Shaji Viswanathan, ETOLA.

13348

Sunderland Business School

GLOBAL CORPORATE STRATEGY

A CRITICAL ANALYSIS AND EVALUATION OF THE STRATAGIES ADOPTED BY THE GLOBAL RUBBER AND TIRE SUPPLIERS.

ABSTRACT
This topic discusses and unfolding the determinant strategic issues pertained to the Global organisations especially Rubber And Tire Industry, instantly analysed the applied strategic concepts and analytical techniques used to disclose the issues, following this focused to analyse how theoretical concepts applied for the dynamic emerging of corporate entrepreneurship and strategic leadership.
PURPOSE OF THE ASSIGNMENT

This Assignment Topics Aims and Purpose is to dealing all the elements concerned with relevant global corporate policies and strategies of the International and Global organisations, as well as to analyse the holistic nature of strategy and application of analytical techniques for solving complex problems in real life organisations , further it aims the critical analysis that leads to strategic decision making and how it enables an organisation to sustain with success in global business environment, finally aims to not only critically evaluate, but also monitor the mission, objectives and policies of global organisations and appraisal of impact of their understanding in problem solving process. INTRODUCTION The globalization process continuing with the search of new market, market segmentation, specified market with size and area , as well as expanded geographic area and the organisations cope up with the different geographical areas globally and making marketing planning, corporate planning, environmental analysis, strategy development, besides that expanding the communication, transportation and technology, similarly dealing the issues of political, economical, social, legal , environmental and ethical issues. The competitiveness in global market is very crucial and the strategic approach decides who wins? The case studies in real life organisations proofing that, those who challenges strategies and changes made to

Shaji Viswanathan, ETOLA.13348 the strategic challenges can sustain and those who implement the plan correctly will

wins.

Question one (a) Comparison and Contrast between corporate entrepreneurship and strategic leadership The corporate entrepreneurship consists of the formal and informal process to develop new business, products as well as services and create value further to create new business growth within the existing organisation, and those individuals are corporate entrepreneurs. They are role players and business builders and change agents and generate change within the organisations. http://bx.businessweek.com/corporate-entrepreneurship/ The entrepreneurship organisations have rapid growth, the dynamic leadership made opportuneful settings, and it has high risk and high benefits as well as contributing product innovations. The innovation leads to dynamic and competitive environments. The entrepreneurial posture positively connected with the following:1. Environmental and technological sophistication. 2. Firm performance and environmental dynamism. 3. Environmental hostility. 4. Value the highest management positions on economic gain. 5. Ability to bring new products to the market. 6.Devoted resources to research and development 7.Identyfying market and product opportunities 8.Ability to create new product application. 9.Supports new ideas. 10.Supports innovation and long term organizational survival. (Krueger, 2002) The strategic leadership gives the vision and direction as well as the growth and success of the corporation and it initiates and provides future growth . Strategic leadership provides the roof under which businesses devise proper strategies and create value. In short strategic leadership provides the vision , direction as well as growth further more sketching a road map to potential performance and also crafting the portfolio of the corporation and deciding the nature of business , performance requirements, types alliance, way of working together with different culture, value for the achievement of vision and goals of the corporation.

Shaji Viswanathan, ETOLA.13348 http://www.1000ventures.com/business_guide/crosscuttings/leadership_strategic.html

