Core Competences at NEC and GTE

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Core Competences at NEC and GTE

• Team Bach
• Mgt693
• Spring 2008

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Core Competencies

• Core competencies are the collective learning in
  the organization, especially how to coordinate
  diverse production skills and integrate multiple
  streams of technologies.
• Prahalad and Hamel, pg. 13

• A core competency is something the firm does
  well, that meets the following 3 tests
• It contributes significantly to the customers
  perceived value.
• Its hard for competitors to imitate.
• It can be leveraged widely, to many products and
  markets.

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Core Competencies
Hondas internal combustion engines
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Core Competencies
What is Sonys Core Competency?
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Core Competencies

• Start from the inside, out.

What does our firm do best?
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Porters Five Forces

• Looks at the environment,
• and starts from the outside, in.

What is the competition doing?
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• A Japanese multinational IT company, NEC
  provides IT and network solutions to business
  enterprises, communications services providers
  and government.

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• GTE was the largest of the independent US
  telephone companies.
• Service provided local telephone service to a
  large number of areas of the US
• In 2000, GTE was bought by Bell Atlantic,
  renaming itself Verizon Communications.
• http//www22.verizon.com/

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NEC - Core Competency
NEC

• Communications Equipment
• Radio broadcast
• Microwave communications technology

• Semiconductors
• 1958 Signed a technology licensing agreement with
  GE
• 1960 established its Integrated Circuits Division
• 1960s moved into LSIs
• 1967 moved into VLSIs

• Computers
• 1950 entered the computer industry
• 1959 worlds first working transistorized
  computer
• 1974 first Japanese microprocessor
• 1979 developed it first PC

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NEC - Core Competency

• Strategy CC
• Vision of NECs future as an integrator of
  Computers and Communications
• through semiconductor technology

Worldwide electronic supplier ranking (1987)
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GTE - Core Business
Precision materials
GTE
Lighting

• Telecommunications
• 1983 acquired GTE Sprint and GTE Spacenet

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GTE-Core Business

• Strategy

Sell or transfer underperforming or non-core
businesses
Focus on new and enhanced communication businesses

• Sold
• Television radio manufacturing operations
• Consumer communication products
• GTE Sprint
• Worldwide lighting, electronic product,
  space-based communications, and aircraft cellular
  phone business
• Transferred
• 80 of GTEs communication transmission and
  central-office switch-manufacturing activities
• 80 of GTEs business systems and PABX business

• 1990s The merger with Contel Corporation
• Alliance with Vodaphone Airtouch
• Purchased BBN
• Agreements with Lycos, Qwest, and Cisco to
  enhance its position in Internet-related
  business
• Expand to foreign markets

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Performance of NEC vs. GTESales
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Performance of NEC vs. GTEGross Domestic Product
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Performance of NEC vs. GTEGrowth Within Stock
Markets
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Performance of NEC vs. GTENet Income
From 1981-1988, GTEs profit was almost 6 times
that of NEC From 1989-1998, GTEs profit was
almost 4 times that of NEC
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Why Core Capabilities and not Core Competence?

• Core Competencies are important but they arent
  everything.
• The ultimate goal of any enterprise is
  profitability.
• According to Grant, there are 2 major sources of
  profitability
• Industry Attractiveness
• Competitive Advantage
• Core Competencies are only key if they can be
  exploited to create a strong competitive
  advantage.

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Resource Based Management Where NEC Failed

• NEC lacked Organizational Capability
  Flexibility
• NEC failed to effectively exploit or develop
• Sustainable competitive advantage
• Continuously developing both existing and new
  capabilities/resources in response to a dynamic
  market.
• Distinctive Capabilities
• Characteristics of your business that your
  competitors cannot replicate (your source of
  competitive advantage)
• Reproducible Capabilities
• Things that your competitors can easily
  acquire.
• Synergy Distinctive Capabilities
• Reproducible Capabilities