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Final international marketing presentation

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Afzaal Ali
Afzaal Ali

This document discusses the concept of core competencies and how they contribute to competitive advantage. It provides examples of how Japanese companies like NEC identified and built upon their core competencies in technologies like semiconductors and telecommunications to grow significantly between 1980 and 1988, while American companies like GTE that did not focus on core competencies fell behind. The key lessons are that companies must identify their core competencies, invest in building them up, and use strategic architectures to guide competence acquisition and new business development in order to secure long-term competitiveness.

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The Core Competence of the Corporation Afzaal Ali
C.K. Prahalad Coimbatore Krishnarao Prahalad ◦ Doctorate from Harvard Business School ◦ Professorships in University of Michigan, INSEAD, and IIM ◦ Co-founder of Praja Inc., where he tried his wings as an entrepreneur ◦ Corporate strategy, the role of management in diversified multinational corporations
Gary Hamel Gary Hamel ◦ Doctorate from the University of Michigan ◦ Professorship in London School of Economics ◦ Founder and president of Strategos, an international management consultancy ◦ Core competence, strategic intent, industry revolution
Basic Theme A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication.
Core Competence  Fundamental knowledge ability or expertise in a specific subject area or skill set  A bundle of skills integrated to make a company unique.  The engine for new business development, underlying component of a company’s competitive advantage.  Created from the coordination, integration and harmonization of diverse skills and multiple streams of technologies.
Business Portfolios in 1980 NEC Telephone Switching & transmission systems Digital PABX Semi-conductors Packet Switching GTE Defense system Lighting products Satellite Telenet Sylvania TV Only comparable in technological base and computer business While NEC had no experience of telecommunication
Comparison between sales revenues of NEC & GTE 21.89 NEC 3.8 1980 1988 1980 1988 Series 1 9.98 16.46 GTE 1980 1988 NEC 21.89
Business Portfolios in 1988 NEC Telephone Switching & trans. systems Digital PABX Semi-conductors Packet Switching GTE Defense system Lighting products Satellite Telenet Sylvania TV World Leader (NEC) Semi-conductors First Tier Player 1. Telecommunication Products 2. Computers New Entries 1. Mobile Telephones 2. Laptop computers 3. Facsimiles machines
Why ?  Strategic intent and Strategic architecture of “C & C” (computing and communication)  Constituted a “C & C” committee  Identify three interrelated streams of technology and market evolution  Care about “core product “and built strategic alliances  Used collaborative arrangements to multiply internal resources. Now a world leader in consumer electronics Image source: NEC
GTEWhy not? No strategic Architecture existed.  Decentralization made it difficult to focus on core competence.  Senior managers worked as if they were managing independent business unit. No mutual decision was made.
The Roots of Competitive Advantage NEC GTE A Portfolio of competencies A Portfolio of Business across many industries VS From 1980 to 1988, the achievements of Japanese companies—  Low cost and High quality  Inventing new markets, creating new products and enhancing them in Vangured markets  Also in established markets they also made great challenge to Western Companies. Many examples are given in this articles:  Canon (personal copiers), Honda (from bikes to four wheelers).  Sony, Casio, Yamaha, Komatsu invented new devices.
WHAT’S THE PROBLEM IN MANY WESTERN COMPANIES ?
