The document discusses the concept of core competencies as presented by Prahalad and Hamel. It defines core competencies as unique bundles of skills that are sources of competitive advantage. It argues companies should shift focus from managing business units to identifying, building, and leveraging core competencies across business units. This requires strategic architectures to guide competency development and consistency in allocating resources. Developing core competencies better positions companies for long-term leadership rather than short-term gains from individual business units.

1. .
Presented by:

2.  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.  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
 TheTyranny of the SBU
 Developing Strategic Architecture

4.  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.  http://www.youtube.com/watch?v=WfP-
VICbLRA

7.  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.  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.  No strategicArchitecture 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.  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.  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.  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.  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. TwoConceptsoftheCorporation:
SBUorCoreCompetence
SBU CoreCompetence
Basicforcompetition Competitivenessoftoday’sproducts Interfirmcompetitiontobuildcompetencies
Corporatestructure Portfolioofbusinessesrelatedinproduct-
marketterms
Portfolioofcompetencies,coreproducts,
andbusinesses
Statusofthebusinessunit Autonomyissacrosanct,theSBU“owns”all
resourcesotherthancash
SBUispotentialreservoirofcore
competencies
Resourceallocation Discretebusinessesaretheunitofanalysis,
capitalisallocatedbusinessbybusiness
Businessesandcompetenciesaretheunitof
analysis:topmanagementallocatescapital
andtalent
Valueaddedoftopmanagement Optimizingcorporatereturnsthroughcapital
allocationtrade-offsamongbusinesses
Enunciatingstrategicarchitectureand
buildingcompetenciestosecurethefuture
Figuresource:Prahalad,C.K.,Hamel,G.(1990).“TheCoreCompetenceoftheCorporation”.HarvardBusinessReview,86.

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

16.  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.  Benefits of StrategicArchitecture
 Reduce the investment needed to secure future
market leadership
 Provide a logic for product and market
diversification

18.  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.

20.  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.  The 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