thecorecompetenceofthecorporation-131213004715-phpapp01
TRANSCRIPT
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The Core Competence of the
Corporation
Ref: CK Prahalad & Gary Hamel
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A Tale of Two CompaniesNEC:% of Total Sales-1990
Comm Sys &
Eqpt
25%
Comp & Ind
Electronic
Devices
45%
ElectronDevices
18%
Other
12%
GTE: % of Total Sales-1990
Tel Ops
70%
Comm Prods &
Services
18%
Electrical
Products
12%
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NEC vs GTE
Sales
0
5
10
15
20
25
81 82 83 84 85 86 87 88 89 90
Year
US$
bn
NEC
GTE
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WW Electronic Supplier Ranking-1987
Sales US $ bn
Computers Telecomms SemiConductors
IBM 50 AT&T 17 NEC 3
UNISYS 10 ALCATEL-ITT 8 HITACHI 2.5
DEC 9 NORTEL 4 TOSHIBA 2.5
FUJITSU 7 NEC 4 MOTOROLA 2.5
NEC 6 SIEMENS 3 TI 2
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Determinants of Firm Profitability
PESTE
15%
5 Forces
40%
You
(Management)45%
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The Three Stages of Competition
OPPORTUNITYHORIZON
STRATEGICARCHITECTURE
COMPETITIVESTRATEGY
Visionof future mkts
Corporate ambitionSense of purpose
Resources (
technology,brands etc)
Competencies
Skills
Industry analysis
Strategic segmentation& positioning
Cost & differentiation
drivers
Competition forExisting Markets
Competition forResources &
Competencies
Competition for
Dreams
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Want to build your brand, create new markets and delight
customers?
Strengthen core
competencies
collective knowledge
that gathers yourfirms diverse skills
and technologies into
one laser-sharp
strategy
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Focus on
Price &
Performance
Short Term
Competitiveness
Ability to build Core
Competencies that generate
Products of the Future
Long Term
Competitiveness
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3 STEPS TO STAYING AHEAD OF
COMPETITION
1. CLARIFY CORE COMPETENCIES
2. BUILD CORE COMPETENCIES
3. CULTIVATE CORE COMPETENCY MINDSET
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CLARIFY CORE COMPETENCIES
1. Articulate Strategic Intent
2. Identify Core Competencies
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Articulate A Strategic Intent
NEC: Exploit the convergence of computing &
communications
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Consider 2 Firms
Firm A Firm B
Aspirations: Modest High
SLACK STRETCH
Resources: High Modest
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Consider 2 Firms (contd)
Firm A
Hi Risk Low Creativity
Firm B
Low RiskHigh Creativity
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Strategic IntentWho would you have bet on 30 years ago?
CATERPILLAR or KOMATSU ?
PHILIPS or SONY ?
RCA or MATSUSHITA ?
GM or HONDA ? HONEYWELL or NEC
PAN AM or BRITISH AIRWAYS ?
CBS or CNN ?
XEROX or CANON ?
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More Examples of Strategic Intent
3M: To solve unsolved problems innovatively
Merck: To preserve and improve human life
Nike:To experience the emotion of competition,winning and crushing
competitors
WalMart: To give ordinary folks the chance to buy the same things as
rich people
Walt Disney: To make people happy
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Identify Core Competencies
How long could we dominate this business if we didntcontrol this competency?
What future opportunities would we lose without it?
Does it provide access to multiple markets? (Casios corecompetence with display systems let it succeed incalculators, laptop monitors and car dashboards)
Do customer benefits revolve around it? (Hondascompetence with high revving, light weight engines offersmultiple consumer benefits)
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BUILD CORE COMPETENCIES
1. Invest in needed technologies. e.g. Citicorp
2. Infuse resources throughout business units to outpace
rivals. e.g. 3M, Honda
3. Forge Strategic Alliances.
e.g. NEC - Honeywell
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CULTIVATE A CORE COMPETENCY
MINDSET
1. Stop thinking of business units as sacrosant
2. Identify projects & people who embody the firms core
competency
3. Gather managers to identify next generation competencies
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Core Competency
(Harmonizing technologies & skills)
3M
Sandpaper
Magnetic Tape
Reflecting Sheet
Sony
Miniaturization
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Competencies: The Roots of Competitiveness (Strategic Architecture)
Competency
1
Competency
2
Competency
3
Competency
4
Core Product 1
Core Product 2
Business
1
Business
2
Business
3
Business
4
1 2 3 4 5 6 7 8 9 10
End Products
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The diversified corporation , is like a large
tree. The trunk and major limbs are core
products, the smaller branches are
business units. The leaves, flowers and
fruits are end products. The root system
that provides the nourishment, sustenanceand stability is the core competency.
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Core Competencies at Canon
Core Competencies
Precision mechanics
Fine optics Micro-electronics
Core Products
Camera
Printer Copier
Aligners
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The Core Product
Reduces fragmentation
Unifies underlying skills
Allows selling to competitors
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A New View of the Corporation
(Layers of Competitive Advantage)
Portfolio of Businesses
Portfolio of Core Competencies
Portfolio of Core Products
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Vickers Map of Competencies
Vickers Map of Competencies
Electronic Controls
-Valve amplifiers
Logic
Motion
Fluid Power
Electrohydraulic
Pumps
Control Valves
Electric Power
AC/ DC
Servo
Stepper
Sensors
Valve/Pumps
Actuator
Machine
System Engineering
Application Focus
Power/Motion
Control
OfferingsSystems Packages Components Service
Training
Focus Markets
Factory Automation Off Highway Missiles/Space
Automative Systems Commercial Aircraft Defence Vehicles
Plastic Process Military Aircraft Marine
Electric Products
Actuators
Fan Packages
Generators
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2 Concepts of the Corporation: SBU or Core Competence
SBU Core Competence
Basis for competition Competitiveness oftodays products Interfirm competition tobuild competencies
Corporate Structure Portfolio of businesses
related in product-market
terms
Portfolio of
competencies,core
products and businesses
Status of the business unit Autonomy issacrosanct;the SBU
ownsall resources
other than cash
SBU is a potentialreservoir of core
competencies
Resource Allocation Discrete businesses are
the unit of analysis;
capital is allocated
business by business
Businesses &
competencies are the unit
of analysis;top
management allocates
capital &talent
Value added of top
management
Optimizing corporate
returns thrucapital
allocation trade-offsamong businesses
Enunciating strategic
architecture & building
competencies to securefuture
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Unleashing Corporate Imagination
Escape the myopia of served market
Think functionality
Challenge price/ performance assumptions
Discover white space opportunities
Employ expeditionary marketing
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Toshibas New Models of Laptops(expeditionary marketing)
1986 4 models
1987 6
1988 8
1989 5
1990 - 10
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The Tyranny of the SBU
Under investment in core competencies and core products
Imprisoned resources
Bounded innovation
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Mobilizing the Organization
Establish an aspiration
level
Analyse with cross-functional teams
Deploy throughout the
organization.