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MKTG 5320 ARTICLE ANALYSIS. THE CORE COMPETENCE OF CORPORATION JOHN RAMIREZ TANER TASTAN SHAFA ASADOVA. Rethinking the Corporation. Corporate Changes 1980’s. Due to Increased International Competition: Flattened Corporate Hierarchies Decluttering Relayering Restructuring.

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mktg 5320 article analysis
MKTG 5320 ARTICLE ANALYSIS

THE CORE COMPETENCE OF CORPORATION

JOHN RAMIREZ

TANER TASTAN

SHAFA ASADOVA

corporate changes 1980 s
Corporate Changes1980’s

Due to Increased International Competition:

Flattened Corporate Hierarchies

Decluttering

Relayering

Restructuring

historical corporate view

Business Unit 2

  • Business Unit 3
  • End Product 3
  • End Product 5

Historical Corporate View

  • End Product 4
  • End Product 6

Silos

benefits of this approach

Benefits of this Approach

Business Unit Autonomy

Reduced risk if one unit fails

Possible Economies of scale

Lower Cost / Unit Production

Non-Cannibalizing Business Units

issues with this approach

Issues with this Approach

Difficulty:

Sharing single corporate message

Expressing strategic intent

Diseconomies of Scope

Inflexibility in changing and emerging markets

corporate changes 1990 s
Corporate Changes1990’s

Shift from SBUs to Core Competencies

Centralized Management Structure and Control

Cross Unit Production

Reduced Redundancies in Production

Capitalized on Economies of Scope

Increased Emphasis on Competitive Advantage

the roots of competitive advantage

THE ROOTS OF COMPETITIVE ADVANTAGE

Portfolio of competencies

Portfolio of businesses

New market

New products

Japanese companies’ technological enhancements

company competitiveness
COMPANY COMPETITIVENESS
  • Price
  • Performance
  • Lower Cost
  • More Faster
  • Management of Technology
  • Adapting to Changing Opportunities
core competencies
CORE COMPETENCIES
  • Collective Learning
  • Coordinate Diverse Production Skills
  • Integrate Multiple Streams of Technologies
  • Convert Theories into Practices
  • Examples: Sony’s Capacity to Miniaturize

Philips’s Optical Media Expertise

core competencies1
CORE COMPETENCIES
  • Cannot Be Deteriorated
  • Are Applied, Shared and Grown
  • They Need to Be Nurtured and Protected
  • They Are The Glue to Bind Existing Businesses
  • They Are Engine for New Business Strategies
  • Important Role in Market Entry
how not to think of competence
HOW NOT to THINK of COMPETENCE
  • Cultivating more competencies does not mean more R&D than competitors
  • Managers decide whether to make or buy
  • Managers need to check:
  • The supply chain
  • Distribution to customer
identifying core competencies
IDENTIFYING CORE COMPETENCIES
  • Three Tests:
  • It should provide potential access to wide variety of markets
  • It should make contribution to the customer benefits
  • It should be difficult to imitate
losing core competence
LOSING CORE COMPETENCE
  • Two clear lessons:
  • The costs of losing core competence can be partly calculated in advance
  • A company without core competence will be struggled to enter an emerging market
from core competencies to core products
FROM CORE COMPETENCIES to CORE PRODUCTS
  • The link between core competencies and end product is “CORE PRODUCT”
  • Core products can increase the value of end products
  • Core products can help company to shape the evaluation of end products in the world
global competition
GLOBAL COMPETITION
  • The goal is to build world leadership
  • Companies aim to:
  • Maximize the production of core products
  • Capture investment away from competitors
  • Those reduce cost, time, and risk in new product development
the tyranny of the sbu

The Tyranny of the SBU

The term of ‘Competitive Engagement”

Domestic Competition

Ex: GE vs. Westinghouse

General Motors vs. Ford

US

Companies don’t lack the technical resources to build competencies

Top Management lacks the vision to build them

the tyranny of the sbu1
The Tyranny of the SBU
  • A shift in commitment will
  • Influence patterns of diversifications, skill deployment
  • Resource allocations priorities
  • Approach to alliances and outsourcing
the tyranny of the sbu2
The Tyranny of the SBU
  • The three different planes on which battles for global leadership are waged:
  • Core competence
  • Core product
  • Products
the tyranny of the sbu3
The Tyranny of the SBU
  • Winning or Losing
  • Winning in core competence: outplace rivals in new business development
  • Winning in core products: outplace rivals in improving product features and the price/performance ratio
the tyranny of the sbu4
The Tyranny of the SBU
  • Difficult to determine whether winning or losing
  • Because measures of product market share do not reflect companies’ underlying competitiveness
the tyranny of the sbu5
The Tyranny of the SBU
  • In re-conceptualization of the corporation the primacy of the SBU is anachronism
  • SBU prism-in many companies means only one plane of global competitive battle is visible to top management
underinvestment in developing core competencies and core products
Underinvestment in Developing Core Competencies and Core Products
  • When the organization is conceived of as multiplicity of SBU, no single business may fell responsible for maintaining in core products
  • In the absence of a more comprehensive view imposed by corporate management, SBU managers will tend to underinvest

Ex. Kodak and Philips

imprisoned resources
Imprisoned Resources
  • As an SBU evolves, it often develops unique competencies
  • The managers of another SBU who asks to borrow talented people is likely
  • To get a cold rebuff
  • Are not only unwilling to land their competence carriers
  • May actually hide talent to prevent is redeployment in the pursuit of new opportunities
imprisoned resources1
Imprisoned Resources
  • When competencies become imprisoned, the people who carry the competencies
  • Don’t get assigned to the most existing opportunities
  • Their skills begin to atrophy

Ex. Canon and Xerox

banned innovation
Banned Innovation
  • If core competencies are not recognized
  • Individual SBU’s will pursue only those innovation opportunities that are close at hand-marginal product-line extensions or geographic expansions Hybrid opportunities like
  • Fax Machines
  • Laptop Computers
  • Hand-held TV
  • Portable Music Keyboard

will emerge only when managers take off their SBU blinkers

developing strategic architecture
Developing Strategic Architecture
  • The fragmentation of core competencies becomes inevitable when
  • A diversified company’s information systems
  • Patterns of communications
  • Career paths
  • Managerial rewards
  • Processes of strategy development

do not transcend SBU lines

redeploying to exploit competencies
Redeploying to Exploit Competencies
  • Signal to middle managers:
  • Core competencies are corporate resources and may be relocate by corporate management
  • The positive contributions of the SBU managers should be made visible across the company