Strategic Leadership focused to the following:1. To lead the organisation as a best practice company and maintain the market share in top in the industry with vision and mission. 2. Liable to provide affordable price with quality as well as reliability. 3. Achievement of excellence in quality, service, customer care more over safety. 4. Achievement of confidence of stakeholders and customers. 5. Innovation and dedication as well as satisfaction of customers are targeted aim. 6. Perpectual growth and optimum growth. 7. Maintain financial soundness and technologically ambitious. 8. Maintain the responsibility as a corporate citizen with human values as well as concern to both the society and environment. 9. Contribution to community development and nation building. 10. Focus on individual progress , work culture, creativity and team spirit. 11. Appraisal to new ideas and systems as well as new talents. 12. Keep transparency in dealings and interactions. (b) Critical evaluation of strategic change of Continental AGs agenda at early 1990 when tire industry in recession noted overcapacities and decline in vehicle registration. The survival of all the global organisations depends the position that maintaining in global market, recurring business as well as the steady expansion of service more over the developments of the customers. The implementation of strategic plan correctly leads the organisation to the success and helps to reach the organisational goals. Strategy refers to a plan of action as well as integration and according to Hitt and Hoskisson, An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage (Hitt, Ireland, and Hoskisson, 2003) vol.7 Meantime the global strategy focused to the standardising of products or services in global basis and the significance of global strategy is that it has to recognize its Strengths and Weaknesses existing globally, moreover to identify the political, social and environmental factors that co-factoring with the global market, moreover the costs involved with the globalisation procedure. The serious decline of continental AG in early 1990s and the losses it made in main divisions due to the monolithic culture and the managers focused to administrative activities besides taking initiative in the area they were accountable. The 7% of the market share in world market with fourth place as well as the halt in tire demand and decline vehicle registration jeopardised the situation of Continental AG, furthermore the recession

Shaji Viswanathan, ETOLA.13348 haunted the industry, due to this the price war started with the competitors. The innovative potential exhausted. Analysis of Continental AG In early1990s 1. Followed Functional structure 2. Faced cut-throat competition 3. Poor profits in key divisions 4. Loss in equipment division 5. Recession in tire industry 6. Internally monolithic 7. Internal Difficulties in equipment market 8. Bureaucratic and centrally structured culture 9. High degree of centralisation 10. The major units has little autonomy 11. Lack of awareness of the sources of losses 12. Poor management in internal competition 13. Suppression of decontrol innovative potential 14. Absence of entrepreneurial initiative on the part of managers and employees 15. Lack of implementation of strategic plans correctly. Financial Analysis of Continental AG In early 1990s The financial analysis reveals the crisis of Continental AG in 1990s .
OPERATIONS Total Sales(In Billions Euro) COST OF SALES EXPENSES NET INCOME 1990 4372 .1 3318 .4 1005 .9 47.8 1991 4794 .3 3581 .3 1278 .5 -65.5 1992 4954 .4 3626 .6 1259 .8 68.0 1993 4790 .3 3549 .6 1207 .4 33.3 1994 5050 3737 .0 1276 .8 36.2 1995 5242 3873 .8 1288 .8 79.4 1996 5333 3914 .5 1320 .2 98.4 1997 5719 .4 4112 .2 1442 .7 164. 5 1998 6743 4990 .0 1615 .0 138. 2 1999 9132 .2 7177 .9 1719 .6 234. 7 2000 10115 8061. 7 1848. 6 204.7

Shaji Viswanathan, ETOLA.13348

In 1990 the total sales was 4372.1 million Euros with a net income of 47.8 million Euros, but the total sales of 1991 was 4794.3 million Euros with Net loss of 65.5 million Euros. This record proved that the Continental AG was Lack of awareness of the sources of losses. The internal and external factors affected continental AG and to overcome these facts Dr.Van Grunberg , the new CEO outlined and declared the strategic plan, that focused to stabilize the corporations profitability and bringing a sustained improvement . The future survival centralised to successful innovations by the company by own strength not by additional acquisitions, more over emphasis given on profit and innovation by 10 point program. The 10point program focused on growth through successful in-house developments and also profitable production structure and focus on investment in sales revenue other than size. New strategic alliance, less acquisition with new focal points, leadership in technology with wide range of systems, expansion to Eastern Europe, environmental protection, focus on rescue operations of general tire, decentralised responsibility that fight against losses and improve earnings and overall progress in 1992.

The new strategy result into success, that reveals the above net income graph of M/S. Continental AG.

Shaji Viswanathan, ETOLA.13348

Question Two
(a) Porters Value Chain and Continental AGs fostered strategic innovation to attain growth in productivity during 1991 to 1999. The economy and the structure of the industry emerged out of the complexities of economic forced as well as social trends and the resources are tangible and intangible . The tangibles are financial, physical, technological and organisational. The intangible resources are human, innovation and reputational. The tangible and intangible resources are variables that contributing the value chain to attain the pre-planned goals. Value chain described as the functional activities within the organisation and it creates value to the product and service produced by the organisation and the basic component of value chain includes the development as well as production and distribution. The supporting activities also includes the accomplishment of primary activities.

