Continental Tyres: Analyzing Business Expansion in France

This project analyzes Continental Tyres' potential expansion into the French market. It begins with an introduction to the business environment and the company's background, including its history and product offerings. The main body of the project uses PESTLE analysis to examine the political, economic, social, technological, legal, and environmental factors influencing Continental's operations in France. It explores France's economic stability, social trends, technological advancements, and legal requirements. Furthermore, the project includes an analysis of the business scenario, highlighting the opportunities and challenges of expansion, such as the country's strong automotive industry and government support for foreign investment, contrasted with potential drawbacks like a shortage of engineers and strict labor laws. The project also applies Porter's Five Forces model to assess the competitive landscape. Overall, the project assesses the feasibility of Continental Tyres' expansion, considering both the advantages and disadvantages of operating in the French market.

Project

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Background of Continental Tyres...............................................................................................1
Business Environment in France.................................................................................................2
Analysis of the Business Scenario..............................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business Environment relates to the combination of both the internal as well as external
factors on the working of an organisation that influences upon the working of a company (What
Is Business Environment? - Definition & Factors, 2019). The factors which are included here are
suppliers, technology, government, market, economic trends. By making selection of this
company, the assignment will be completed which is Continental Tyres. This company was
founded in the year 1871 and is headquartered in Hanover, Germany. The organisation provides
many kinds of goods and services to the market in which the company is established such as
tyres, brake systems, powertrain, chasis components, automotive safety, vehicle electronics and
many more for the satisfaction of their needs and wants. The following assignment will start with
covering by looking opportunities of Foreign Direct Investment (FDI) and is making the
expansion of their business to France. In the following assignment, it will start with focusing on
background information and the influence of the external business environment on the operations
of Continental Types in case the organisation is set up there. Additionally, the assignment will
also include some of the key issues that could be encountered by the organisation and will also
provide some recommendations for those.
MAIN BODY
Background of Continental Tyres
Continental AG which was formerly known as Continental. It is a German Automotive
Organisation which is specialised in tyres, brakes system, automotive and safety, powertrain and
chasis parts for the other big companies in the industry. In current times, the company is the
world's forth largest tyre manufacturer.
The company was firstly founded in the year 1871 as a rubber manufacturer, and with the
passing of time in 1898, the company started to make production of tyres of vehicles and that
step took the brand to the first step of its success and it became the first organisation making the
production of grooved vehicle tyres. In addition to this, the second step of the success of
Continental AG was the invention of detachable wheel tyres which was made for making their
use in touring vehicles. The company further merged it with some other big rubber companies in
order so that the largest rubber making company could be made in Germany in the late 1920s.
Further, Continental AG acquired another company in 2007 which was Siemens AG's
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Automotive Unit and after that the company was ranked third in global level in the sales of
automotive parts in the year 2012. Continental also took over Rubber and Plastics Company
Phoenix AG in the year 2004 and and in 2008, the organisation appeared overextended with its
integration of VDO and had since lost almost half of its market capitalisation but it returned back
after a period of 45 months in the market again (Aithal, 2016).
Business Environment in France
The impacts of the external business environmental factors on the working of the
company will be known with the help of the application of PESTLE Analysis will be done. With
the help of this analysis, it will be possible to have an idea about the market and environment and
market conditions of companies in France. This analysis will also help in deciding the company
to enter or not in the new market or what strategies, the company needs to develop in order to
make their business in France.
This analysis in the following context says that with the help of which it is possible to
know about the influences that has been created by the external environmental factors on the
working of the organisation and its working. The following analysis will be applied to the
Automotive Industry of France so that Continental AG may have an idea about the market
conditions and think upon their decision to establish their market in France or not. The
description of the factors which are covered under this analysis is discussed as under:
Political Factors: With the help of these factors, the impact on the working of an organisation
will be created as it contains many other factors in it such as due to changes in the governmental
policies, rules and regulations, employment law, labour laws, consumers laws and many more
which impacts upon the working of an organisation in either positive or negative way (Shenoy
and Aithal, 2017).
The political stability of the country is covered under the strength of this country which
will allow Continental Tyres to make stable and long term policies for the growth and
development of the country. In addition to this, the company is also having good bilateral
relation with Germany and also the trade relations. The government also gives encouragement to
Foreign Direct Investment and provide opportunities to both companies and employees.
Economical Factors: These are the factors which influences the working of an organisation with
the help of many factors such as due to the changes in the interest rates, inflation, deflation,
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disposable incomes of customers, GDP of a country and many more that changes the working of
an organisation.
