Group 7

Core CompetenceA harmonized combination of multiple resources and skills that distinguish a firm in the marketplaceCore competence is.the collective learning in the organizationa bundle of skills integrated to make a company uniquecreated from the coordination, integration and harmonization of diverse skills and multiple streams of technologiesUnlike physical assets, competencies do not deteriorate as they are applied and shared. They grow.

Link of core competence with corporationThe article emphasizes the importance of core competence of a corporation and asks management to develop their organization based on core competenceRethinking the Corporation The Roots of Competitive Advantage How Not to Think of Competence From Core Competencies to Core Products The Tyranny of the SBU Developing Strategic Architecture Redeploying to Exploit Competencies

Rethinking the Corporation

The critical task for management is to create an organization capable of infusing products with irresistible functionality or, better yet, creating products that customers but have not yet even imagined.

GTE vs. NEC Example

GTENECIndustry Position 1980Sales $9.98B, Net Cash Flow $1.73BWell positioned to become major player in information technology industryActive in telecommunicationsSales $3.8 BComparable technological base and computer business No experience in telecommunicationsManagement ConceptsNo strategic intent or architecture Senior Managers continued to function as individual business unitsStrategic Focus to bridge gap between telecommunications and office automation Core Competency - SemiconductorsC&C Computing and Communications CommitteeBusiness MovesDivested Sylvania TV and Telenet Joint Ventures for switching, transmission and digital PABX Closed down semiconductorsConsolidated position in mainframe computersMoved beyond switching and transmission to include mobile phones, fax machinesExecution Increasingly dependent on outsiders for critical skills Used collaborative arrangements (strategic alliances) to build knowledgeIndustry Position 1988Sales $16.46BTelephone operating company with position in defense and lightingSales $21.89 BWorld leader in semiconductors and first-tier in telecommunicationsResultPortfolio of BusinessesPortfolio of Competencies

Roots of Competitive AdvantageCompanies using competencies experience rapid growth:Canon, Honda outpaced rivalsSony, Casio, Yamaha invented new devices

Consolidating corporate-wide technologies and resources into competencies is the key to success

How Not to Think of CompetenceCompanies consider themselves as bundles of product making businesses (remember Marketing Myopia!) and is focused on price/performance attributes of current productsBuilding core competencies is different from integrating vertically.Cultivating core competence does not mean outspending rivals on R&D or getting businesses to become more vertically integrated

From Core Competencies to Core Products

The Tyranny of the SBU

Developing Strategic ArchitectureA strategic architecture is a road map of the future that identifies core competencies to build and their constituent technologies. A strategic architecture should aim at building competencies. Training helps.Creates a managerial culture of team work, capacity to change, and willingness to share resourcesProtects proprietary skills, offers consistency in resource allocation and allows us to think long term around thatReduces the investment needed to secure future market leadershipProvides logic for product and market diversification

Redeploying to Exploit CompetenciesIdentify competencies and the projects and people connected with them.Recognize that core competencies are corporate recourses and may be reallocated as needed.Divisional managers come together and decide the needed investment to build each competency.Cooperative SBU managers must be recognized for their team work.Expose people by using a rotation program.End goal: Strong feeling of community and customer focus.

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