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Key Topics
Requirement
The aim of the Final Assessment is for you to demonstrate your understanding of key concepts in strategic management and your capacity to craft a professional document. It will be very good preparation for your dissertation.
Part One (approx 3000 words)
1. Choose a concept/model in strategic management. You can choose the concept from the ones discussed in the course or you can choose another one. Examples of concepts are: core competencies, generic strategies, mergers and acquisitions, alliances, CSR, blue ocean strategy, etc.
2. Critically examine the concept: define the concept; identify when it was first discussed and what the arguments were for its creation; discuss how the concept then evolved by identifying the arguments for and against it over time and by noting any adaptations.
3. Explain how the concept fits today with other concepts of strategic management, and discuss how/if the concept is relevant or not to today’s business challenges. In Part One you must demonstrate you can research and develop a deep understanding of a concept by identifying, examining and challenging different views of it. You should reference a minimum of 10 academic sources: academic books and/or articles from academic journals that are peer- reviewed. This excludes textbooks, articles from business magazines and ‘popular’ books you may find in airport bookstores, but you can use these as additional supporting references if needed.
All sources should be correctly referenced using the Harvard system, as for any professional academic document.
Part Two (approx 1500 words)
4. Present a real life case study of the concept that you chose in Part One ‘in action’. You can use your own organisation or an organisation of your choice – we recommend you use an organisation you are personally familiar with as it will be easier for you to ‘see inside’ the
organisation
Part Two should be like a mini-case study where you will present the situation of the organisation you choose, the issues faced, and how the concept was or is being used to solve the issues and raise the general performance of the organisation.
In Part Two, you must show you can integrate theory and practice. You do this by giving examples of the theory in action, and by evaluating the approach taken and how effective it was in delivering the desired results. By reflecting on events, you may even challenge the theory itself – From the events you describe, is the theory valid? How can it be improved?
Solution
Core Competence a part of Strategic Management
Strategic management is the planning, analyzing and assessing all the things that are necessary for an organization so that it can meet its main goals and objectives. It is all about inspected and evaluate the cross-functional all the business decisions of an organization before implementing them so that the optimization can take place at all the levels of the organization and the results become advantageous and positive (Prahalad and Hamel, 2006).
Strategic management routinely comprises of analyzing of the internal and external strengths and weaknesses of any organization, drafting the action plans, implementing the action plans, and at the last evaluating the success of the action plans has been to what extent and what are the changes required to make it more beneficial and the if the results are not positive, the step that can be taken to formulate new strategies.
The strategic management is closely linked with the strategic planning, wherever the strategic management has required the need for strategic planning is inevitable and obligatory (Teece and Shuen, 1997). Having a clear cut strategy has enabled many organizations to reach a dominant level and savor the advantages that come with it which can be many like above average returns on investments, and high turnover, huge profits, and market control and recognition.it make a huge difference between an organizations' success and failure. The question remains in the field of strategic management is how to achieve a competitive advantage, and after achieving a competitive advantage how to sustain it, and remain in the field as long as possible, we confront this dilemma with the development and implementation of the dynamic capabilities that many great authors have given their precious views upon. The authors give their views upon how some organizations are loaded with the firm level strategies and the proposals related to the implementation and the survival of these strategies in the dynamic environment. They also discuss how some organizations have gained excessive competitive advantages in the reign of rapid changes.
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Core competency
The term core competency first came into knowledge in an article "The Core Competence of the Corporation," published by Harvard Business Review in 1990 by C.K. Prahalad and Gary Hamel. This term core competency means the unique characteristics and capabilities of a company or an organization that equips them with a competitive advantage in the market place. The company possessing a core competency can have a value in the market by delivering value to the customers, which conclusively results in a competitive strategy. The core competencies cannot be duplicated by the competitors so easily because the core competency of a company comprises of specific skill sets, unique knowledge, abilities, and expertise on a subject of the area, which allows the company to reach a larger market and increases their customer demand. The companies with a definitive power in the market are said to have a core competency, like the data storage and the development of accounting applications providing companies. For example; apple's design innovative ideas capabilities, Netflix's content imparting platform, and Google's unique search engines expertise.