France is counted among one of the Ten Top Economies in the world with good and
increasing GDP. With the help of this point, it is clear that good GDP means that the purchasing
power of the people living there will also be high and this will allow the business to have
increment in their profits. There are many big automotive companies operating there to which
Continental can make contracts and make their business to grow and develop. So from this point
of view also, the expansion can made (Aithal, 2017). This will help Continentals to carry out
Foreign Direct Investment helping organisation to make expansion process successful.
Social Factors: These factors also influences upon the working of an organisation in many ways
such as due to the changes in the tastes and preferences of people, their faith, beliefs and m,any
more which impacts upon the working of an organisation.
France is one of the most modern countries in the world. This country is famous for its
cars, culture, fashion and many more things and the people also makes use of luxurious products.
So this will help Continental to provide them with a different driving taste experiences which
will help in creating good image of the organisation and their products as well.
Technological Factors: These are those factors which impacts upon the working of an
organisation due to the changes made in the working of an organisation, changes in the way of
working, changes in the technological advancement which impacts upon the working of an
organisation.
In technology also, France is not behind anyone. The country launched their first satellite
around 50 years ago and had good history and present in the field of science, technology, IT, and
space technology. However, the country lacks in good computer engineers but this is an
opportunity for the company to take their own engineers from other countries which could
provide good services and do excellent innovations which will help in developing market share.
So the following factor is also in favour of the organisation so business expansion idea can be
executed (Aithal, 2017).
Legal Factors: These are those factors which impacts upon the working of an organisation when
the government of a country introduces some new laws and regulations only for some
businesses, in that case, the impact of these laws are considered under the legal factors.
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The French Government has also made some laws for the safety and security of
employees in order to prevent them from discrimination such as the breaks to be provided to
employees within 4.5 hours and also provisions such as sick leaves, maternity leaves, paternity
leaves and many more but the fulfilment of these obligations will provide the company with
good benefits such as good brand image, employee satisfaction and many more. So the idea of
expansion is feasible. The fulfilment of these obligations will help the company to make Foreign
Direct Investment in that country also.
Environmental Factors: These are those factors which impacts upon the working of an
organisation due to the working of an organisation and the impact which the organisation creates
upon the environment. For example, the bad impact of the working of an organisation on the
environment such as pollution, emission of harmful gases are considered among these factors.
The last discussion has been made about the environmental factors which is impacting
upon the working of an organisation. It is because of many tourist places in France, natural
disasters, water pollution and many more. So the government is more concerned about
environment. So Continental must take care of this aspect as well which will provide the
company with good benefits (Aithal, Shailashree and Kumar, 2016).
Overall, it can be said that the impact of these factors will be positive and have
favourable conditions in which Continental AG could make their expansion process.
Analysis of the Business Scenario
The following organisation Continental AG will expand the operations and their physical
existence in the France due to the high use of cars, sports cars, good financial position of the
country and the people as well. The GDP of the country is also increasing which is a positive
point for the company as the business expansion will result and give many opportunities to the
organisation.
On the basis of various positive impacts of establishing business there, the Continentals
AG has now making their plan to expand the business to France. In the benefits of business
expansion, there are many opportunities which have been considered by Continentals such as
good relation in between France and Germany. Due to this, it will help positively to the
organisation because it will increase their opportunities of growth to Germany also and there are
many trade benefits as well which the company may have due to expansion. In addition to this,
the benefit is also related to the technological advancement of the country in many fields that
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will help the organisation to develop more competencies and acquire the chances of growth. The
government is also taking initiatives to encourage Foreign Direct Investment in the country as
thee are high employment opportunities in the country.
Even after this, there are also several drawbacks that Continental may face due to the
expansion in France. It is related to the low availability of engineers there due to this the
company will lack in engineering works. This will increase the costs of the company's operations
as it has to hire them from their own country. The rules regulations related to the leaves and
working hours of the employees are also very strict to follow and the non fulfilment of these
obligations will make the company to face severe consequences (Aithal, Shailashree and Kumar,
2016).
Overall, it can be said that there are not much restriction which are impacting upon the
working of the organisation and will make the expansion process of the company to be
successful.
