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A Critical Evaluation of Strategic Change and Entrepreneurship

Executive Summary

This report analysed and critically evaluated the strategies adopted by automotive supplier Continental AG from the beginning of 1990s to date. The analysis revealed firstly, that Continental AG set the agenda for strategic change by calling the company to focus on profitability and innovation. Secondly, implanting profitability towards a new growth strategy was achieved through decentralisation of the organisation into independent profit orientated divisions; increasing the profitability of the company's service functions through outsourcing and central coordination of decentral activities to prevent inefficiency. Thirdly, Continental AG successfully fostered strategic innovation by investing in central R&D facilities, developing and acquiring additional competences in brake and chassis systems and rewarding entrepreneurial behaviour. Fourthly, Dr. Stephan Kessel was correct in saying that the company should focus on establishing chassis systems as its core competence, integrating tyres with chassis components and maintaining entrepreneurial energy to deal with its future challenges. This is because chassis systems will be more vital in vehicles with growing electrical components, integration of tyre and chassis components will allow Continental to be a trendsetter in technological innovation and that innovation and entrepreneurship are more important than ever in today's rapidly changing and volatile commercial environments. Finally, it seems that Continental's future strategy is going in right direction with the company looking to build its hybrid product portfolio, increase its presence in the automotive electronics business and expand further into India and China due to increasing opportunities on those areas (Datamonitor, 2007a). Nonetheless, 68.8% of Continental's revenue comes from Europe, which makes the company vulnerable to economic fluctuations in that region and therefore Continental would have to develop strategies to counteract this imbalance. Continental AG achieved record breaking profits, gained automotive supplier status and became an important part of the world automotive industry as a result of the strategies adopted. One can therefore conclude that the strategies chosen by Continental AG were appropriate for their situation and effectively carried out. Hence, it is recommended that Continental maintains its entrepreneurial culture that now exists within the company and create new products and market opportunities. In light of its revenue bias towards the European market, it would also be advisable for Continental AG to expand further into growing market regions such as Asia-Pacific.

4. Conclusions

This report analysed and critically evaluated the strategies adopted by Continental AG in order to recover from the crisis the company went through in the early 1990s. Information from both the case study and additional research demonstrated that Continental had severe problems both externally in terms of price wars and global recession and internally in terms lack of accountability and entrepreneurial spirit. This forced radical strategic changes, which moved the organisation from a sales-driven and functionally orientated firm to a dynamic entrepreneurial company, which produced a vast array of innovative products and solutions. As a result, Continental AG generated record breaking profits of €204.7 million in 2000, achieved automotive supplier status and became an important part of the world automotive industry (Bruch and Vogel, cited in De Wit and Meyer, 2004, pp. 738 - 746). One can therefore conclude that the strategies adopted by Continental AG were appropriate for their situation and effectively carried out. Hence, it is recommended that Continental maintains its entrepreneurial culture that now exists within the company and create new products and market opportunities. In light of its revenue bias towards the European market, it would also be advisable for Continental AG to expand further into growing market regions such as Asia-Pacific.

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