According to the article, the core competencies require a collaborative study in the organization, specially related to the varied production skills and the alliance of the multiple sets of technologies. It is the communication, collaboration and the commitment of the members towards a strategic plan across the organizational range. It requires the involvement from all the levels and departments of the organizations and their functions (Javidan, 1998). Competencies are unlike the physical assets of any organizations which do deteriorate over time; competencies can be implemented, combined or shared. But still they are required to be fostered and fostered the knowledge might fade if it is not taken use of. Competencies bind the business, and they are like the engine for the new ideas. There are many key concepts of core competency like core competencies, generic strategies, mergers, and acquisitions, alliances, CSR, blue ocean strategy, etc. all of them are the unique qualities established, planned, developed, implemented and maintained by an organization to get a hold of the market. All of the core competency are unique and give immediate results to the organizations but still the accurate effectiveness of the core competencies cannot be measured as they are ever evolving. The competency that we are going to review is the competitive advantage as it is the most favorite tool of the organizations to become more profitable than their competitors.
The literature of 20 years concludes that competitive strategies are not the only way to receive a competitive advantage in the market. And according to some authors, it is not even the best way to achieve it. Strategies that focus a great deal of the innovation which is an integral part of the competitive advantages that some organizations are solely paying attention at to create a great demand and following among the users and expanding the market size, rather focusing on a definite number of customers (Porter, 2008). The innovation strategies used to gain the competitive advantage have proven to be more profitable than the other competitive strategies and is addition they are considered to be more sustainable. The competitors may take up to 15 years to derive the same profits as an innovative, competitive organization may have at once. The innovation competitiveness can allow the companies to eliminate the need of trade off or solely focus on low cost or high differentiation.
The core competencies aim to deliver three values
An access to the broad varieties of market makes a significant change in the perceived value to the customer product about the end product. Makes the duplication impossible or extremely elusive for the competitors (Thomas and Bogner, 1994), for example, the camera manufacturing companies use fine optimization of the optics and mechanism and developed microelectronics to make the imitation impossible to the other companies, and may make the development of other products that use these competencies very easy.
To emerge and sustain in the global markets the organizations need to develop core competencies instead of using the vertical integration. NEC a Japanese corporation that provides information technology employed its set of core competencies to develop and excel in the market of telecommunication, semiconductor, and consumer electronic market. The author explained that how core competencies integrated with the strategic plans of the organizations can help to evolve with the changing technology and market environment. The building of the competence is the outcome of the strategic programs being used in an effective manner and it must be used by the top management to its fullest up to its full capacity. And they are very important for the cost cutting and the challenges faced in the price war.
The point to be noted about the definition given by Prahalad and Hamel (1990), is that the core competencies can be used for the ‘collective learning across the organization', hence, it cannot portray resourceful combination towards the corporate level, this mainly happens because term 'core competence' is frequently confused with ‘something that a company is good at in particular'. Management must realize that the stakeholders are an asset to the organizations which can be used to construct and integrate the competencies.
In the ‘competing for the future', the authors Prahalad and Hamel show how the administrators can formulate a prevision for the industries to adapt to the changes and find out the ways the resources can be used to attain the goals in spite of all the constraints involved. The executives must develop foresightedness for the ways that the competencies could be used for the origination of the fresh business thoughts. They central idea to achieve the industrial leadership is to create an independent and individual point of view for the future opportunities and business capabilities (Hall, 1992).
To achieve the competency advantages the company doesn't only need to concentrate on its tangible assets but also the intangible assets like core competencies. For example, Microsoft has excelled in its Information Technology innovations which make the duplication extremely difficult for its competitors. One more idea to identify the core competencies has been proposed by Danilovic & Leisner. The core competencies are related to the core products of an organization. The core products are related to the representation of the core competencies. Many approaches have been proposed to identify the portfolios of the products with the core competencies and one has been proposed by Danilovic & Leisner (2007). They can use the design structure matrices to identify the core products with core competencies and to map the specific product among the product category with the specific competency. Bonjour & Micaelli (2010) also introduced a method to measure how well the competencies have been achieved, implemented and are sustaining in a company's environment.
