Core Competences at NEC and GTE

1. Core Competences at NEC and GTE Team Bach Mgt693 Spring 2008

2. “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

3. Core Competencies Honda’s internal combustion engines

4. Core Competencies What is Sony’s Core Competency?

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

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

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

8. 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/

9. NEC - “Core Competency” • Communications Equipment • Radio broadcast • Microwave communications technology NEC • 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 world’s first working transistorized computer • 1974 first Japanese microprocessor • 1979 developed it first PC

10. 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)

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

12. 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 GTE’s communication transmission and central-office switch-manufacturing activities • 80% of GTE’s 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

13. Performance of NEC vs. GTESales

14. Performance of NEC vs. GTEGross Domestic Product

15. Performance of NEC vs. GTEGrowth Within Stock Markets

16. Performance of NEC vs. GTENet 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

17. 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.

18. 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