Core Competences at NEC

and GTE
Team Bach
Mgt693
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.
Its hard for competitors
to imitate.
It can be leveraged
widely, to many
products and markets.
Core Competencies
Hondas internal
combustion engines
Core Competencies
What is Sonys Core Competency?
Core Competencies
Start from the inside, out.
What does our
firm do best?
Porters 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://www22.verizon.com/

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
NEC - Core Competency
Strategy: C&C

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


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
Worldwide electronic supplier ranking (1987)
GTE - Core Business
GTE
Telecommunications
1983 acquired GTE Sprint
and GTE Spacenet

Lighting
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
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
Performance of NEC vs. GTE
Sales
Sales in Millions of $'s
NEC vs GTE
$-
$10,000
$20,000
$30,000
$40,000
$50,000
1
9
8
0
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
GTE
NEC
Performance of NEC vs. GTE
Gross Domestic Product
Year on Year GDP Growth
Japan vs. US
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
1
9
8
0
1
9
8
2
1
9
8
4
1
9
8
6
1
9
8
8
1
9
9
0
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
US GDP Growth
Japan GDP
Growth
US Japan
Average year on year growth 1980-1988 7.2% 11.2%
Average year on year growth 1989-1999 5.2% 3.1%
Performance of NEC vs. GTE
Growth Within Stock Markets
Nikkei 225 vs S & P 500
Year on Year Growth
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
1
9
8
1
1
9
8
3
1
9
8
5
1
9
8
7
1
9
8
9
1
9
9
1
1
9
9
3
1
9
9
5
1
9
9
7
1
9
9
9
S & P 500
Nikkei 225
Performance of NEC vs. GTE
Net Income
Net Income in Million's of US $
NEC vs GTE 1980-1999
$(2,500)
$(1,500)
$(500)
$500
$1,500
$2,500
$3,500
1
9
8
0
1
9
8
2
1
9
8
4
1
9
8
6
1
9
8
8
1
9
9
0
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
GTE
NEC
From 1981-1988, GTEs profit was almost 6 times that of NEC
From 1989-1998, GTEs profit was almost 4 times that of NEC
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.



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