According to Prahalad and Hamel, the expensive ways to achieve the core competency are not necessary. The core competency can be applied with the low-cost measure as well as alliances and the licensing agreement. In many cases, the sharing of the competencies has given various effectual results without adding any additional costs. To better understand the competencies it is better to understand what the core competencies do not imply. The core competencies according to Prahalad and Hamel are not only about: Spending more than the rivals, Cost sharing in the business units, Vertical integration, The core competencies may be dependent on each other but by themselves, they are not sustainable.
The failure to have an idea of one's own core competencies has led to the destructible losses faced by many organizations (Jiang, 1999). The companies that are based on decentralization have faced more problems than the any other, because they rely on the outsourcing of the critical tasks, and leads to the companies being unaware of their core competencies because they don't know how the things are done in their company. The failure to realize their core competencies has led to the losses from many companies and industries, for example: in US in the 1970's many manufacturers were involved in the Television manufacturing business because the industry was mature at that time and there was high demand and the models could be manufactured at low costs from the Far East manufacturers. And to cut the cost and obtain high profits they lost their core competence of high-quality video which resulted in people preferring the new digital television industry.
Core products the core competency helps the organization to manifest them in every end product and creates a link between the end product and the core competencies, because of the core products the end products also have the value creation. In the simplest words, the core products aid the organizations in the launching of the end products. For example, Honda uses its gasoline powered engines in its every end product like cars, motorcycles, lawnmowers and generators.
One of the biggest advantages of a core competency is that it can be shared with the other companies and can be used in creating their end products (Fine and Whitney, 2002), but this makes the traditional measures of market share insufficient to measure their effectiveness. Prahalad and Hamel here intended to share that the core product share is an in appropriate metric. If a company has a sufficient amount of core products in can, increase its market share with the help of economies of share and economies of scope.
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Prahalad and Hamel also suggested that organizations should be corporate by their core competencies rather than independent business units. The problem with the executives or managers of most of the corporations is that they focus on getting their end products immediately to the markets without focusing on their core competencies, as they do not feel responsible for creating a companywide core competency. And sometimes the strategic business units underinvest in building the core competency without the right direction from the corporate management. Sometimes if a company does manage to build their core competency, they may not be able to share it with the other business units. Prahalad and Hamel suggested a solution to this problem which is the proper allocation of not only the company's cash as well as the core competencies among the business units. Many companies have faced the problem of losing their key employees to sustain their corporate key competency which is highly appreciable. The key argument on the value added top management is the building of the competencies to secure the future of the business is through competencies, this argument becomes the key theme in the book published in 1996 'competing for the future' where Prahalad and Hamel argued that the companies which are prepared for the future opportunities in the market are already defeated by the future of core competencies and corporate value which is largely related to the past. The main arguments followed are: Who will be the inventors of the future industries? Who will the transformers of today's industries? How many companies are aware and concerned about the future of their business? Naturally these ideas are used to create the blueprint of the strategies for the development of the business. These are the main points to identify the strengths and weaknesses of the corporates and their strategies. Thus dispensing with the simplicity of the business, it compliments with the two rules of the learning in the organizations and strategic adjustments.
While reexamining the patterns, development and the evolution of the corporations we come to know that, Prahalad and Hamel's way of understanding are concerned with reexamining of the methods involved with the development, ownership, and control of the core competencies on which the success of the core products is dependent on the market. While the authors like Porter had argued that a company's strength was the investment in the core technologies and their ownership and other authors such as Kenichi Ohmae suggested that technologies keep on evolving with rapidity according to as their research and development costs keep on multiplying. And the ability to handle the proprietary, joint ventures technologies and licenses effectively is the most efficient manner to secure and sustain a competitive position in the market. The most interesting to note about the both the groups of the author is they all suggested that though the technologies keep on changing, the companies have to secure their future position right now.as in fact, the horizon of strategic planning has widened. The big difference hinted by all the authors and their predecessors is that less conditional management structure assembled with an empowered workforce closed circuit connections can be built into the planning process, by the inspection of the near, intermediate and far ends of the business, so that the costly mistakes can be avoided in the future by the group which is too ignorant of the daily operations and changes in the market place.
