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.”
A core competency is
something the firm does
well, that meets the
following 3 tests:

Prahalad and Hamel, pg. 13


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://www22.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
•1960s 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
•1990s 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
Sales in Millions of $'s
NEC vs GTE
$50,000
$40,000
$30,000
GTE
$20,000
NEC
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
$-
1980
$10,000
Performance of NEC vs. GTE
Gross Domestic Product
Year on Year GDP Growth
Japan vs. US
35.0%
30.0%
25.0%
20.0%
US GDP Grow th
15.0%
Japan GDP
Grow th
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
Average year on year growth 1980-1988
Average year on year growth 1989-1999
98
19
US
7.2%
5.2%
Japan
11.2%
3.1%
Performance of NEC vs. GTE
Growth Within Stock Markets
Nikkei 225 vs S & P 500
Year on Year Growth
S & P 500
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
Nikkei 225
19
83
19
81
60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
Performance of NEC vs. GTE
Net Income
Net Income in Million's of US $
NEC vs GTE 1980-1999
$3,500
$2,500
$1,500
GTE
$500
NEC
$(500)
$(1,500)
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
$(2,500)
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