Core Competence of the Corporation

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Questions and Answers

What core competency did NEC successfully build in the 1970s and 1980s?

  • Aerospace Engineering
  • Automotive Technology
  • Computer Hardware
  • Telephones
  • Semiconductors (correct)

What is the key difference in how NEC and GTE approached their businesses?

  • NEC embraced a 'core competency' approach, while GTE focused on 'core products.' (correct)
  • NEC prioritized international expansion, while GTE focused on domestic markets.
  • NEC emphasized cost reduction, while GTE emphasized quality.
  • NEC focused on long-term growth, while GTE focused on short-term profits.
  • NEC invested heavily in R&D, while GTE relied on acquisitions.

The authors argue that outsourcing is a viable long-term strategy for building core competencies.

False (B)

What is the authors' main point about the relationship between 'end products' and 'core competencies'?

<p>End products cannot be developed without strong core competencies. (D)</p> Signup and view all the answers

According to the authors, how does 'strategic architecture' support the development of core competencies?

<p>It provides a framework for making strategic decisions about resource allocation. (A)</p> Signup and view all the answers

What is the primary danger of the 'SBU' organizational structure?

<p>The SBU structure can lead to a lack of focus on developing core competencies and can hinder the flow of skills and knowledge across the company.</p> Signup and view all the answers

According to the authors, what is the most important role of senior management regarding 'core competencies'?

<p>Developing a strategic architecture for the company that guides investment in core competencies. (C)</p> Signup and view all the answers

How do the authors suggest that companies should approach the allocation of 'core competencies'?

<p>By allowing SBUs to bid for core competencies based on their needs and potential benefits. (D)</p> Signup and view all the answers

The authors argue that developing core competencies is a more complex and challenging task than integrating vertically within a company.

<p>True (A)</p> Signup and view all the answers

What is the authors' primary argument about the danger of companies relying solely on 'end product' metrics?

<p>It can result in companies losing sight of the crucial role of core competencies in driving long-term success. (E)</p> Signup and view all the answers

According to the authors, what is one of the key benefits of developing a 'strategic architecture' for a company?

<p>It provides a clear roadmap for the company's future development, guiding investment and resource allocation. (A)</p> Signup and view all the answers

What is the main point made by the authors about the 'Tyranny of the SBU'?

<p>The SBU structure can hinder the development of core competencies by creating a siloed mindset and making it difficult for companies to leverage their resources and skills across different businesses.</p> Signup and view all the answers

The authors argue that developing core competencies is a complex process that requires a long-term commitment from senior management.

<p>True (A)</p> Signup and view all the answers

Flashcards

Core Competencies

The fundamental capabilities that give a company a competitive edge in the market.

Strategic Architecture

The overall strategic direction of a company, focusing on building core competencies for future success.

Core Products

The physical embodiments of core competencies, representing the company's unique products and services.

Miniaturization

The ability to make a product smaller and more compact.

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Mechatronics

A company's ability to seamlessly combine mechanics and electronics.

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Competence Acquisition

The process of actively seeking and incorporating new skills from outside sources, typically through partnerships.

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Systems Integration

The ability to coordinate multiple teams and functions across the organization to achieve a common goal.

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Collective Learning

A process of continuous improvement that involves sharing knowledge and ideas throughout the company.

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Strategic Business Unit (SBU)

An organization structure that divides the company into independent units with their own products, markets, and resources.

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Agility

A company's ability to adapt quickly to changing markets and customer needs.

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Core Product Leadership

A strategy where a company focuses on manufacturing key components for itself and other companies.

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Outsourcing

The practice of outsourcing key components or services to external suppliers.

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Original Equipment Manufacturer (OEM)

A contract where one company provides goods or services for another company under their own brand.

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External Customer Focus

A method of selling products to external customers, in addition to using them internally.

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Innovation

The ability to create new products and services that are innovative and meet market demands.

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Product Enhancement

A company's ability to quickly develop new features and improvements for its existing products.

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Market Diversification

A company's ability to expand into new markets and product areas.

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Customer Loyalty

A company's commitment to building long-term relationships with its customers.

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Competence Redeployment

The ability to quickly move key employees and skills across different parts of the company.

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Cost Leadership

A company's ability to manufacture products at lower costs compared to its competitors.

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Quality Leadership

A company's ability to produce high-quality products that are reliable and durable.

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Technological Leadership

A company's ability to develop new technologies and processes that give it a competitive advantage.

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Talent Acquisition

A company's ability to attract and retain talented individuals with specialized skills.

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Resource Allocation

A company's ability to manage its resources effectively to achieve its goals.

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Organizational Culture

A company's ability to create a positive work environment that fosters collaboration and innovation.

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Organizational Agility

A company's ability to adapt to changing market conditions and respond effectively to new challenges.

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Customer Focus

A company's ability to create new products and services that meet the needs of specific customer groups.

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Market Expansion

A company's ability to leverage its core competencies to expand its market share and create new growth opportunities.

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New Product Development

A company's ability to develop new products and services that are not currently available in the market.

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Strategic Alliances

A company's ability to collaborate with other companies to achieve common goals.

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Long-Term Vision

A company's ability to make decisions that are based on long-term goals and objectives.

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Study Notes

Core Competence of the Corporation

  • Global competition is judged not on restructuring but on identifying, cultivating, and exploiting core competencies.
  • The article critiques Western companies' inability to adapt to changing market dynamics, contrasting them with the success of NEC in the 1980s and 1990s in diverse fields like telecommunications, semiconductors, and computers.
  • GTE, once positioned for future tech dominance, lost ground due to not focusing on core competencies in a defined strategic architecture, unlike NEC.
  • Successful companies like NEC define a clear strategic intent ("C&C") for convergence of computing and communication, acquiring competencies along those lines, and building collaborative relationships in core products.
  • Core competencies are not static; they represent an organization's collective learning (how to coordinate diverse production skills and integrate multiple technologies). Examples include Sony's miniaturization or Philips' optical media expertise.
  • Core competencies go beyond simply sharing costs or facilities; they entail a coordinated, shared understanding driven by upper management across departments.
  • Identifying core competencies involves several criteria: 1) wide market access, 2) customer benefit contribution, and 3) competitive difficulty in imitation.
  • Core products are tangible embodiments of core competencies, forming the basis for product diversification, and providing opportunities for revenue and market feedback.
  • A diversified corporation is likened to a tree, with core products/ competencies as roots, businesses/units as branches, and end-products as fruits.
  • Management must build a strategic architecture to define competencies, their technologies/elements, future market/product paths, and required resources; it also must manage inter-business units effectively, rather than only independently managing divisions.
  • Western companies often lack clear vision for managing core competencies and allocating resources across all businesses; they often look at products rather than holistic core competencies.
  • Restructuring, or short-term gains, are not appropriate responses; rather consider core competencies over longer periods.
  • Maintaining and expanding competencies is vital for long-term competitiveness.

Rethinking the Corporation

  • The structure of the diversified corporation is challenged as insufficient for today's dynamic markets; existing practices are too focused on product-market, not competence-building, strategies.
  • The article emphasizes the need to manage the corporation as a collection of core competencies, not businesses.
  • Japanese companies like Canon are cited as successfully identifying and utilizing core competencies, in contrast to Western competitors like Xerox.
  • Core competency building requires a long-term view, and a commitment across the entire company.
  • Companies need to consider not only short-term measures but long-term strategic architecture.
  • The implications of not understanding or developing core competencies are considerable; failure is likely.

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