Continental Group Business Policies & Strategies

The Continental Group case presents a number of critical issues for the company. The primary issue is the diversification into four business areasùpackaging, financial services, energy, and forest products. Although originally a packaging company, Continental branched out into the additional areas on the advice of outside consultants who were experts in each of the business areas. The company has not achieved a competitive advantage in these areas, however, and needs to make a decision about how to regroup to achieve an advantage. Another critical issue is the companyÆs financial position. In the most recent four years, its overhead costs have totaled approximately $200,000,000, and its ôdebt is structured so that at least 40% of the net sale price of any assets must be paid to the debt holdersö (ôThe Continental Group, Inc.ö 9).

ContinentalÆs problem is that it has diversified into many segments without achieving a strong position in any of them. It did not even confine itself to the packaging industry but delved into peripheral areas that do not appreciably build its packaging business.

The problem can only be justified by resting the lionÆs share of responsibility on the outside consultants who advised Continental to diversify as it did. It is important to note, however, that each of the consultants was an expert in a specific industryùpackaging, financial services, energy, and forest productsùbut no consultant wa

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uld give it a competitive advantage. In the forest products business, ContinentalÆs consultants stated that its timberland would only be a valuable asset to the company as long as it remained in the paperboard business where timberland could provide low-cost availability to the timber needed for making paperboard (ôThe Continental Group, Inc.ö 8); otherwise, it would do better to divest itself of its timberland, since other larger companies had greater economies of scale and greater market power with customers (ôThe Continental Group, Inc.ö 9). Remaining in the paperboard business would require major changes, since consultants pointed out that ContinentalÆs paperboard plants were employing ônear obsolete technologyö and ôshowed signs of poor preventive maintenance practices,ö as well as utilizing a plant whose market value was overstated by at least $200,000,000 (ôThe Continental Group, Inc.ö 8). In the energy business, the company is ôa baby to the industry giants,ö according to an industry analyst (ôThe Continental Group, Inc.ö 4). It does have a strong position in some segments; it is the State of FloridaÆs largest energy supplier, for example (ôThe Continental Group, Inc.ö 4). However, in terms of energy exploration and produ
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Approximate Word count = 2052
Approximate Pages = 8 (250 words per page)

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