Corporate Entrepreneurship And Strategic Leadership Methods


Different people have their different understanding on corporate entrepreneurship and the most popularly accepted definition of corporate entrepreneurship is concluded by Guth and Ginsberg (1990, pp5-15). They defined corporate entrepreneurship contains the birth of new businesses in the existing businesses and rebirth (or transformational) of organizations by a renewal of the entrepreneurs' key ideas. Not only is corporate venturing encompassed in this definition, but also it introduces the interplay of new ideas about organizations and their characteristics (Guth & Ginsberg 1990, pp5-15).

On the other hand, strategic leadership is defined as the imperatives of entrepreneurship. Hitt et al. (2001d) and Ireland & Hitt (2000) posed the definition of strategic leadership as the ability of entrepreneurs to foresee, convince, to be flexible and empower others to create and implement strategic changes when necessary.

It can be viewed from these two definitions that corporate entrepreneurship refers to the creation and development of new business ideas and opportunities in corporations. It is the whole process whereby enterprises act in innovative, risk-taking and pro-active ways (Zahra, 1993; Dess, Lumpkin & Mcgee, 1999; Bouchard, 2001). Therefore, corporate entrepreneurship always leads to many outcomes, such as new products and services by adding functions or changing packaging, business development by market development or market diversification. Thus, it is always chosen as a strategy to increase financial performance of corporations. On the contrary, strategic leadership is considered as one of the factors that affects the accuracy and feasibility of corporate entrepreneurship as a strategy to create and develop new ideas and opportunities for corporations. It can be seen from the definition above that strategic leadership is about the ability to foresee, convince and empower others to make strategic changes happen (Ireland & Hitt 2000).

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However, many entrepreneurship and strategy experts agree that corporate entrepreneurship and strategic leadership are the driven factors to add value to corporations and to utilize corporations' capabilities to differentiate themselves from their competitors (Hough & Scheepers 2008, p18). In another word, corporate entrepreneurship and strategic leadership are the core competences of corporations which themselves are valuable and inimitable. They are the fundaments for the growth and development of corporations, and the core competitiveness of corporations to their competitors in a long-term view.

Evaluate Continental's Agenda for Strategic Changes

It is stated in the case that because of the recession of world tire industry. The earnings of Continental plummeted from a profit of €116.6 million in 1989 to a loss of €65.5 million in 1991. However, after making strategic changes, Continental reversed the earning to a profit €68 million in 1992 and kept growing since 1993 (Bruch 2001). And it is also known from the case that the major internal reasons for the crisis in 1991 were: lack of awareness about the loss units; internal competition from different brands; suppression of decentral innovative potential; absence of entrepreneurial initiative (Bruch 2001).

However, Continental was able to make strategic changes which helped the corporation survive in the crisis and even become better. By going through the case, the strategic changes can be stated as follows:

On July 20, 1991, Dr. Hubertus von Grünberg took over the position of Executive Board chairman of Continental (Bruch 2001).

Dr. von Grünberg shifted the focus of Continental to stable profitability on August 30, 1991.

10-point program was carried out on December 2, 1991 to reinforce the focus on profit and innovation

Fundamental restructuration was taken since February 1, 1992 to find out which units weren't earning anything (Bruch 2001).

Market orientation rather than brand orientation was adopted at end of 1993.

Some operations are outsourced such as IT and long-term contracts were drawn up to reduce cost.

It is clear from the major internal reasons for the crisis that lack of entrepreneurial initiative is the foremost reason which should be firstly improved. Therefore, the first strategic change of appointing Dr. Hubertus von Grünberg to be the chairman of Continental Executive Board was a proper change for the corporation (Bruch 2001). From the case, Dr. Hubertus von Grünberg had entrepreneurship because of his experience of CEO in ITT, besides, Dr. von Grünberg had the ability to foresee, envision, and empower others to make strategic changes happen (Bruch 2001). By clearly setting the long-term direction of stable profitability for Continental, the corporation enabled the corporation's capabilities focus on a reasonable mission. The implementation of 10-point program empowered other managers and employees to make sure that the corporation was towards the mission (Bruch 2001). Obviously, Continental perfectly made the first move work. Meanwhile, the problem of suppression of decentral innovative potential was solved involuntarily by the implementation of 10-point program and the appointment of Dr. Hubertus von Grünberg (Bruch 2001).

