Organizational Change at Continental Ag

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Executive summary

The tire industry is a very competitive industry with major players such as Bridgestone Corporation; The Goodyear Tire and Rubber Company and Compagnie Générale des Établissements Michelin. Competing in this market with low margins has been hard for Continental AG before 1995. They have been losing money due to their high manufacturing costs and not able to compete against big competitors.

Von Grunberg was appointed as new CEO in 1991 and has implemented several changes for the continuity of Continental AG and growth. Cutting labor costs by shifting manufacturing processes to low labor cost countries and restructuring the organizational strategy through innovation and differentiation has been are the main changes implemented.

Continental AG has used different sets of theoretical change strategies and tools as a combination to become a learning organization. Models such as Kurt Lewin field forces, Kaizen, Michael Porter’s generic strategies and Liedtka’s thinking model have all been implanted over the years.

Building theoretical knowledge in practice is a good way of understanding that it is clearly in correlation with the practical side of management. Through the combination of historical models and looking to the internal and external factors is the key for revival.

Table of contents

The initial change strategy
The underlying assumptions of strategic thinking
Change tool applied
The modification and development process of the change tools and solutions Evaluation of alternative strategies
Evaluation of alternative change tools/solutions
Justification of the given intervention

This report has been created for the purpose of investigating an active company within the business environment that has had a change intervention authorized by Curtin Business School to get an insight on how theory can be applied into practice. This report examines Continental AG’s change intervention.

Continental AG was founded in 1871 as a rubber manufacture and at present is the number 4 tire manufacturer in the world and the number 2 in Europe with having its headquarter based in Hannover, Germany. Continental AG’s nearest rivals in the business are Bridgestone Corporation; The Goodyear Tire and Rubber Company and Compagnie Générale des Établissements Michelin.

Answers to the following questions will be given within this report: What was the reason for Continental AG to change their organization and how has Continental AG managed their change initiative. What has Continental AG done after the change intervention was applied and what change tools were used? Could Continental AG have been able to use a different change strategy and if so how would this have affected their business performance?

The initial change strategy
The change strategies that Continental AG has adopted is a competition based focus. Continental AG has made the change to a new market with focusing on innovative products and establishing a strong market position also being referred to a diversification strategy. The main drivers for change were not really the capabilities internally of Continental AG even though they were affected due to the high competition in the tire industry resulting in lower profit margins to be realized. Therefore internally they had to cut down their labor force by 20%. Because of the high competition in the tire industry, leaders of the market were able to be more efficient and able to set the prices in the industry. Therefore combinations of strategies have been applied with diversification, cost cutting and outsourcing strategy.

Continental AG has been outsourcing many manufacturing processes by establishing joint venture relationships. This has made them operate more efficiently without losing value of their offerings. Also a solid ERP management system was a factor to the...
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