Analysing Global Rubber And Tire Industries Business Essay

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The current and one of the five largest automotive suppliers in the world and is the second largest in Europe was founded in Hanover in 1871. It was by no means the first German rubber company; several small firms had been active in Hanover in the previous decade. Continental was promoted by a group of financiers and industrialists with established interests in the rubber business. The firm's product range consisted of waterproofed fabrics, footwear, and solid tires, but soon a general line of industrial rubber goods, medical supplies, and sundry consumer goods, such as balls and toys, was added.

Continental is also a competent partner in networked automobile communication. With its six divisions - Chassis & Safety, Powertrain, Interior, Passenger and Light Truck Tires, Commercial Vehicle Tires, and ContiTech - Continental is a continuous driving force for future mobility concepts, and not just in the automotive industry.


CE is an evolving area of research. Today, there is no universally acceptable definition of CE (Gautam & Verma, 1997). CE refers to the process of creating new business within established firms to improve organisational profitability and enhance a firm's competitive position or the strategic renewal of existing business. Others argue that the concept of corporate entrepreneurship should encompass the struggle of large firms to renew them by carrying out new combinations of resources that alter the relationships between them and their environments.

Burgelman (1984: 154) conceptualises the definition of corporate entrepreneurship as a process of "extending the firm's domain of competence and corresponding opportunity set through internally generated new resource combinations". The term "new resource combinations" is interpreted to be synonymous with innovation in the Schumpeterian sense. Corporate entrepreneurship is a process of organisational renewal (Sathe, 1989) that has two distinct but related dimensions:

Innovation and venturing, and strategic stress creating new business through market developments by undertaking product, process, technological and administrative innovations.

The second dimension of corporate entrepreneurship embodies renewal activities that enhance a firm's ability to compete and take risks (Miller, 1983).


It is a plan whose aim is to link ends, ways, and means. The difficult part involves developing the plan based on uncertain, ambiguous, complex, or volatile knowledge, information, and data.

Strategic Leadership

It is crucial to develop the organizational environment needed to increase the entrepreneurial orientation in established businesses.

Strategic leadership entails making decisions across different cultures, agencies, agendas, personalities, and desires. It requires the devising of plans that are feasible, desirable, and acceptable to one's organization and partners. Strategic leadership demands the ability to make sound, reasoned decisions-specifically, consequential decisions with grave implications. Since the aim of strategy is to link ends, ways, and means, so it determines the ends, choose the best ways, and apply the most effective means. The strategy is the plan; strategic leadership is the thinking and decision making required developing and affecting the plan. Skills for leading at the strategic level are more complex than those for leading at the tactical and operational levels, with skills blurring at the seams between those levels.Strategic leadership begins with organizational values, standards, and ethics-the foundation of our profession.

Strategic leadership and support for Corporate enterpreneurial strategy

The first factor as a facilitator for CE activities is Strategic leadership. Ireland and Hitt (1999:42) defines Strategic Leadership as a person's ability to anticipate, envision, maintain flexibility, strategically thinking and work with others to initiate changes that will create a viable future in the organisation.

The strategic-leadership environment differs from the climate at lower levels of ­leadership. Even the best leaders face challenges with the many components of the strategic leadership. The consequences of strategic decisions call for individuals with unique performance abilities who can navigate the volatility, uncertainty, complexity, and ambiguity inherent in the nature of those decisions.

Dess, G.G.Lumpkin,T.T. & McGee J.E. 1999. 'Linking CE to strategy, structure, and process: suggested research directions', Entrepreneurship Theory and Practice, 99: 85-102.

(b) Strategic changes at the beginning of 1990

When the worlds tire industries was in a great recession in spite of this Continental AG being a highest rubber investor in the production of cars and trucks has made a profit amounting to €4,372.1 million resulting in to price combat with the other industries.

As a consequence in just two years its earnings plummeted from a profit €116.6million in1989 to a mere €47.8million in 1990,followed by losses of €65.5 million in the same time sales grew by about €42.2million.Acquisitions in this time period led to a balloning of net indebtness to €1.2 billion.

