MKTG 5320 ARTICLE ANALYSIS

1. MKTG 5320 ARTICLE ANALYSIS THE CORE COMPETENCE OF CORPORATION JOHN RAMIREZ TANER TASTAN SHAFA ASADOVA

2. Rethinking the Corporation

3. Corporate Changes1980’s Due to Increased International Competition: Flattened Corporate Hierarchies Decluttering Relayering Restructuring

4. Business Unit 2 • Business Unit 3 • End Product 3 • End Product 5 Historical Corporate View • End Product 4 • End Product 6 Silos

5. Historical Corporate View “Silos”Example: Consumer Electronics

6. Benefits of this Approach Business Unit Autonomy Reduced risk if one unit fails Possible Economies of scale Lower Cost / Unit Production Non-Cannibalizing Business Units

7. Issues with this Approach Difficulty: Sharing single corporate message Expressing strategic intent Diseconomies of Scope Inflexibility in changing and emerging markets

8. Corporate Changes1990’s Shift from SBUs to Core Competencies Centralized Management Structure and Control Cross Unit Production Reduced Redundancies in Production Capitalized on Economies of Scope Increased Emphasis on Competitive Advantage

9. THE ROOTS OF COMPETITIVE ADVANTAGE Portfolio of competencies Portfolio of businesses New market New products Japanese companies’ technological enhancements

11. COMPANY COMPETITIVENESS • Price • Performance • Lower Cost • More Faster • Management of Technology • Adapting to Changing Opportunities

12. CORE COMPETENCIES • Collective Learning • Coordinate Diverse Production Skills • Integrate Multiple Streams of Technologies • Convert Theories into Practices • Examples: Sony’s Capacity to Miniaturize Philips’s Optical Media Expertise

13. CORE COMPETENCIES • Cannot Be Deteriorated • Are Applied, Shared and Grown • They Need to Be Nurtured and Protected • They Are The Glue to Bind Existing Businesses • They Are Engine for New Business Strategies • Important Role in Market Entry

14. HOW NOT to THINK of COMPETENCE • Cultivating more competencies does not mean more R&D than competitors • Managers decide whether to make or buy • Managers need to check: • The supply chain • Distribution to customer

15. IDENTIFYING CORE COMPETENCIES • Three Tests: • It should provide potential access to wide variety of markets • It should make contribution to the customer benefits • It should be difficult to imitate

16. LOSING CORE COMPETENCE • Two clear lessons: • The costs of losing core competence can be partly calculated in advance • A company without core competence will be struggled to enter an emerging market

17. FROM CORE COMPETENCIES to CORE PRODUCTS • The link between core competencies and end product is “CORE PRODUCT” • Core products can increase the value of end products • Core products can help company to shape the evaluation of end products in the world

18. GLOBAL COMPETITION • The goal is to build world leadership • Companies aim to: • Maximize the production of core products • Capture investment away from competitors • Those reduce cost, time, and risk in new product development

19. The Tyranny of the SBU The term of ‘Competitive Engagement” Domestic Competition Ex: GE vs. Westinghouse General Motors vs. Ford US Companies don’t lack the technical resources to build competencies Top Management lacks the vision to build them

20. The Tyranny of the SBU • A shift in commitment will • Influence patterns of diversifications, skill deployment • Resource allocations priorities • Approach to alliances and outsourcing

21. The Tyranny of the SBU • The three different planes on which battles for global leadership are waged: • Core competence • Core product • Products

22. The Tyranny of the SBU • Winning or Losing • Winning in core competence: outplace rivals in new business development • Winning in core products: outplace rivals in improving product features and the price/performance ratio

23. The Tyranny of the SBU • Difficult to determine whether winning or losing • Because measures of product market share do not reflect companies’ underlying competitiveness

24. The Tyranny of the SBU • In re-conceptualization of the corporation the primacy of the SBU is anachronism • SBU prism-in many companies means only one plane of global competitive battle is visible to top management

25. Underinvestment in Developing Core Competencies and Core Products • When the organization is conceived of as multiplicity of SBU, no single business may fell responsible for maintaining in core products • In the absence of a more comprehensive view imposed by corporate management, SBU managers will tend to underinvest Ex. Kodak and Philips

26. Imprisoned Resources • As an SBU evolves, it often develops unique competencies • The managers of another SBU who asks to borrow talented people is likely • To get a cold rebuff • Are not only unwilling to land their competence carriers • May actually hide talent to prevent is redeployment in the pursuit of new opportunities

27. Imprisoned Resources • When competencies become imprisoned, the people who carry the competencies • Don’t get assigned to the most existing opportunities • Their skills begin to atrophy Ex. Canon and Xerox

28. Banned Innovation • If core competencies are not recognized • Individual SBU’s will pursue only those innovation opportunities that are close at hand-marginal product-line extensions or geographic expansions Hybrid opportunities like • Fax Machines • Laptop Computers • Hand-held TV • Portable Music Keyboard will emerge only when managers take off their SBU blinkers

29. Developing Strategic Architecture • The fragmentation of core competencies becomes inevitable when • A diversified company’s information systems • Patterns of communications • Career paths • Managerial rewards • Processes of strategy development do not transcend SBU lines

30. Redeploying to Exploit Competencies • Signal to middle managers: • Core competencies are corporate resources and may be relocate by corporate management • The positive contributions of the SBU managers should be made visible across the company