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By setting the long-term direction to stable profitability, it became important to Continental to understand which units didn't earn anything rather than made a loss. Hence, the next strategic change for Continental was to restructure the corporation (Bruch 2001). Based on the findings about which business units didn't earn anything to the corporation, Continental was restructured to clearly identify the above units in order to pinpoint these units and cut loss. For example, Tire Production was replaced by two separated business units, "Passenger Tires" and "Commercial Vehicle Tires/Environment/Research" (Bruch 2001). By this strategic change, Continental was able to take actions on those business units which made loss and improve the performance to get positive financial outcome.

At the end of 1993, Market orientation rather than brand orientation was adopted by Continental that helped corporation avoided the internal competition (Bruch 2001). By restructuring business units according to different market target and position, the corporate avoided internal competition and re-strength the core competences to compete external competitors.

By taking the above strategic changes, Continental announced a positive profit in 1992 of €68 million. In conclusion, the strategic changes were suitable and reasonable to Continental in the midst of a serious recession of world tire industry. Besides, the way of implementing the strategic changes was proper to the corporate and results of the positive profit in the next year, which indicated the effectiveness of the changes.

Question 2

Porter's Value Chain Analysis

Porter's value chain model is a typical value chain model, which state nine kinds of business activities (Wang 2007, p81). And these business activities are classified into assistant and basic activities, which can stated as below:

Wang Weijun (2007). Integration and innovation orient to e-society. New York: Springer Science+ Business Media, LLC. p81.

It can be seen from the above value chain that basic business activities are the action on purchase logistics, production, consignment logistic and market distribution, service, while assistant activities involve actions on infrastructure of enterprise, manpower resource management, technology development and purchase (Wang 2007, p81; Wickramasinghe et al 2007, p170). Therefore, the strategic innovative activities that helped Continental achieve growth in productivity from 1991 to 1999 will be discussed based on the two classified activities.

Assistant activities.

By going through the case, it is not difficult to find that the main assistant activities related to Porter's Value Chain are mainly infrastructure of enterprises, Manpower resource management and technology development. A fund of at least of approximately 4% of the sale revenue since 1991 was invested in R & D, which helped the corporation to gain sustainable competitive advantage through the creation and innovation from R & D (Bruch 2001). For instance, a new tire line was added to the production and one-stage tire machine was invented to help the corporation achieve the growth in productivity.

Research and innovative forces were relocated and a technology centre was established in Hanover though combination of two R & D resources into one (Bruch 2001). Through this, the ability to innovate new technology for tire production was strengthened and the research resources were centralized. Besides this, RDE (research-development-engineering) meetings are designed to help R & D focus on the technologies oriented to market and customers (Bruch 2001).

Basic Activities.

The main basic activity that help Continental achieve the growth in productivity was the innovation of complete systems (Bruch 2001). By adding technical chassis components such as TPMS (Tire Pressure Monitoring System), SWT (Sidewall Torsion Sensor), more value was added into tire production, which in turn increased productivity. Besides, Dr. Hubertus von Grünberg introduced MMP (Modular Manufacturing Process) which improved the consignment logistic and market distribution process of Continental (Bruch 2001).

Though Continental adopted many innovative activities that helped achieve the growth in productivity, the corporation might implement other activities related to the rest business activities in the Value Chain to achieve much better productivity. For example, like what Dell's direct-to customer strategy, Continental may be able to ask its suppliers to move to the area of its production factories to reduce the time on waiting materials ready for production, especially those essential materials as rubber (Leeman 2010, p184).

Corporate Governance and Corporate Social Responsibility

Before comparing and contrasting the "corporate governance" and "corporate social responsibility" practices of Continental AG with those of Goodyear Tyre & Rubber Company, it is necessary to understand the definition of both concepts. Plessis et al (2005, p10)defined corporate governance as the system that corporate uses to regulate and oversee the corporate activities and to balance the interests of all internal stakeholders (employees, shareholders, etc.) and external stakeholders (governments, local communities, other parties, etc.) as long as whoever can be affected by the corporations activities, with the view to make sure responsible behavior by corporation and as well as to reach the maximum level of profitability and efficiency for the corporation (Plessis et al 2005, p10). While corporate social responsibility is defined as a commitment which agree to improve community welfare through discretionary business practices and contributions of corporate resources (Kotler & Lee 2005, p3).