Value chain model within the organisation

Primary Activities Input Research and development Components Final Assembly Marketing and service Output Support Activities Infrastructure Logistics Human Resources

The fundamentals of the value chain analysis are:1. Valuable 2. Rare 3. Costly to imitate 4. Exploitation by organisations 5. Competitive implications 6. Organisations Performance The value chain analysis and decision model

Shaji Viswanathan, ETOLA.13348

(b) Comparison and contrast between the corporate governance and corporate social responsibility practices of both Continental AG and Good Year Tyre & Rubber Company. In a more globalized, interconnected and competitive world, the way that environmental, social and corporate governance issues are managed is part of companies overall management quality needed to compete successfully. Companies that perform better with regard to these issues can increase shareholder value by, for example, properly managing risks, anticipating regulatory action or accessing new markets while at the same time contributing to the sustainable development of the societies in which they operate. Moreover these issues can have a strong impact on reputation and brands, an increasingly important part of company value. (UN Global Compacts, 2004 Report) The corporate governance focused to the crucial business issues and corporate failures and good governance required for the public market trust. The social and environmental as well as non-financial boundaries to identify for the good corporate governance. The corporate governance is the set of procedures and programs applied by the organisation to reach the pre-planned goals, mission, and vision considering the sake of stakeholders. Maximisation of the wealth is the motto to set the policies and procedures as well as it considered the managerial performance, social responsibility and the social, cultural, environmental factors, further legal, ethical practices focused to the customers and stakeholders. The corporate organisations responsible for social responsibility and the society often demand it. The motto of corporate aims not only the profit but also responsibility to the society. The corporate governance and corporate responsibility are interconnected and interrelated , as well as it can measured with Triple-Bottom-Line(TBL) accounting and it measures the values of corporate social responsibility as well as it provides information about social, environmental and sustainability factors. The Continental AG and Good Year Tyre & Rubber Company are responsible to their society. The summary of their corporate social responsibility report discloses that:Good Year Tyre & Rubber Company Focus on consumers Engage with associates Respect the environment Support for communities

Continental AG
Respect the laws and culture of each country Ethical and legal principles govern the way live and work Behaviour is characterized by honesty and integrity Open and constructive dialogue with all group of

Shaji Viswanathan, ETOLA.13348

society Respect interest of stakeholders and allow them to participate in success Environmentally conscious , protecting climate and resources also ensuring sustainability Actions ensure the long term success of the corporation.

Commitment to innovation and integrity Designing innovative products Building quality products Delivery products to customers Listening to customers Diversity and inclusions Training and development Employee resource group Health and well being Safe work place, fire protection Business continuity planning Employment practice, human right and zero tolerance and no violence Environmental health and safety policy Managing environmental programs Green house gases and reduce environmental foot print Energy, manufacturing and water efficiency
End of life tires disposal and state of art manufacturing policy

Support for education, safety, community and disaster relief.

Question Three
(a) The review of effectiveness of Continental AGs structure adaption of functional, organisational and corporate in unleashing managers entrepreneurial energy during 1992 to 2001. Due to the internal and external problems and crisis Dr. Von Hubertus took over as the chairman of Continental AG , following this changes made to decentralisation to all major divisions and focused to market oriented. The motivational factors of encouraging innovations as well as the senior level managers contributed entrepreneurial energy and spirit, as a result of this the Continental AG deviated and directed towards new strategic directions as system supplier to automobile industry. Since 1992 the Continental AG generate steady profit and the financial data analysis shows the details as :OPERATI ONS 1990 1991 199 2 199 3 199 4 199 5 199 6 1997 199 8 1999 2000

Shaji Viswanathan, ETOLA.13348

NET INCOME

47.8

-65.5

68.0

33.3

36.2

79.4

98. 4

164. 5

138 .2

234. 7

204.7

The bureaucratic nature and centralise structure and culture caused the part of the crisis. The corporate structure was tuned to functional responsibilities and it reflected in centralised control philosophy, as a result of this the new CEO Dr. Von Hubertus adopted a 10 point program and pinpointing and cutting losses and restructured all major divisions and eight independent legal companies formed with different product and market segmentation , as well as it demands profitability and responsibility applied in all levels of functions to generate profit and cut cost and these developments give managers extra freedom to set mind as entrepreneurs and act as entrepreneurial manner and it point out the following:1. Cross functional Action Instead of functional thinking 2. Result responsibility instead of mere plan fulfilment 3. Customer orientation instead of functional hierarchal orientation 4. Agreement on targets instead of those on top dictating what is to be done 5. Internal service units instead of central staff functions. The structure adaption leads the organisation to the sustainable situation. The structure followed by Continental AG in different periods are:1991-functional structure 1992-organisational structure 2001-corporate structure.

