Core Competences

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Core Competences at NEC and GTE Team Bach Mgt693 Spring 2008

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Core Competences

Transcript of Core Competences

Page 1: Core Competences

Core Competences at NEC and GTE

Team BachMgt693Spring 2008

Page 2: Core Competences

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.

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Core Competencies

Honda’s internal

combustion engines

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Core Competencies

What is Sony’s Core Competency?

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Core Competencies

Start from the inside, out.

What does our firm do best?

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Porter’s Five Forces

Looks at the environment, and starts from the outside, in.

What is the competition

doing?

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A Japanese multinational IT company, NEC provides IT and network solutions to business enterprises, communications services providers and government.

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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/

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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

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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)

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GTE - “Core Business”

GTE

Telecommunications•1983 acquired GTE Sprint and GTE Spacenet

Lighting Precision materials

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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

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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

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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%

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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

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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

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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.

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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