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It is not difficult to find out that corporate social responsibility concerns the well-being of external stakeholders, especially community; however, corporate government pays close attentions to well-beings of internal and external stakeholders (Bruch 2001). Relating to Continental AG and those of Goodyear Tyre & Rubber Company, the corporate governance and social responsibility can be presented as follows:

Corporate Governance

Corporate governance of Continental is guided by the Corporate Governance Principles of Continental AG while the corporate governance of Goodyear Tyre & Rubber Company can be viewed from Goodyear corporate responsibility report (Continental AG 2010 & Goodyear 2007). Compare to that Continental focus more on the internal stakeholders such as shareholders, executive board, supervisory board and financial results, Goodyear Tyre & Rubber Company balance the attention on customers and employees. The reason is that Continental AG may think that internal stakeholders are the source of competences and competitiveness (Continental AG 2010); and Goodyear Tyre & Rubber Company views that only can the corporation be developed and competitive unless customers and employees feel satisfied with the quality of products and compensation of the corporation (Goodyear 2007). The Corporate Governance Principles of Continental AG is very specific which describes the rights and obligations of each internal party. This indicates that Continental is conservative. However, the corporate governance of Goodyear Tyre & Rubber Company is blur which shows its innovative perspective in managing the corporation. Goodyear Tyre & Rubber Company pays more attention on employees than that of Continental AG.

Although the corporate governance of Continental AG differ from that of Goodyear Tyre & Rubber Company, there is not such an universal principle that is suitable to every company, therefore, as long as the corporate governance is proper to the corporation and its development, then it can be considered as good (Millstein 1998, p49).

Corporate Social Responsibility

Social responsibility of Continental is stated in its website while the social responsibility is presented in Goodyear corporate responsibility report (Continental AG website 2010 & Goodyear 2007)). Continental views the world changing all the time, so social responsibility and the obligations could become a competitive advantage to the corporation (Continental AG website 2010). The main areas that Continental concentrates on are education, science, traffic safety, social improvement and sports. On the other hand, Goodyear Tyre & Rubber Company pays more attention to the macro and micro environment and to improve the quality for the associates, family and society, by applying Zero Waste To Landfill strategy and Goodyear Environmental, Health and Safety Policy (Goodyear 2007). Obviously, social responsibility of Continental tends to be social-development-oriented, and that of Goodyear Tyre & Rubber Company tends to be environment-oriented.

To sum up, profitability and growth are not the only purposes for corporations, other purposes such as social development, environment protection, children care are always taken into considerations by corporations. Despite different concentrations on society, the importance of corporations can't be neglected.

Question 3

Effectiveness of Functional, Organizational & Corporate Structures

Functional Structure.

Functional structure refers to the structure that is organized around the processes and activities that required to produce the corporation's products and services, for example, operation, R&D, marketing, etc (Kates & Galbraith 2007, p10). The effective functional structure that help corporation unleash its entrepreneurial energy is always centralized, highly specialized, and offer to a particular market. The following chart shows the functional structure of Continental in 1991.

Chart 1: Functional structure of Continental AG in 1991

Source: Bruch Heike (2001). Continental 2001: Liberating Entrepreneurial Energy. p21.$FILE/Conti+case.pdf [Last Accessed: 20th Dec, 2010]

Since then, Continental reorganized the functional structure that unleashed the entrepreneurial energy (Bruch 2001). More capital was invested in R&D department to discover new technology for tire production, and RDE (research-development-engineering) meetings were hold to make managers involved in R&D, which in turn unleashed their entrepreneurial energy. Besides, production departments were also reorganized in accordance with oriented market rather than products (Bruch 2001). This activity avoided negative competition in the corporation and concentrated managers' entrepreneurial energy on market development. By implementing these activities, the functional structure of Continental became more effective to unleash manager's entrepreneurial energy (Bruch 2001).

Organizational Structure

The number and different types of departments or groups in a corporation and the official reporting relationship and lines of communications among the department, groups and other internal stakeholders represent the organizational structure of the corporation (Daft 2010, p90). It should be designed to support the strategy of the corporation. The following relationship gives an understanding about Continental's organizational structure.