The Problem in manyWestern Companies? Their senior executives are less capable than those in Japan They limit the ability of individual businesses to fully exploit the deep technological capabilities Japanese companies possess greater technical capabilities In the long run, competitiveness derives from an ability to build the core competencies at the lower cost and faster than competitors
Corporation End Products Business Units Core Products Core Competencies Provides nourishment, sustenance, and stability
The Characteristics of Core Competencies Core competencies are collective learning in the organization, especially how to coordinates diverse production skills and integrate multiple streams of technologies Core competencies are communication , involvement, and deep commitment to working across organizational boundaries. Involves many level of people and all functional units It is also about the organization of the work and the diversity of the value Does not diminish with use. And core competencies are also the engine for new business development.
Identifying Core Competencies – Three Tests Core Competency Identify Accessibility: Provide potential access to a wide variety of markets Value-creation: make a significant contribution to perceived customer benefits of the end product Uniqueness: Be difficult for competitors to imitate
Losing Core Competencies Core Competency lose Outsourcing the core competencies Having an Alliance Forgoing opportunities to establish core competencies
Losing Core Competencies Outsourcing the core competencies Having an Alliance Forgoing opportunities to establish core competencies
Key Lessons Throw out a baby with bath water in divestment decision The costs of loosing core competency can be only partly calculated in advance. A company has failed to invest in core competence building will find it very difficult to enter an emerging market. When it comes to core competencies, it is difficult to get off the train, walk to the station, and then reboard e.g. Motorola
From Core Competencies to Core Products Core Competence Core Product End Product
SBU or Core Competence Core Competence  Inter-firm competition to build competencies.  Portfolio of competencies, core products, and businesses.  SBU is potential reservoir of core competencies.  Businesses and competencies are the unit of analysis: top management allocates capital and talent.  Articulating strategic architecture and building competencies to secure the future.  Competitiveness of today’s products.  Portfolio of businesses related in product market terms.  Autonomy is valued, the SBU “owns” all resources other than cash.  Discrete businesses are the unit of analysis, capital is allocated business by business.  Optimizing corporate returns through capital allocation trade-offs among businesses.
Strategic Architecture A road map of the future that identifies which core competencies to build and their constituent Technologies What’s is the strategic architecture Advantages:  Motivate organizations to learn from alliances  Help organizations to ensure internal development efforts  Reduced the investment needed to secure future market leadership  Help companies to find a distinct competitive advantage  A tool for communicating with customers and other external constituents
Conclusion  People critical to core competencies are corporate assets to be deployed by corporate management.  Core Competencies are wellspring of new Business Development.  Only if the company is conceived of as a hierarchy of core competencies, core product and market-focused business will it be fit to fight.  Top management must add value by articulating the strategic architecture that guides the competence acquisition process
Core Competencies of Corporations Past Present Future
Core Competencies of Corporations
Final international marketing presentation

