference and leaves the Affect part of Dr. Kessel's control largely needing.
A Tire Industry publication (Tyre Industry Magazines Ltd, 2001)also elaborates the growing dissimilarities of judgment between Dr. Kessel and his forerunner, Dr. von Grunberg, who at that time in time was Chairman of the Supervisory Board (which is mandated to appoint and replace Exec Board Users). This might also be measured as a shortfall in the Influencing capacity of Dr. Kessel.
In final result, using De Vries (1196) criterion it could be summarised that Dr. Kessel was noticeably successful in his Architectural role in designing and operating profitable devices and the Organisation all together, his Charismatic role and capability fell short of what was required at Continental AG in 2001.
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