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Core competence

A research project on the concept of Core Competencies by Hamel and Kakar.. One of the most famously followed management principles worldwide.

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Core competence

  1. 1. The Core Competence of the Corporation . A Presentation for Harvard Summer School „13 By Ritesh Malik Akshara ravilla Sonal Kotecha Eesha Palkar
  2. 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. 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. 4. Core Competence  What is Core Competence??
  5. 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. 6. Video by Prahlad  http://www.youtube.com/watch?v=WfP-VICbLRA
  7. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 19. Vickers Learns the Value of Strategic Architecture
  20. 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. 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. 22. A presentation for MNGT of Technology & Innovation by Prof. Thachenkary Akshara Ravilla Eesha Palkar Sonal Kotecha Ritesh Malik

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