CASE ANALYSIS (HCL)CORE COMPETENCE AND FLEXIBILTYBASED STRATEGIES
INTRODUCTION- HCL (Hindustan Computers Limited) is a leading globalTechnology and IT enterprise whose range of services spansProduct Engineering andTechnology Development, ApplicationServices, BPO Services, Infrastructure Services, IT Hardware,Systems Integration, and Distribution ofTechnology andTelecom products in India.
HCL Today The HCL Enterprise comprises two companies listed in India:HCL Technologies and HCL Infosystems. HCL Technologies isthe IT and BPO services arm focused on global markets, whileHCL Infosystems deals in the IT, Communication, OfficeAutomation Products & System Integration arm focused on theIndian market. Today, HCL has 45,000 employees of diversenationalities, operating across 17 countries including 360service centers in India. HCL has global partnerships with several leading Fortune 1000firms, including several IT andTechnology majors.
HUMAN RESOURCES COMPETENCIES Trained professionals People oriented-ness Human innovativeness Talent and creativity of HR Dedication of employees
HCL’s current HR strategies Managing People up to Speed with IT Bringing People up to Speed with IT Training Speciality of Work force
MARKETING COMPETENCIES OF HCL Focus on customer solutions through human valueaddition Effective distribution system Global presence
R&D COMPETENCIES Continuous technology development and upgradation One of the best software developmentcenters in the world
FINANCIAL COMPETENCIES Strong financial position Returns above industry average
Ratios Industry average1998-97 1997-96 1996-95Net Profit Ratio 8.92 6.94 7.37Rate of Return on Fixed Assets 29.96 28.92 32.64Rate of Return on Total Assets 10.83 8.41 9.89Return on capital Employed 31.83 31.42 31.07Return on Shareholders’ Equity 26.84 22.57 23.65Divident payout (D/P) Ratio 0.33 0.55 0.02
Ratios Fiscal year2011 2010Net Profit Ratio 17.22 20.18Rate of Return on Fixed Assets 2.73 2.56Return on capital Employed 85.04 77.92Return on Shareholders’ Equity 7.5 4.00Dividend payout (D/P) Ratio 49.97 29.86
Core Competencies A core competency is a concept in management theoryoriginally advocated by CK Prahalad, and Gary Hamel,two business book writers. In their view a corecompetency is a specific factor that a business sees asbeing central to the way it, or its employees, works. Itfulfills three key criteria:1. It is not easy for competitors to imitate.2. It can be re-used widely for many products and markets.3. It must contribute to the end consumers experiencedbenefits.
A core competency can take various forms, including technical/subject matterknow-how, a reliable process and/or close relationships with customers andsuppliers. It may also include product development or culture, such as employeededication, best Human Resource Management (HRM), good market coverageetc. Core competencies are particular strengths relative to other organizations in theindustry which provide the fundamental basis for the provision of added value.Core competencies are the collective learning in organizations, and involve howto coordinate diverse production skills and integrate multiple streams oftechnologies. It is communication, an involvement and a deep commitment toworking across organizational boundaries. Few companies are likely to buildworld leadership in more than five or six fundamental competencies
Competitive advantage When a firm sustains profits that exceed the average for itsindustry, the firm is said to possess a competitive advantageover its rivals. The goal of much of business strategy is toachieve a sustainable competitive advantage. A competitive advantage exists when the firm is able todeliver the same benefits as competitors but at a lower cost(cost advantage), or deliver benefits that exceed those ofcompeting products (differentiation advantage). Thus, acompetitive advantage enables the firm to create superiorvalue for its customers and superior profits for itself.