Case studies - business strategy cases

Question 1

1. What are the major strategy tensions/dichotomies that Honda has attempted to reconcile over the past 50 years?

Answer 1

• Collective v individualist culture → encouraging competition between individuals in company-wide quality circle competitions; individual managers closely associated with projects and products for which they have been responsible; but loyalty and cooperation is encouraged through promotion of groups processes; collective decision making at the board room, tight cooperation of F-1 team held up as a model for all employees, interdepartmental cooperation in product development in Sales-Engineering-Development teams
• Vertical v horizontal (flat) organisational structure – within a strongly hierarchical structural framework, also have:
o Round-table meetings: executives and front-line supervisors
o Round-table meetings: executives and middle-level managers
o Diagonal linkages through discussions between manufacturing managers and front-line sales staff.
• Career path: expert system without entering management v managers following diagonal promotion paths.
• Japanese v Western management; stress de-centralised management structures over centralisation, praises achievements of individuals, merit-based promotion over seniority
• Technology research:
o Trade-off between various pollutants – don’t create the pollutants in the first place (rather than cleaning them up afterwards) – CVCC enginge
o Fuel economy v engine power, adjusting according to drivint conditions
o Revolution v evolution, or deliberateness v emergence: Face-lift v complete model change →Sales-Engineering-Development teams working together for whole process, rolling or iterative model; 2 yr face life, 2yr lag then unseen components are changed; time, lateral (sister models)
• Efficiency v human dignity → free-flow assembly line gave production line workers control over when they are finished work on a product
• Mass production v customisation → batch production for simpler logistics and quality control while wider range of products and workers satisfaction
• Cost v quality → by right first time or build in quality (not testing in later) – total quality management – TQM
• Interorganisational competition v interorganisational cooperation
o Multiple v single supplier → 1 supplier supplies all car seats for Honda accord, another supplier for the Honda civic.
• Responsiveness v synergies → over time, Honda emphasised one pole over another

Question 2

2. Do Honda managers view these tensions/dichotomies as puzzles, dilemmas, trade offs or paradoxes? Explain

Answer 2

Paradoxes – to get the best of both worlds

Changing emphasis but never a pole

Question 3

3. What types of organisation and mind-set do you think are needed to reconcile strategy tensions/dichotomies in the way Honda has?

Answer 3

• Open for new ideas, flexible, create a learning environment, proactive
• Uncompromising (no trade-offs, only better in both) – innovative, creative, challenging assumptions
• Creative entrepreneurial spirit, market orientation
• Keeping your roots

Question 4

1. Describe Continental’s change path in the period 1991-2001.

Answer 4

• Restructure from functional areas (insensitive to markets or customers) to business units to create transparency
• Switched from brand orientation to market orientation (the brands were previously in direct competition to each other) (so general market manager responsibility for regional business segments on a mix of all brands)
• Realisation focus, not planning → stronger link between conception and realisation by giving employees who developed the concept the job of implementing it.
• Towards less centralisation control (while retaining certain functions as central units: controlling, finance, technology centre, purchasing.) More target based.
• Changing target from sales to profits
• Own R&D instead of buying companies for it (innovation instead of acquisitions)
• From tyre supplier to chassis systems supplier (including Teves acquisition)
• Internal competition to increase productivity, e.g. focus on profitability of production entities with consequences of shutting down after a grace period of 1 year, based on transparency
• From bureaucratic to entrepreneurial culture (intrapreneur)
• Parallel project teams to speed up processes and improve results

Question 5

1a. If judged by the magnitude (scope and amplitude) and pace (timing and speed), how would you characterize the strategic renewal process of Continental: revolutionary or evolutionary?

Answer 5

High magnitude: high amplitude (radical), broad scope (comprehensive)
Pace: timing and speed:
• Timing: Depends on the measures – some were done immediately (huge losses at the beginning), some over a longer period of time (e.g. culture).
• Speed: Depends on the activities, high

Therefore, a rather revolutionary change path in the beginning; over time, becoming more evolutionary.

Question 6

2. What do you consider the major barriers to change faced by von Grünberg during his tenure at Continental?

Answer 6

• Psychological resistance: fear of losing their jobs, lack of inclusion in the decision-making process (top-down; non-participative leadership style)
• Cultural resistance: keep traditions (argument certain processes in the tyre business were off limits to change by merit of their traditional status), risk avoidance, keep status quo of a rubber tyre mass producer; focus on parts rather than systems, bureaucratic, centralistic culture
• Political resistance (concerned about losing something): fear of losing power, status, bonus, and salary…(motto of cut the losses)
• Stakeholder lock-in: operational needs to continuously supply to customers.
• Competence lock-in: new know-how needed for chassis systems → acquisition of Teves
• Investment lock-in from previous acquisitions in tyre production facilities and equipment.
• Systems lock-in (e.g. SAP system/Oracle – long-term contract, business processes, training, data in there)

Question 7

3. What might have happened if Von Grünberg had chosen to turn Continental around according to the continuous renewal perspective?

Answer 7

Change too slow, risk of bankruptcy (record loss in 1991).
• Tyre overcapacity, decline in vehicle registrations, need for economies of scale → price war
• Fiercely competition, sharp drop in results, loss-making operations, threat of take-over

Question 8

3. What might have happened if Von Grünberg had chosen to turn Continental around either according to the discontinuous renewal perspective?

Answer 8

If radical discontinuous approach:
• risk of taking wrong decisions based on poor data: profitable/non-profitable; lack of awareness of the sources of the company’s losses
• risk of losing key employees (go elsewhere, or slowly disengage and go by the clock, not what needs to get done)
• risk of losing customers and customer trust
• risk of suppliers losing trust that the bills will get paid
• risk of losing shareholders

Question 9

4. What would you recommend to the new CEO Dr. Kessel to achieve further strategic renewal at Continental: a more revolutionary or a more evolutionary approach? Explain why.

Answer 9

Focus on improvements in the details → continuous approach
Key challenge: maintaining the entrepreneurial spirit

What actually happened:
• Kessel wasn’t there for long. New guy was close to Grünberg, radical change → moved tyre manufacturing outside Germany. Bought an electronics company VDO, then they got bought out. New smaller company got into trouble → only partly owned by the new, smaller company. Now much more an electronics company.