Porter's Five Forces Model:
With the help of this analysis, it will be possible to know about the industry attractiveness
and the profitability level. So the application of this analysis on Automotive Industry of UK has
been given as under:
Competitive Rivalry: The consideration in the following power is related to the number of
competitors of an organisation present currently in the market. So looking upon the current
market conditions, it can be said easily that competition is not much intense in the market as the
organisation could make its main focus on the making contract with other luxury car
manufacturers which will become a regular source of income for Continental. But the overall
number of competitors for Continental AG is very limited so the wallop of this force on the
practical of the system is considered as low.
Bargaining Power of Customers: In the following power, the consideration is taken about the
extent to which the customer have the power to influence the prices of the company. On the basis
of current market situations, there are less companies and also they are not innovated as much as
of Continental AG. Th organisation is having different types of products and services with the
help of which it has become possible for the company to make differentiate their products and
services from that of competitors (Aithal, VT and Kumar, 2016). This differentiation in the
quality, size and many factors in the products and services of Continental AG helps in reducing
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the bargaining power of customers as low. So the customers do not have much control over their
prices.
Bargaining Power of Suppliers: In the following power, the consideration is taken about the
extent to which the suppliers can influence the prices of their raw materials for the organization
in the way in which they want. The raw material which has been used by the organisation in
order to make their products and services are easily available with the suppliers. So it is not
difficult for the organisation to acquire sufficient amount of raw material in order to continue the
operations of the company in the way in which they want. From this, it can be said that the
suppliers do not have much power over the prices of the raw material needed by the organisation
for continuing the processes of the company (Perera, 2017).
Threat of New Entrants: In this power, the consideration is taken about the level to which the
organisations are free to enter and exit the market in which the organisation is dealing. In other
words, the consideration is about the easiness to enter and make business in the market.
However, there are not much restrictions on the companies to enter in this market but there must
be something to provide with the companies so that they could provide them to their customers
for the fulfilment of their needs and demands. This differentiation in the products and service is
with Continental AG as the following organisation is having differentiated products from that of
other companies in the industry. On the very basis of entering in the market the following power
is considered as high but on the basis of standing organisations on the basis of quality, it will be
Continental AG as other organisations are not much advance which Continental AG is.
Threat of Substitutes: In the following power, the consideration has been taken about the
chances people could shift to the products and services of other companies. There are many
substitutes available which can be used in place of other Continental AG but the main issue is
regarding the safety and security which other organisations do not provide but Continental AG
provides. But overall looking from the perspective of threat of substitutes this power is
considered as high.
Overall, it can be said that the industry attractiveness is moderate and the chances of
growth and development of Continental AG is high in the market (Shenoy and Aithal, 2016).
CONCLUSION
From the above assignment, it has been concluded that with the help of PESTLE
Analysis it will be possible for the company to know about the impact of macro environmental
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factors which will be created on the working of an organisation. In addition to this, it is also
concluded that with the help of Porter's Five Forces Model, it will be possible to have knowledge
about the industry and its attractiveness which will also provide an idea the organisation to work
on their expansion process or not.
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REFERENCES
Books and Journals
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International Journal of Management, Technology, and Social Sciences (IJMTS). 2(2).
pp.40-54.
Aithal, P. S., 2017. Industry Analysis–The First Step in Business Management Scholarly
Research. International Journal of Case Studies in Business, IT and Education
(IJCSBE). 1(1). pp.1-13.
Aithal, P. S., Shailashree, V. and Kumar, P. M., 2016. ABCD analysis of Stage Model in Higher
Education. International Journal of Management, IT and Engineering. 6(1). pp.11-24.
Aithal, P. S., Shailashree, V. and Kumar, P. M., 2016. Application of ABCD Analysis
Framework on Private University System in India. International Journal of
Management Sciences and Business Research. 5(4). pp.159-170.
Aithal, P. S., VT, S. and Kumar, P. M., 2016. Analysis of ABC Model of Annual Research
Productivity using ABCD Framework. International Journal of Current Research and
Modern Education (IJCRME), ISSN (Online), pp.2455-5428.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Shenoy, V. and Aithal, P. S., 2016. ABCD Analysis of On-line Campus Placement Model. IRA-
International Journal of Management & Social Sciences,(ISSN 2455-2267). 5(2).
pp.227-244.
Shenoy, V. and Aithal, P. S., 2017. Quantitative ABCD Analysis of IEDRA Model of Placement
Determination. International Journal of Case Studies in Business, IT and Education
(IJCSBE). 1(2). pp.103-113.
Online
What Is Business Environment? - Definition & Factors. 2019. [Online]. Available Through:
<https://study.com/academy/lesson/what-is-business-environment-definition-factors-
quiz.html>
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