sts that the decisions it made with regard to the four businesses were not tied to any goals or strategic framework but were made on the basis of individual recommendations by consultants. In comments to the press in 1984, ContinentalÆs chief executive officer, S. Bruce Smart, Jr., stated that ContinentalÆs new objectives at that time were ô1. to prove that a management that began in one business can successfully manage a variety of businesses, and 2. to spread the culture of competitive excellence throughout the companyö (Davidson 18). These are vague objectives that do not lead to any quantifiable business outcomes; perhaps this statement is the first key to ContinentalÆs troubles.
ContinentalÆs business situation is marked by a restructure in 2001 that did not do away with the four disparate business segments. This left the company in a noncompetitive position, since its presence in each of the four businesses is too small and too shallow for it to compete with industry giants.
An analysis of ContinentalÆs business situation must be addressed both in terms of its overall situation and within the context of each of the four businesses. Overall, the companyÆs financial statistics show increasing revenues with concomitant increases in gross margin, assets, and return from 1992 through 2002, but in 2004, all of the financials except the share price took a sudden dip (ôThe Continental Group, Inc.ö Exhibit 1). The company clearly needs to recover financiallyùsomething it was able to do between 1990 and 1992 when such a dip took place before, and to do so it must address the business reasons for its lagging financials. Since it is segmented into the four businesses, it is not big enough in any one of them to achieve economies of scale, and thus has to sacrifice some of its profits to the inefficiencies of running multiple smaller businesses.
Within the context of each of the four businesses, Continental has diffe...