In the immediate 1991 Continental's serious decline started: being ranked second in the German market. But in the global market the company controlled only 7% and occupied fourth-place with a great gap behind the "Big Three" - Michelin (20%), Goodyear (16.4%) and Bridgestone (16.2%) at the time when demand for the tires was no so good and almost dead in the market. When compared to the situations that were faces internally by the Continental was not a good profit making firm as it was the managers who were not comfortable in the aspect of administrative functions, suffering from a loss of €65.5 million in 1991.

Hence due to lack of the major factors like nonexistence of internal competition, knowledge of resources and entrepreneurial behavior by the managers reflecting to a great loss amounting to €51 million on sales of €256million. Moreover, Continental was running into trouble integrating the companies acquired as part of its growth strategy. These included, among others, Uniroyal 1979, Semperit 1985, and General Tire 1987. The European tire brands such as Uniroyal and Semperit were positioned similar to the parent brand in the replacement market and ended up competing for the same target customers. Thus both market areas - the original equipment business with the automotive industry and the replacement market - were in trouble through internal difficulties.

Pirelli's attempted takeover in 1990

As we know that Continental is an independent firm with respect to the production of tires and this was threatened by Pirelli's attempted to takeover for the fifth time with respect to global market. Pirelli's merger proposal was rejected leading to a conflict between CEO, banks and politicians. The situation was made relaxed by conducting an inspection in the conference which was accepted by both the companies by making the shares of the Pirelli to a bank confederation.

Relentless cost- cutting in 1990s

Fierce competition persisted in the worldwide tire market, and Continental recorded losses of 128 million marks, or US$78 million, for the year. After signs of recovery in the first half of 1992, market conditions deteriorated again, and von Gruenberg characterized the early months of 1993 as "miserable. During this period, Continental committed itself to rigorous cost-cutting and company-wide restructuring. Central to these initiatives was the effort to reduce labour costs. Hence Continental lay off 10,168 workers, or 20 percent of its labour force, between 1991 and 1993. In 1994, the company announced plans to trim another 1,500 to 2,000 employees from its ranks.

In the determination to develop as a leading global provider in the field of automotive systems Continental changed its main goal in the market in 2000. This making a drastic change in its development from manufacturing rubber products to automotive chassis spreading out the entrepreneurial energy among the managers which was evolving into a challenging task.


(a) Porters value chain

The term Value Chain was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the activities performed by the organization and links them to the organizations competitive position.

Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price.

Porter identified Primary Activities and Support Activities as shown in the following diagram:

Fostering strategic innovation

When Hubertus von Gruenberg took over as CEO of Continental in 1991 the company recorded losses of 128 million marks, or US$78 million, for the year. The corporate situation was characterized by fierce predatory competition, a sharp drop in results, loss making operations in the corporation and the threat of takeover by Pirelli.

Dr. von Gruenberg was concentrated focus on profit innovations. And he reinforced them on December 2; 1991. The program highlighted strategic topics and placed immediate demands on Continental's managers to intensify Continental's focus in the next years on two basic perspectives. First, the company and its managers had to follow a clear profit orientation marking a departure from its previous growth strategy. Second, he stressed the absolute importance of innovations for the corporation if it was to be able to claim technology leadership in the tire sector.

RDE Meetings: Innovation meets market demands

Dr. von Gruenberg made an aggressive entrance in the present structure of R&D's making the full utilization of the available resources there by making higher power in the firm's innovation. A new centre for technology was established after reorganizing for a time of two years in the headquarters of Continental AG in April 1996.

Therefore RDE made a good podium for establishing new business ideas. e.g. by linking existing products with other technologies and with the market areas." (Wolf-Dieter Gogoll, Head of Corporate Human Resources until 2000).

Automotive systems

In 1995, von Gruenberg established Continental's Automotive Systems division to pursue research and technology in automotive electronics, which promised much higher profit margins than tires. One of the key innovations of this group, introduced in 1997, was an electromechanical brake system called the Integrated Starter Alternator Damper (ISAD).

Technical Innovation

To further facilitate the globalization of tire production, the company developed something called the modular manufacturing process (MMP), to produce basic tire parts or modules at low-cost sites and subsequently shipped to plants in other markets for assembly. In 1997, Von Gruenberg's goal was to realize 40% of Continental's tire production from such low-cost sites. In 1998, Continental was building plants in Russia and Brazil where MMP would be implemented. He estimated that MMP plants would be six times more cost efficient than standard conventional plants. In 1999, Continental forged even further ahead with its investment in electronic safety systems

The innovations successfully attained by the power and asset of the firm indicates the firm's future growth and its survival in the competitive market.