Chart 2: Organizational structure of tire operations in 1992

Source: Bruch Heike (2001). Continental 2001: Liberating Entrepreneurial Energy. p21.$FILE/Conti+case.pdf [Last Accessed: 20th Dec, 2010]

Improvements were made by Continental during 1992 to 2001 in organizational structure. Changes in reporting relationship such as Delegation of Authority and Responsibility" (DAR) were introduced to the management which made the hierarchy of Continental not so complicated, which unleashed entrepreneurial energy directly and indirectly (Bruch 2001).

Corporate Structure

Corporate structure refers to a grouping of different positions and departments within a company, which all have separate tasks but work together to operate as a company (Business Dictionary). During the years from 1992 to 2001, Productivity comparisons, great authority and enhanced career opportunities were taken in Continental which enhanced entrepreneurial energy. The below chart indicates the corporate structure of Continental.

Chart 3: Corporate structure of Continental AG in 2001

Source: Bruch Heike (2001). Continental 2001: Liberating Entrepreneurial Energy. p22.$FILE/Conti+case.pdf [Last Accessed: 20th Dec, 2010]

It could be seen clearly from above that the effectiveness of functional, organizational and corporate structure had been enhanced. By implementing the above mentioned activities, the structures became flatter which accelerated the speed of information transformation in Continental (Bruch 2001). With clearly classification of different functions, especially the production function, managers enabled to focus their entrepreneurial energy on a specific area. The simplification of reporting system and new innovative report structure gave managers more authority in their area, which motivated them to unleash more entrepreneurial energy (Bruch 2001). Nevertheless, positive internal competition such as productivity comparison, enhanced career opportunity and entrepreneurship concept in the corporation culture enhanced the performance of managers.

Obviously, the functional, organizational and corporate structure became simple and more effective for the unleashing of managers' entrepreneurial energy.

Effectiveness of Leadership Skills

By effective and innovate management of Dr. Hubertus von Grünberg, Entrepreneurially driven managers were appointed in key position to manage the corporation, capabilities became more innovative and productive. All theses helped Continental increase profit in the following years (Bruch 2001). However, after Dr Stephan Kessel's taking over Board chairmanship from Dr. Hubertus von Grünberg, Continental faced many strategic challenges. According to the case, the main strategic challenge was to maintain and keep the uncompleted change of liberated entrepreneurial energy on going, which in other word, the basic new cultural maxim (Bruch 2001). It involved that managers constantly question the status quo in an entrepreneurial manner and accept the change process as an ongoing personal task, another strategic challenge was to stretch in the core area of competence---chassis systems.

Many leadership skills can be applied to dealing with this strategic challenge, including power management, motivation, and communication, providing direction, strategic thinking, planning, change management, conflict resolution and negotiation, team-building, etc (Pratt 2010, p382). It is evident in the case that the main leadership skills applied by Dr Stephan Kessel were strategic thinking, communication, power management and providing direction.

The leadership skills such as strategic thinking and power management are very effective in dealing with strategic challenges in 2001. Strategic thinking about the challenges gave Dr Stephan Kessel a better understanding of the challenges and their impacts on corporation and the factors that affected the challenges (Bruch 2001). By understanding, Dr Stephan Kessel was able to make strategic plan and provide direction to guide the corporation deal with the challenges. Besides, good communication such as workshops, BASICS, etc., helped employees and managers in Continental understand the strategic challenges and how to deal with them (Bruch 2001).

However, other leadership skills should be applied by Dr Stephan Kessel to make sure the success of dealing with strategic challenges. For instance, motivation, better compensation and empowerment would enhance the performance of both managers and employees to handle the challenges (Pratt 2010, p384). Specific plans should be released to even to bottom lines to guide staff. Besides, more communication techniques should be applied to help staff understand the impact of challenges to them and also to get feedback from them in order to have better understandings about the implementation of the plans (Pratt 2010, p384).

In conclusion, although Continental encountered big suffering in the crisis of world tire industry in 1991 and the profit became negative, the corporation remained the competitiveness and was still one of the leaders in the tire industry (Bruch 2001). By the appointment of Dr. Hubertus von Grünberg and Dr. Stephan Kessel, and their intellectual management and accurate envision about the future of tire industry, Continental successfully managed many strategic changes and reached to higher position. Therefore, the case of Continental is one proof that entrepreneurship and strategic leadership have significant influence on the success of business.