The companies need to take the help from the core competence management so that they successfully keep on implementing the Core Competence in their areas of expertise, they also need to find out the ways on the basis of which they can continuously evolve it and make it better and make it sustainable so that it can be used for the future as well. The core competency management relies on the factors like; realizing the core competence, developing it further, creating the other new competencies along with it, diversifying it further in the business domain.
According to the report of AT & T, the core competency of a business helps it to concentrate on the existing market while trying to enter into new market or field. Along with it also lead to the activation of the company, it helps the increased implementation of the company's business strategies into the globalized world, it also helps to maintain the competitiveness of the organization, along with the other reasons it also helps the company to concentrate on its R&D department, the strategic alliances are also encouraged with the help of it which leads to successful integration of strategic business division with that of the whole company. Therefor it becomes urgent for companies to realize their core competence and manage it.
Conclusion
This review helped to examine the concepts related to the core competence, its effectiveness, the methodologies involved to survive in the market with so much of competition and demands. The review is based on the studies of the core competency, analysis, related literature, real-life experiences and academics which show that the future business environment will have no boundaries. All the challenges and the limitations will be worked upon with the successful implementation of the expertise and the abilities of the highly skilled employees. The technology will keep on evolving, and one business will not be limited to the one product or service. It also shows that with one mechanical technology, a company will not be able to keep the dominant position forever.
The application of a core competence in a company can make it diversified and allow it to enter into the new fields and helps in the activation of new technology in the organization. It helps the organizations to the more important things like R&D and strategic alliances, it also leads to the strategic allocation of the resources and helps to integrate the goals of the separate business divisions and the whole organization. Core competence is very crucial to the success of any organization and gives it a direction which is why all the organizations need to work on creating a core competence and strengthen it continuously.
It is very reasonable to say that the organizations need to indulge in creating diversified strategies, business philosophies and goals based upon the core competence if they want to compete in the global market which keeps on changing with time rapidly. So it is more urgent for all the companies to create a core competence at its earliest.
References
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Hamel, G., & Prahalad, C. K. (1990). Corporate imagination and expeditionary marketing. Harvard business review, 69(4), 81-92.
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Danilovic, M., & Leisner, P. (2007). Analyzing core competence and core products for developing agile and adaptable corporation. In DSM 2007: Proceedings of the 9th International DSM Conference, Munich, Germany, 16.-18.10. 2007.
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Bonjour, E., & Micaelli, J. P. (2010). Design core competence diagnosis: a case from the automotive industry. Engineering Management, IEEE Transactions on, 57(2), 323-337.
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Ohmae, K. (1999). The Borderless World: Power and Strategy in the Interlinked Economy, Management Lessons in the New Logic of the Global Marketplace. New York: HarperBusiness.
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Prahalad, C. K., & Hamel, G. (2006). The core competence of the corporation (pp. 275-292). Springer Berlin Heidelberg.
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Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic management journal, 18(7), 509-533.
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Javidan, M. (1998). Core competence: what does it mean in practice?. Long range planning, 31(1), 60-71.
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Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
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Thomas, H., & Bogner, W. C. (1994). Core competence and competitive advantage: A model and illustrative evidence from the pharmaceutical industry.
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Hall, R. (1992). The strategic analysis of intangible resources. Strategic management journal, 13(2), 135-144.
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Jiang, B. W. (1999). Potentials and Nature of Firm's Core Competence (53)[J]. Journal Of Industrial Engineering And Engineering Management, 1.
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Fine, C. H., & Whitney, D. E. (2002). Is the make-buy decision process a core competence?.
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