(b) Corporate Governance and Corporate Social Responsibility

Corporate governance  is the set of  processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the board of directors, employees, customers, creditors, suppliers, and the community at large.

The purpose of these Corporate Governance of Continental AG (the "Company") is to further a responsible management of the Company and the Continental Corporation (the "Corporation") focused on value creation. On the basis of applicable law, the German Corporate Governance Code (the "Code") and our Basics, the Principles are intended to make the governance by the Executive Board and the Supervisory Board transparent and understandable and to promote the confidence of investors, customers, employees and the general public in the management and control of the Company as a publicly listed German stock corporation. The Supervisory Board, the Executive Board and all employees of the Corporation understand the Principles as their obligation.

The Good Year Corporate Governance is responsible management of the company and has some basic corporate governance principles on the basis of their rules and regulations. The Principles intended to make the committee gives the confidence to employees, general public, investors and customers. The company had good relationship between stake holders, customers and employees.

Continental's corporate governance is different to compare other companies has good corporate governance which is helpful and effect to achieve their goals. The Continental and Good year companies are good companies in the world. They had good corporate governance.

Corporate Social Responsibility

It is a very broad concept, used in different contexts to cover a wide range of subjects and issues. It will never have a single meaning, as different stakeholders have different primary interests when approaching the issue.

As a global technology company and development partner to the automotive industry and further important industries, Continental stand by their social responsibility.

Continental respects the laws and culture of each country in which they operate. Ethical and legal principles govern the way they live and work. These principles are set out in their code of conduct.

Their behaviour is characterized by honesty and integrity. They conduct an open and constructive dialog with all groups in society. They respect the interests of their stakeholders (customers, shareholders, employees, partners, suppliers) and allow them to participate fairly in our success. They are environmentally conscious, protecting climate and resources and thus ensuring their sustainability. Their actions ensure the long-term success of the corporation.

As a company in the global market Continental has a decentralized organization with strong local responsibility. This applies not only to the business units, but also to the social commitment of the Company and its branches, and of private initiatives that are founded and supported by committed Company employees. Therefore charitable projects, donations or other activities are initiated and supervised as far as possible at the discretion of the decentralized units. Exceptions are supraregional projects and challenges as well as our commitment in the event of an international disaster. Primary goal of all the activities of the Company and its employees is direct, fast, lasting support.

For a company in the automobile supplier industry, taking on social responsibility also means making a social contribution to issues of mobility and traffic safety.

Goodyear is one of the world's largest tire companies, with operations in most regions of the world. Together with its U.S. and international subsidiaries and joint ventures, Goodyear develops, manufactures, markets and sells tires for most applications. It also manufactures and sells rubber-related chemicals for various applications.

Working With Migrant Children-By giving back to the community, Goodyear focuses on volunteer programs and provides opportunities for associates to participate in activities. Goodyear's Shanghai office organized several volunteer activities with the Puguang Migrant School, which it adopted in 2007.

The Blimp As A Safety Ambassador-The Navigator blimp - Goodyear's safety ambassador in China - completed its second year of promoting safe driving.

Birmingham Children's Hospital Partnership-Goodyear Dunlop UK's community program observed its ¬rst anniversary and a continuation of its partnership with Birmingham Children's Hospital.

Mountain Rescue Partnership-2008 also saw the launch of a national safety program, with Goodyear becoming the safety and innovation partner to Mountain Rescue England and Wales.

Educating Two Generations: Goodyear's Largest Social Investment in the Eastern Cape-In 2008 making its largest investment to date in the education of the Eastern Cape community.


(a)Functional, Organisational and Corporate structures:

Continental was running in trouble situation when Dr. Hubertus von Gruenberg was chief executive of the board. The factors like competitive influences and internal factors were responsible due to one of the major issues were poor profits.

The grounds for this were the company's generally official and centralised structure and culture. The corporate structure was regulated to functional responsibility with areas like tire production, marketing and sales of tires, corporate finance, controlling and coordination and technical products which stayed largely unaffected to customers.