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Final international marketing presentation

  • 1. The Core Competence of the Corporation Afzaal Ali
  • 2. C.K. Prahalad Coimbatore Krishnarao Prahalad ◦ Doctorate from Harvard Business School ◦ Professorships in University of Michigan, INSEAD, and IIM ◦ Co-founder of Praja Inc., where he tried his wings as an entrepreneur ◦ Corporate strategy, the role of management in diversified multinational corporations
  • 3. Gary Hamel Gary Hamel ◦ Doctorate from the University of Michigan ◦ Professorship in London School of Economics ◦ Founder and president of Strategos, an international management consultancy ◦ Core competence, strategic intent, industry revolution
  • 4. Basic Theme A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication.
  • 5. Core Competence  Fundamental knowledge ability or expertise in a specific subject area or skill set  A bundle of skills integrated to make a company unique.  The engine for new business development, underlying component of a company’s competitive advantage.  Created from the coordination, integration and harmonization of diverse skills and multiple streams of technologies.
  • 6. Business Portfolios in 1980 NEC Telephone Switching & transmission systems Digital PABX Semi-conductors Packet Switching GTE Defense system Lighting products Satellite Telenet Sylvania TV Only comparable in technological base and computer business While NEC had no experience of telecommunication
  • 7. Comparison between sales revenues of NEC & GTE 21.89 NEC 3.8 1980 1988 1980 1988 Series 1 9.98 16.46 GTE 1980 1988 NEC 21.89
  • 8. Business Portfolios in 1988 NEC Telephone Switching & trans. systems Digital PABX Semi-conductors Packet Switching GTE Defense system Lighting products Satellite Telenet Sylvania TV World Leader (NEC) Semi-conductors First Tier Player 1. Telecommunication Products 2. Computers New Entries 1. Mobile Telephones 2. Laptop computers 3. Facsimiles machines
  • 9. Why ?  Strategic intent and Strategic architecture of “C & C” (computing and communication)  Constituted a “C & C” committee  Identify three interrelated streams of technology and market evolution  Care about “core product “and built strategic alliances  Used collaborative arrangements to multiply internal resources. Now a world leader in consumer electronics Image source: NEC
  • 10. GTEWhy not? No strategic Architecture existed.  Decentralization made it difficult to focus on core competence.  Senior managers worked as if they were managing independent business unit. No mutual decision was made.
  • 11. The Roots of Competitive Advantage NEC GTE A Portfolio of competencies A Portfolio of Business across many industries VS From 1980 to 1988, the achievements of Japanese companies—  Low cost and High quality  Inventing new markets, creating new products and enhancing them in Vangured markets  Also in established markets they also made great challenge to Western Companies. Many examples are given in this articles:  Canon (personal copiers), Honda (from bikes to four wheelers).  Sony, Casio, Yamaha, Komatsu invented new devices.
  • 12. WHAT’S THE PROBLEM IN MANY WESTERN COMPANIES ?
  • 13. The Problem in manyWestern Companies? Their senior executives are less capable than those in Japan They limit the ability of individual businesses to fully exploit the deep technological capabilities Japanese companies possess greater technical capabilities In the long run, competitiveness derives from an ability to build the core competencies at the lower cost and faster than competitors
  • 14. Corporation End Products Business Units Core Products Core Competencies Provides nourishment, sustenance, and stability
  • 15. The Characteristics of Core Competencies Core competencies are collective learning in the organization, especially how to coordinates diverse production skills and integrate multiple streams of technologies Core competencies are communication , involvement, and deep commitment to working across organizational boundaries. Involves many level of people and all functional units It is also about the organization of the work and the diversity of the value Does not diminish with use. And core competencies are also the engine for new business development.
  • 16. Identifying Core Competencies – Three Tests Core Competency Identify Accessibility: Provide potential access to a wide variety of markets Value-creation: make a significant contribution to perceived customer benefits of the end product Uniqueness: Be difficult for competitors to imitate
  • 17. Losing Core Competencies Core Competency lose Outsourcing the core competencies Having an Alliance Forgoing opportunities to establish core competencies
  • 18. Losing Core Competencies Outsourcing the core competencies Having an Alliance Forgoing opportunities to establish core competencies
  • 19. Key Lessons Throw out a baby with bath water in divestment decision The costs of loosing core competency can be only partly calculated in advance. A company has failed to invest in core competence building will find it very difficult to enter an emerging market. When it comes to core competencies, it is difficult to get off the train, walk to the station, and then reboard e.g. Motorola
  • 20. From Core Competencies to Core Products Core Competence Core Product End Product
  • 21. SBU or Core Competence Core Competence  Inter-firm competition to build competencies.  Portfolio of competencies, core products, and businesses.  SBU is potential reservoir of core competencies.  Businesses and competencies are the unit of analysis: top management allocates capital and talent.  Articulating strategic architecture and building competencies to secure the future.  Competitiveness of today’s products.  Portfolio of businesses related in product market terms.  Autonomy is valued, the SBU “owns” all resources other than cash.  Discrete businesses are the unit of analysis, capital is allocated business by business.  Optimizing corporate returns through capital allocation trade-offs among businesses.
  • 22. Strategic Architecture A road map of the future that identifies which core competencies to build and their constituent Technologies What’s is the strategic architecture Advantages:  Motivate organizations to learn from alliances  Help organizations to ensure internal development efforts  Reduced the investment needed to secure future market leadership  Help companies to find a distinct competitive advantage  A tool for communicating with customers and other external constituents
  • 23. Conclusion  People critical to core competencies are corporate assets to be deployed by corporate management.  Core Competencies are wellspring of new Business Development.  Only if the company is conceived of as a hierarchy of core competencies, core product and market-focused business will it be fit to fight.  Top management must add value by articulating the strategic architecture that guides the competence acquisition process
  • 24. Core Competencies of Corporations Past Present Future
  • 25. Core Competencies of Corporations