Core Competences at NEC and GTE Team Bach

Core Competences at NEC and GTE Team Bach Mgt 693 Spring 2008

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. It’s hard for competitors to imitate. It can be leveraged widely, to many products and markets.

Core Competencies Honda’s internal combustion engines

Core Competencies What is Sony’s Core Competency?

Core Competencies Start from the inside, out. What does our firm do best?

Porter’s Five Forces Looks at the environment, and starts from the outside, in. What is the competition doing?

A Japanese multinational IT company, NEC provides IT and network solutions to business enterprises, communications services providers and government.

¡ 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: //www 22. verizon. com/

NEC - “Core Competency” Communications Equipment NEC Semiconductors • 1958 Signed a technology licensing agreement with GE • Radio broadcast • Microwave communications technology Computers • 1950 entered the computer industry • 1959 world’s first working transistorized computer • 1974 first Japanese microprocessor • 1979 developed it first PC • 1960 established its Integrated Circuits Division • 1960 s moved into LSIs • 1967 moved into VLSIs

NEC - “Core Competency” Strategy: C&C Vision of NEC’s future as an integrator of Computers and Communications through semiconductor technology Worldwide electronic supplier ranking (1987) Computers Telecommunication Semiconductor 1 IBM AT&T NEC 2 Unisys Alcatel-ITT Hitachi 3 DEC Northern Telecom Toshiba 4 Fujutsu NEC Motorola 5 NEC Siemens TI

GTE - “Core Business” Lighting GTE Telecommunications • 1983 acquired GTE Sprint and GTE Spacenet Precision materials

GTE-”Core Business” Strategy: Sell or transfer underperforming or non-core businesses Focus on new and enhanced communication businesses Sold: • Television & radio manufacturing operations • 1990 s The merger with Contel Corporation • Consumer communication products • Alliance with Vodaphone Airtouch • GTE Sprint • Worldwide lighting, electronic product, space-based communications, and aircraft cellular phone business Transferred: • 80% of GTE’s communication transmission and central-office switchmanufacturing activities • 80% of GTE’s business systems and PABX business • Purchased BBN • Agreements with Lycos, Qwest, and Cisco to enhance its position in “Internet-related business” • Expand to foreign markets

Performance of NEC vs. GTE Sales

Performance of NEC vs. GTE Gross Domestic Product

Performance of NEC vs. GTE Growth Within Stock Markets

Performance of NEC vs. GTE Net Income From 1981 -1988, GTE’s profit was almost 6 times that of NEC From 1989 -1998, GTE’s profit was almost 4 times that of NEC

Why Core Capabilities and not Core Competence? • • Core Competencies are important but they aren’t 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.

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