The document discusses the concept of core competence within corporations, emphasizing its significance in achieving competitive advantage through unique skill integration and strategic management. It critiques the traditional strategic business unit (SBU) model for underinvesting in core competencies and outlines the need for a strategic architecture to foster innovation and resource allocation. Key themes include identifying and preserving core competencies to maintain market leadership and drive long-term growth.

1. The Core Competence of the
Corporation
.
A Presentation for Harvard Summer
School „13
By
Ritesh Malik
Akshara ravilla
Sonal Kotecha
Eesha Palkar

2. Perspective of Core Competence
 Concept of Core Competence :-
 C. K. Prahalad
 Professor of corporate strategy and international
business at University of Michigan.
 Gary Hamel:
 Lecturer in business and policy management at
London Business School.

3. Introduction: Main Idea
 Idea: The evolution of global management and the
emergence/importance of Competency-minded
management
 Rethinking the Corporation
 The Roots of Competitive Advantage
 Identifying Core Competencies – And Losing Them
 The Tyranny of the SBU
 Developing Strategic Architecture

4. Core Competence
 What is Core Competence??

5.  a bundle of skills integrated to make a
company unique.
 the engine for new business development,
underlying component of a company‟s
competitive advantage.
 created from the coordination, integration
and harmonization of diverse skills and
multiple streams of technologies.

6. Video by Prahlad
 http://www.youtube.com/watch?v=WfP-VICbLRA

7. Rethinking the Corporation
 Build product for customers need but have not yet even
imagined.
 Requires radical change in the management of major
companies.
 Understand the changing basis for global leadership.

8. Analyze the Case
 Strategic architecture: to exploit the convergence of
computing and communicating(“C & C”).
 Acquired competencies in semiconductors.
 Used collaborative arrangements to multiply internal
resources.
 Now a world leader in consumer electronics
Image source: NEC

9. GTE
 No strategic Architecture existed.
 Decentralization made it difficult to focus on core
competence.
 Senior managers worked as if they were managing
independent business unit.
 No mutual decision was made.

10. Roots of Competitive Advantage
 Portfolio of companies versus portfolio of Business:
 Canon(personal copiers), Honda(from bikes to four
wheelers).
 Sony, Casio, Yamaha,Komatsu invented new devices.
 Consolidating corporate-wide technologies and
resources into competencies.

11. Cont..
 In Short Run companies, its competitiveness derives
from price/performance attributes of current products.
 In Long Run companies, its competitiveness derives from
an ability to build at lower cost and more speedily than
competitors.
 Western companies “stuck” in old mentality.
 Diversified corporation is a “large tree”.

12. Identifying Core Competencies – And
losing them
 How to identify:
 Accessibility: provide potential access to a variety of markets
 Value-creation: make a significant contribution to perceived
customer benefits of the end product
 Uniqueness: Be difficult for competitors to imitate

13. Identifying Core Competencies – And
losing them
 How to lose:
A Core Competency is lost:
 Through outsourcing/OEM-supply relationships
=> Example: Chrysler vs Honda
 Through giving up opportunities to establish competencies
that are evolving in existing businesses
=> Example: television business

14. The Tyranny of the SBU
Two Concepts of the Corporation:
SBU or Core Competence
SBU Core Competence
Basic for competition Competitiveness of today’s products Interfirm competition to build competencies
Corporate structure Portfolio of businesses related in product-
market terms
Portfolio of competencies, core products,
and businesses
Status of the business unit Autonomy is sacrosanct, the SBU “owns” all
resources other than cash
SBU is potential reservoir of core
competencies
Resource allocation Discrete businesses are the unit of analysis,
capital is allocated business by business
Businesses and competencies are the unit of
analysis: top management allocates capital
and talent
Value added of top management Optimizing corporate returns through capital
allocation trade-offs among businesses
Enunciating strategic architecture and
building competencies to secure the future
Figure source: Prahalad, C.K., Hamel, G. (1990). “ The Core Competence of the Corporation”. Harvard Business Review, 86.

15. The Tyranny of the SBU
 The ineffectiveness of SBU model:
 Underinvestment in Developing Core Competencies and
Core Products
 Imprisoned Resources
 Bounded Innovation
 A shift in management is inevitable.

16. Developing Strategic Architecture
 A strategic architecture:
 Establish objectives for competence building
 A road map of the future that identifies which core
competencies to build and related technologies
 Create a managerial culture, team work, a capacity to
change, and a willingness to share resources, to protect
proprietary skills, and to think long term
 Consistency of resource allocation, administrative
infrastructure

17. Developing Strategic Architecture
 Management duties : To identify and commit to technical
and production linkages across SBUs that will provide a
distinct competitive advantage.
 Top management: make resource allocation priority
decision.
 Lower level of management: understand and maintain
consistency with top management‟s decision and
disciplines.

18. Benefits of Strategic Architecture
• Reduce the investment needed to secure future market
leadership
• Provide a logic for product and market diversification
• Reduce R&D costs.

19. Vickers Learns the Value of
Strategic Architecture

20. Redeploying to Exploit Competencies
 SBUs should bid for core competencies in the same way
they did for capital.
 How to exploit:
 SBUs must defend why they need certain talents
 SBUs must sacrifice short term in return for long term
benefits
 Rotation

21. Conclusion
 This article is a radical breakthrough in management.
 Strengths of the article:
 Timely, ground-breaking, forward-looking
 Weakness of the article:
 Difficult to read and understand fully

22. A presentation for MNGT
of Technology &
Innovation by
Prof. Thachenkary
Akshara Ravilla
Eesha Palkar
Sonal Kotecha
Ritesh Malik