The Core Competence of the Corporation

     Case study 2: the core competence of the corporation

Summary

Rethinking the corporation

The critical task for management is to create an organization capable of infusing products with irresistible functionality or creating products that customers need but have not even imagined. It requires radical change in the management of major companies.

In real case, NEC articulated a strategic intent to exploit the convergence of computing and communications, hinge on acquiring competencies in semiconductor. Also, NEC was able to accumulate a broad array of core competence by using collaborative arrangements to multiply internal resources.

For GTE, it has no strategic architecture existed and decentralization made it difficult to focus on core competencies.Instead, individual businesses became increasingly dependent on outsiders for critical skills, and collaboration became a router to staged exit.

The roots of competitive advantage

In the short run, a company’s competitiveness derives from the price/performance attributes of current products.

In the long run, competitiveness derives from an ability to build, at lower cost and more speedily than competitors, the core competencies that spawn unanticipated products.

The diversified corporation is a large tree. The trunk and major limb are core products, the smaller branches are business units; the leaves, flowers, and fruit are end products.

How not to think of competence

Unlike the battle for global brand dominance, the battle to build world-class competencies is invisible.

Cultivating core competence does not mean outspending rival on research and development.

Identifying core competencies - and losing them

Three tests can be applied to identify core competencies in company

A core competence provides potential access to wide variety of markets

A core competence should make a significant contribution to the perceived customers benefit of the end product.

A core competence should be difficult for competitors to imitate.

Two way of losing core competencies

Outsourcing/OEM-supply relationships

Forgoing opportunities to establish competencies that are evolving in existing business.

The tyranny of the SBU

SBU model:  Under investment in development core competencies and core products