the core competence of the corporation
TRANSCRIPT
The Core Competence of the Corporationteddy – benny – diena
1Classified - Highly Confidential
Introduction
Rethinking The Corporation
The Roots Of Competitive Advantage
How Not To Think Of Competence
Identifying Core Competencies And Losing Them
From Core Competencies To Core Products
The Tyranny Of SBU
Developing Strategic Architecture
Redeploying To Exploit Competencies
2
Content
Classified - Highly Confidential
3
Perspective of core competences
• Concept of core competences:
• C.K. Prahalad
Professor of corporate strategyand intenational business atUniversity of Michigan.
• Gary Hamel
Lecturer in business and policymanagement at LondonBusiness School
Classified - Highly Confidential
4
Introduction: Main Idea
• Idea: The evolution of globalmanagement and theemergence/importance ofcompetency-minded management.
Classified - Highly Confidential
5
Introduction: Core Competencies
• What is Core Competence???
• Core Competence is :
Classified - Highly Confidential
a bundle of skills integrated to make acompany unique
The engine for new businessdevelopment, underlying component of acompany’s competitive advantage
Created from the coordination,integration and harmonization of diverseskills and multiple streams of technologies
6
Rethinking The Corporation
• Build product for customersneed but have not yet evenimagined.
• Requires radical change inthe management of majorcompanies.
• Understand the changingbasis for global leadership
Classified - Highly Confidential
7
Rethinking The Corporation
Classified - Highly Confidential
NEC GTE• Strategic architecture: to
exploit the convergencecomputing andcommunicating ( C&C )
• Acquired competenciesin semiconductors.
• Used Collaborativearrangements tomultiply internalresources
• Now a world leader inconsumer electronics
• No strategic architectureexisted
• Decentralization made itdifficult to focus on corecompetence
• Senior managers workedas if they weremanaging independentbusiness unit.
• No Mutual decision wasmade
8
The Roots Of Competitive Advantage
Classified - Highly Confidential
• In the short run, a company’scompetitiveness derives from the priceattributes of current products
• In the long run, competitiveness derivesfrom the ability to build a lower cost andmore speedily than competitors, the corecompetencies that spawn unanticipatedproducts
• Real resources of advantage are to befound in management’s ability toconsolidate corporate-wide technologiesand production skills into competenciesthat empower individual business toadapt quickly to changing opportunities
9
The Roots Of Competitive Advantage
• The diversified corporation is a largetree.
Classified - Highly Confidential
The trunk and major limbs arecore products
The smaller branches arebusiness units
The leaves, flowers and fruitare end product,
The root system that providesnourishment, substance andstability is the core product.
10
The Roots Of Competitive Advantage
• There are major companies thathave had the potential to build corecompetencies but failed because ofan inability to conceive of thecompany as anything other than acollection of discreet business.
• Management trapped in the SBUmind-set almost inevitably finds itsindividual businesses dependent onexternal sources for criticalcomponents.
Classified - Highly Confidential
11
How Not To Think Of Competence
Classified - Highly Confidential
• In the core competencies underlying them,disparate business become coherent.
• Unlike the battle for global brand dominance,which is visible in the worlds broadcast andprint media, the battle to build world classcompetencies is invisible to people who aren'tdeliberately looking for it
• Cultivating core competence does not meanoutspending rivals on R&D or sharing costbetween SBU.
• Building core competence is more ambitiousand different than integrating vertically
12
Identifying Core Competencies And Losing Them
Three test to identify corecompetencies of a company:
1. It provides potential access to a widevarieties of markets.
2. It makes a significant contribution tothe perceived customer benefit of theend products.
3. It should be difficult for competitorsto imitate.
Classified - Highly Confidential
13
Identifying Core Competencies And Losing Them
Ways to losing the core competenciesof a company:
1. Get depends on outsourcing.Outsourcing may a good shortcut for acompetitive product, but may ruin thecore competencies to sustain productleadership.
2. Forgoing the opportunities to establishcompetencies that are evolving inexisting business.
Classified - Highly Confidential
14
From Core Competencies to Core Products
Tangible link between identified corecompetencies and end products is“the core product”;
the components or subassembliesthat actually contribute to the value
of the end product.
Classified - Highly Confidential
15
From Core Competencies to Core Products
Should have distinctions between:
Classified - Highly Confidential
Core competencies Core products End products
Ability to miniaturized electronics
Portable music player Sony Walkman
Strong brand & distinct taste
“Secret” Coke concentrate
Coca-Cola
Indexing technologies & large-scale hardware
Internet based productivity tools
Google doc, mail, search engine, etc
Source:http://www.ukessays.com/essays/business/analysing-the-core-competencies-of-google-inc-business-essay.phphttp://www.ukessays.com/essays/business/coca-cola-a-resource-based-view-business-essay.php
16
The Tyranny of SBU
Strategic Business Unit & Core Competence
Classified - Highly Confidential
17
The Tyranny of SBU
SBU put today’s competition as main focus, while ithas three damage cost:
Classified - Highly Confidential
1. Under-investment in developingcore competencies and coreproducts
2. Imprisoned resources
3. Bounded innovation
18
Developing Strategic Architecture
Strategic Architecture is “a road map of the futurethat identifies which core competencies to build andtheir constituent technologies”.
By providing an impetus for learning from alliancesand focus for internal development efforts, a strategicarchitecture can dramatically reduce the investmentneeded to secure future market leadership.
Classified - Highly Confidential
19
Redeploying to Exploit Competencies
Core competencies are corporate resources and maybe reallocated by corporate management.
Reward system that focus only on product-line resultsand career path that seldom cross SBU boundariesengender pattern of behavior among unit managersthat are destructively competitive.
Classified - Highly Confidential
20
Redeploying to Exploit Competencies
Ways to wean key employees off the idea that theybelong in perpetuity to any particular business:
In early careers; they may be exposed to varietyof business through carefully plane rotationprogram.
In mid career; periodic assignment to cross-divisional projects may necessary.
Classified - Highly Confidential