Concerned with technology leadership in the tire sector Dr. von Gruenberg pointed the importance of corporate innovations. The emerging corporate guideline for all direct and indirect areas is now only to make profits. In 1993, he projected a sustained annual rate of 2.5% including long term target 4.5% of corporate profit return excluding taxes.

The restructure of functional co-ordination in tire sector took place on February 1, 1992. The core areas tire Production on one hand and Marketing and sales on the other, were responsible equally for car and truck tires, were substituted by two distinct market-driven board-level divisions - traveller tires and commercial vehicle tires were responsible for the entire production and marketing process.

To know actually where the profits and losses were being generated Continental was conscious of major reorganization was needed which was realized as an essential responsibility for the managers.

The dissolution of the traveller tire partition organizationally into couple of business units which is an example of in what way unprofitable spaces were changed. The highly profitable replacement business was organizationally separated from the unprofitable unique machinery industry.

In December 1991 Dr. von Gruenberg utilised this opportunity for good cause implementing CE in entrepreneurial business style which is more important in any industry.

"Delegation of Authority and Responsibility" (DAR) was the procedure changed in the culture in 1992- entrepreneurial prospective was deployed and released in all the areas of the firm. Hence, including the managers working collectively for outspreading highly the entrepreneurship crossing the bars in reorganizing divisions

Create internal competition

Organizational divisions with fewer profits were highlighted by Dr. von Gruenberg and made efficient managers as an in charge to get the situation financially controlled and projected on "red-hot podiums" and on the development of these divisions leading to the achievement of their goals and targets by liberating the competition internally in the industry.

Profit- orientation functions

To improve the profits, innovative values and principles were brought in and induced in the firm's procuring procedures making an annual rise to around €2.7billion corresponding to 50%of corporate sales.

The reliability of Dr. von Gruenberg not only in his firmness on maximizing profits; at the same time encouraging consistency in risk taking which is now a days considered as a challenging task handling in a positive manner expecting to avoid any kind of changes supported by wide range procedures.

The argument that some of the procedures regarding with tire industry restricted to any kind of traditional changes with excellence which made the managers to reflect towards several procedures in the corporate firms. These were considered as absolutely an escape to restrict the pressure by Dr. von Gruenberg very strongly.

New Production concept

The new and modern thoughts of Dr von Gruenberg put him always a step forward with an absolutely different idea known as Modular Manufacturing Process(MMP) successful to fulfil the ultimatum in flexibility of more productivity by dividing it in to two level process and taking material at less (built to order principle). The production by MMP for car tire was intended up to 15% by the year 2003 starting its initial project for basic modules taking into account 60% of the items for consumption.

(b) Dr Stephan Kessel's (Chairman of Continental AG), leadership skills dealing

With the company:

Dr Stephan Kessel was CEO of Continental from 1999 to 2001. Kessel is connected with 4Board Members in 4 different Organisations and 5 different industries having good leadership skills. He began his career in Research and Development at continental AG and worked as advisor in the automotive supply industry until leaving the company. A major change has taken place evolving a concept of entrepreneurial thoughts in the industry at the time when Continental was very much in making good profits in the emerging market when Dr. Stephen Kessel was offered with the post as a chief executive by the board of directors who liberated and carried this energy was considered to be the most important task.

Establishing chassis system

The objective in establishing chassis system by the industry is to become a leading evolution in the emerging market in 2001 by the Continental which oriented as a provider of automotive to the firm which makes a radical change from owing the goods into specialization in the chassis system of automotive.

To establish these strategies with in the Continental a process called wide balanced scorecard was introduced by Dr. Kessel bringing together with a massive number of managers joining with the emerging competency in the corporate world.

New corporate unit Strategic Technology

The goal of the industry is to make an optimized system instead several modules from different sectors. The direction of thinking was changed due to the ultimatum of the emerging technology in the corporate strategies made alive with its typical style. The best example for the reformation of the supply in the industry was in association with the help of tires, chassis, brakes and technical goods which make sure to increase in the profits.

He implemented a new policy called BASICS. Building the value is its major goal there by making profits to their shareholders, customers including the common man.

Dr.Kessel assumed responsibility of the firm's OEM tires business, successfully turning around its performance and held a variety of management positions at the firm. In 1997, he succeeded in leading the turnaround of Continental's truck tire business after 12 years of reported losses.