Shaji Viswanathan, ETOLA.13348

Sales(Billions) (Euro) OPERATIONS NET INCOME

4372. 1 1990 47.8

4794. 3 1991 -65.5

4954. 4 1992 68.0

4790. 3 1993 33.3

505 0 199 4 36.2

524 2 199 5 79.4

533 3 199 6 98. 4

5719. 4 1997 164.5

6743 1998 138. 2

9132. 2 1999 234.7

1011 5 2000 204. 7

The structure of an organisation can contribute to the organisations strategic goals and objectives. It is the basement of the organisations culture and it influences the employees behaviour, performance, motivation and co-operation and it allow flexibility, encourage creativity and effectively it can use the skills in employees. If an organisational structure did not suit its goals and objectives, it will jeopardize the organisation by obstacles in communication, co-operation, and completion of tasks as well as slower cycle time and inefficient use of resources. Source: http://www.ehow.com/about_5171264_organizational-structure-benefits.html In 1991, the Continental AG followed a functional structure and made good sales of Euro 4794.3, even though it falls in a huge loss in 1991 of Euro 65.5 billion. This caused by internal and external problems, as well as in functional structure, the resources not used in optimum level. The functional structure has separate functional areas and the employees have less concern about the other functional areas and it not allowing an overall prospective of the organization and it creates barriers in overall communication, co-operation and co-ordination. It has only individual functional focus only and all processes are separate in individual functional area and this functional structure not allowing managers to have a broad perspective in the organisation or other functional area. The functional structure required resources for each individual functional area and it is not sharing the resources and not sharing the knowledge among people in the same organisation. From 1992 to 2000, Continental AG structured to organisational. In an organisational structure, all the employees opinions are considered and encouraging employees to participate in decision-making process. Ideas exchanged among employees and managers freely communicating with employees without any complications also allowing employees to share their ideas and opinions without fear. It encourages employees creativity and it has only few layers of management and easy to implement any changes. The changes can give

Shaji Viswanathan, ETOLA.13348 directly to the lower level by top-level decision makers and it avoids communication issues. It allows employees and managers work closely and encourage independent thinking as well as teamwork. More over employees have opportunity to view and visualise the overall functions of the organisation and can come up with solutions to particulars problems along with the team and it helps the overall running of the organisation. In organisational structure, employees are highly trained and skilled, further capable to deal the responsibilities, further the cross training available within the organisation and they can perform entrepreneurial spirit and energy. Source: http://www.ehow.co.uk/list_6545841_benefits-flat-organizational-structure. (b) Evaluation of the effectiveness of Continental AGs chairmans Kessel ) leadership skills in dealing with strategic challenges in 2001. (Dr. Stephan

In 1995 Dr. Stephen Kessel assigned to cutting losses and re-orienting equipment business and in 1997 he was appointed as board member of Continental AG for commercial tires. The performance of commercial tires before and throughout that period was as follows:Commercial Tires year 1993 sales 527 EBIT -25 1994 549 -15 1995 597 3 1996 548 -12 1997 669 11 1998 759 48 1999 879 49 2000 976 36

The task assigned to Dr. Stephen Kessel was successfully managed and implemented leadership and entrepreneurial skills and spirits. Moreover he has introduced in Continental AG balanced score card and it is vital to strategic planning and management terms. The building and implementing balanced score card is vital to the organisations for accomplishment of the mission and vision.

