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COMPETENCY
A presentation by:
1 Himanshu gupta
Akash kumar
Amar kashyap
Nishant singh
2
Author
s
Graduate of Harvard School of Business
Professor at Univ. of Michigan School of Business
Advocate of Core Competency Focus for Businesses
Business Consultant
HBR“He was one of the foremost business thinkers
of
our time”
Coimbatore K. Prahalad
19412010
Graduate of University of Michigan School of
Business
Visiting Professor of London Business School
Ranked as the “World’s most influential business
thinker” by the Wall Street Journal
Business Consultant and Media Contributor
Gary Hamel
1954 Present
3 CORE COMPETENCY
Core competency is a concept in management theory introduced by, C. K.
PRAHALAD and GARY HAMEL.
It can be defined as "a harmonized combination of multiple resources and skills
that distinguish a firm in the marketplace“
Core competency are the skills, characteristics, and assets that set your company
apart from competitors.
They are the fuel for innovation and the roots of competitive advantage.
The engine for new business development, underlying component of a company’s
competitive advantage created from the coordination, integration and
harmonization of diverse skills and multiple streams of technologies.
4 IDENTIFYING YOUR CORE
COMPETENCIES
Prahalad and Hamel suggest three factors to help identify core
competencies in any business:
1. Provides potential access to a wide variety of markets
2. Makes a significant contribution to the perceived customer benefits of the end
product.
3. Difficult for competitors to imitate
5 COMPETENCIES DO NOT MEAN
Outspending competitors on research and
development
Cost sharing among SBU’s
Vertical integration
6 Roots Of Competitive
Advantage
• The diversified corporation is a large tree.
The trunk and major limbs are core products
The smaller branches are business units
The leaves, flowers and fruit are end product,
The root system that provides nourishment,
substance and stability is the core product.
7 Losing Core
Competencies
How to lose: A Core Competency is lost:
Through outsourcing/OEMsupply relationships
Example: Chrysler vs Honda
(Chrysler unlike Honda considered its engines and power trains as simply
another component and started outsourcing)
Through giving up opportunities to establish competencies that are evolving in
existing businesses
Example: television business
More
About…
STRATEGIC ARCHITECTURE
Company’s future is determined by it’s core competencies. These competencies
define the architecture and characteristics of the global competitive firm.
BOUNDARY LESS ORGANIZATION
In the old diversified corporation, ideas and technologies are reluctantly shared
from
one SBU to the next, if at all.
Boundaries seem transparent when SBU’s share core competencies and core
products. These resources come from the firm.
8 RESOURCE ALLOCATION
When core competencies are the roots of the firm, specialized employees and
core products can be allocated to various SBU’s.
At Maruti, specialized employees move between camera and printer products
regularly.
INNOVATION
Using core competencies, new technologies can be developed without heavy R&D costs.
Fiat: Drive your way; Maruti Suzuki : Count on us; Hyundai: New thinking new possibilities;
Honda: Offroad buggy; Ford: Go further
COMPETENCE BUILDING
The focus of today’s global firm should be in competence building.
Constantly improving competencies provides for new integrated technologies.
Competencies provide focus for longterm goals.
COMPETITIVE ADVANTAGE
Shortterm market share can be won by anyone with a good idea. Race to get products
9 on the shelf.
Longterm success involves competency structured organizations, innovation, and
market consistency.
Same core products, integrated into new end products, creating new markets.
SBU vs Core
Competence
10
CORE PRODUCTS
Core competencies manifest themselves in core products that serve as a link
between the competencies and end products. Core products enable value
creation in the end products. Examples of firms and some of their core products
include:
• Canon laser printer subsystems;
• Honda gasoline powered engines;
• Black & Decker small electric motors
Because firms may sell their core products to other firms that use them as the
basis for end user products, traditional measures of brand market share are
insufficient for evaluating the success of core competencies. Prahalad and
Hamel suggest that core product share is the appropriate metric. While a
company may have a low brand share, it may have high core product share and it
11 is this share that is important from a core competency standpoint.
Once a firm has successful core products, it can expand the number of uses in
order to gain a cost advantage via economies of scale and economies of scope.
Case Study : HONDA MOTOR CO.
12
It is a Japanese multinational corporation primarily known for automobiles and
motorcycles.
It is the largest manufacturer of motorcycles and internal combustion engines
measured by volume producing more than 14 million internal combustion
engines in an year.
Apart from core automobiles and motorcycles Honda are also manufacturers
garden equipment, marine engines, personal watercrafts
They have recently ventured into the aerospace industry with GE Honda Aero
engines. The Honda jet was scheduled in 2011.
MARKET SHARE OF HONDA
EXAMPLE
14
HONDA
uses
Manufacturing Culture of These Core
capability innovation competencies
are
To create
Light weight
and reliable Core products
engines
Used in
End products
16 CORE COMPETENCIES OF HONDA
R&D
FINANCIAL RESOURCES
MANUFACTURING
COMBINATION OF CORE COMPETENCIES LET TO CORE PRODUCT i.e.
ENGINES WHICH THEY DIVERSIFIED INTO VARIOUS BUSINESS LIKE
AUTOMOBILES,MOTORCYCLES,POWER PRODUCTS,HONDA JETS AND
ROBOTICS.
References:
Article Study
Gary Hamel and C. K. Prahalad, (1990) “The Core Competence of the Corporation”
Harvard Business Review , vol. 68, no. 3, MayJune 1990, pp 7993.
http://www.tutor2u.net/business/strategy/core_competencies.htm
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THANK You !