Core Competences
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Transcript of Core Competences
Core Competences at NEC and GTE
Team BachMgt693Spring 2008
Core Competencies
“Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies.”
Prahalad and Hamel, pg. 13
A core competency is something the firm does
well, that meets the following 3 tests:
It contributes significantly to the customers’ perceived value.
It’s hard for competitors to imitate.
It can be leveraged widely, to many products and markets.
Core Competencies
Honda’s internal
combustion engines
Core Competencies
What is Sony’s Core Competency?
Core Competencies
Start from the inside, out.
What does our firm do best?
Porter’s Five Forces
Looks at the environment, and starts from the outside, in.
What is the competition
doing?
A Japanese multinational IT company, NEC provides IT and network solutions to business enterprises, communications services providers and government.
GTE was the largest of the independent US telephone companies.
Service: provided local telephone service to a large number of areas of the US
In 2000, GTE was bought by Bell Atlantic, renaming itself Verizon Communications.http://www22.verizon.com/
NEC - “Core Competency”
NECCommunications Equipment
•Radio broadcast
•Microwave communications technology
Semiconductors
•1958 Signed a technology licensing agreement with GE
•1960 established its Integrated Circuits Division
•1960s moved into LSIs
•1967 moved into VLSIs
Computers
•1950 entered the computer industry
•1959 world’s first working transistorized computer
•1974 first Japanese microprocessor
•1979 developed it first PC
NEC - “Core Competency”
Strategy: C&C
Vision of NEC’s future as an integrator of Computers and Communications
through semiconductor technology
Computers Telecommunication Semiconductor
1 IBM AT&T NEC
2 Unisys Alcatel-ITT Hitachi
3 DEC Northern Telecom Toshiba
4 Fujutsu NEC Motorola
5 NEC Siemens TI
Worldwide electronic supplier ranking (1987)
GTE - “Core Business”
GTE
Telecommunications•1983 acquired GTE Sprint and GTE Spacenet
Lighting Precision materials
GTE-”Core Business”
Strategy:Sell or transfer underperforming or
non-core businessesFocus on new and enhanced communication businesses
Sold:
•Television & radio manufacturing operations
•Consumer communication products
•GTE Sprint
•Worldwide lighting, electronic product, space-based communications, and aircraft cellular phone business
Transferred:
•80% of GTE’s communication transmission and central-office switch-manufacturing activities
•80% of GTE’s business systems and PABX business
•1990s The merger with Contel Corporation
•Alliance with Vodaphone Airtouch
•Purchased BBN
•Agreements with Lycos, Qwest, and Cisco to enhance its position in “Internet-related business”
•Expand to foreign markets
Performance of NEC vs. GTESales
Sales in Millions of $'s NEC vs GTE
$-
$10,000
$20,000
$30,000
$40,000
$50,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
GTE
NEC
Performance of NEC vs. GTEGross Domestic Product
Year on Year GDP Growth Japan vs. US
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
US GDP Growth
Japan GDPGrowth
US JapanAverage year on year growth 1980-1988 7.2% 11.2%Average year on year growth 1989-1999 5.2% 3.1%
Performance of NEC vs. GTEGrowth Within Stock Markets
Nikkei 225 vs S & P 500Year on Year Growth
-80.0%-60.0%
-40.0%-20.0%
0.0%20.0%
40.0%60.0%
S & P 500
Nikkei 225
Performance of NEC vs. GTENet Income
Net Income in Million's of US $ NEC vs GTE 1980-1999
$(2,500)
$(1,500)
$(500)
$500
$1,500
$2,500
$3,500
GTE
NEC
From 1981-1988, GTE’s profit was almost 6 times that of NEC
From 1989-1998, GTE’s profit was almost 4 times that of NEC
Why Core Capabilities and not Core Competence?
• Core Competencies are important but they aren’t everything.
• The ultimate goal of any enterprise is profitability.
• According to Grant, there are 2 major sources of profitability:• Industry Attractiveness• Competitive Advantage
• Core Competencies are only key if they can be exploited to create a strong competitive advantage.
Resource Based Management: Where NEC Failed
• NEC lacked Organizational Capability & Flexibility• NEC failed to effectively exploit or develop:
• Sustainable competitive advantage:Continuously developing both existing and new capabilities/resources in response to a dynamic market.
• Distinctive CapabilitiesCharacteristics of your business that your competitors cannot replicate (your source of competitive advantage)
• Reproducible Capabilities Things that your competitors can easily
acquire.• Synergy = Distinctive Capabilities + Reproducible Capabilities