Shaji Viswanathan, ETOLA.13348 1. Assessment:-The balanced sore card begins with the assessment of mission and vision as well as changes and challenges, enablers and values; moreover it includes the preparation of change management plan and conducting communication workshop for identifying key messages as well as the media outlets, timing and messengers. 2. Strategy: - plotting the elements of strategy and strategic results, themes. Perspectives by workshop participants to give attention to customer needs and organisations value proposition. 3. Objectives: - The strategic elements derived from assessment and strategy decomposed into strategic objectives, avoid strategic block, and define the strategic intent. The objectives are initiated and classified on the strategic theme level and then categorized by perspective, linked with strategy maps for every strategy theme, and merging to produce a set of strategic objectives for the organisation. 4. Strategy Map: - The cause and effect linkage between strategic objectives formed in an enterprise-wide strategy Map and theme strategy maps merged into overall enterprisewide strategy map and it discloses how it creates value for the organisations stakeholders including customers. 5. Performance measures: - It is developed for enterprise-wide strategic objectives and foremost and lagging measures are identified targets are established, moreover the baseline and benchmarking data developed. 6. Initiative: - Develop strategic initiatives and it support the strategic objectives for build the accountability, performance measures as well as the strategic initiatives assigned to the proper staff and documented in data definition section. 7. Automation:-It adds structure, discipline, and implementing to the balanced score card and processes to information and knowledge and communicating the performance information. 8. The enterprise level scorecard cascaded into business and support level scorecard and then to individual score card, that is high-level strategy into lower level objectives, measures and operational details. Accountability follows the objectives, measures, and ownership defined at each level. 9. Evaluation: - The evaluation process of the completed score card reveals answers for the raised questions and it tells the strategies working or not and the scorecard measuring the right thing or not and the organisations environment changed or not and the money budgeting strategically or not.
Source: http://www.balancedscorecard.org/BSCResources/TheNineStepstoSuccess/tabid/58/Default.aspx

Moreover, the significant BASICS of Continental AG reveal the leadership skills of Dr. Stephen Kessel. The BASICS of Continental AG reveals that Shape Continental Together The vision statement discloses that they make individual mobility safe and more comfortable and will be the global technology leader in all business area as well as the overall focus to value creation and discloses the responsibility to the stakeholders and declared to stand for social responsibility, environmental protection, partnership and appreciation to supplier contribution, moreover focused to provide superior technology, leadership and innovation. These strategic theme implementation with leadership skills and entrepreneurial spirit will leads to attain the targets and strategy. Conclusions

Shaji Viswanathan, ETOLA.13348 The sustainability of the global corporate organisations depends the global strategy that developed and implemented in accordance with the global competition. The changes and challenges adoption, maintaining culture of high performance, striving for the best, cooperation and team work, responsibility and management, learning and knowledge management, perspectives and strategic initiatives are significant in the globalised business. References and Bibliography
Krueger, N. F. (2002). ENTREPRENEURSHIP- CRITICAL PERSPECTIVE ON BUSINESS AND MANAGEMENT. books.google.co.uk M.htt, D. Ireland, & R. Hoskisson, 2003 Strategic Management, 5th edition (p.9), Cincinnati, Thomson South-Western.

Who Cares Wins: Connecting Financial Markets to a Changing World, p. i, UN Global Compact, 2004.

http://corostrandberg.com/pdfs/Corporate_Governance.pdf (Accessed on 15/01/2011) Case Study

Liberating Entrepreneurial Energy, Continental AG , (p. 1 to 24) De Wit & Meyer, University Of St.Gallen.

Webliography Business Exchange http://bx.businessweek.com/corporate-entrepreneurship/(Accessed on 16/12/2010) Strategic Leadership. http://www.1000ventures.com/business_guide/crosscuttings/leadership_strategic.html Accessed on 16/12/2010) M/S. Continental AG http://www.conti-online.com/generator/www/com/en/continental/ (Accessed on 18/01/2011) M/S. Good Year Tire & Rubber Company http://www.goodyear.com/corporate/ (Accesses on 18/01/2011) EHOW Business and finance http://www.ehow.com/about_5171264_organizational-structure-benefits.html(accessed on 18/01/2011)
1998-2010 Balanced Scorecard Institute, a Strategy Management Group company

http://www.balancedscorecard.org/BSCResources/TheNineStepstoSuccess/tabid/58/Default.a spx (Acessed on 19/01/2011)