6 Robert Uberman, Multinational Corporations (MNCs)

What does create a customer value ? Most companies possessed detailed cost breakdowns of their products and services very few breaks down value contribution. In any industries there is a number of skills and capabilities which are necessary to run a business but very few that make a real difference. It is of a strategic importance to understand where the latter ones lay. Hamel Gary, Prahalad C.K.,„Competing for the future ”, pp Robert Uberman, Multinational Corporations (MNCs)

Resource based approach to strategy formulation Concept of „core competences” put forward by Hamel and Prahalad, based on the equation given below: competences = skills + resources „Hard” and „soft” strategy aspects MNC as dynamic organism based on relations and cooperation – not a simple set of individuals Robert M. Grant: Contemporary strategy analysis, Blackwell Publishing, Maiden, 2005, 5th ed. pp Robert Uberman, Multinational Corporations (MNCs)

„Core competences” - definitione Key properties: –unique –valuable –difficult to imitate Types of key competences: –tangible: localisation, mineral deposits –legal: licences, patents –organisational: capabilities Core competences need to: –be shared across all key units –allow for creation of new branches of products Robert Uberman, Multinational Corporations (MNCs)

Cases of Canon and Intel Core competence: –Canon: precision mechanics applied to fine optics (laser engine) used in printers, overhead projectors, copy machines and others –Intel: microprocessors Both are: –unique (technologies offered by competitors are much less attractive) –difficult to imitate (relate to complicated processes managed by a wide group of people) –valuable (various and evolving applications are developed) Robert M. Grant: Contemporary strategy analysis, Blackwell Publishing, Maiden, 2005, 5th ed. pp Robert Uberman, Multinational Corporations (MNCs)

Cases of Nike i Olam Cases of Nike i Olam (HBR, 2/2004, pp ) Core competence: –Nike: sporting shoes technology development –Olam (Nigeria, Singapore): currency and price risk management of African agricultural markets Both indicated above are: –unique (technologies offered by Nike’s competitors are less effective, nobody has been able to challenge Olam’s abilities to manage risks related to agricultural activities) –difficult to replicate (relate to complex processes/technologies) –precious (can be applied across various products: fe. Various kinds of sportswear, different agricultural products) Both are shared by all corporate divisions and serve as a base for products and services. Robert Uberman, Multinational Corporations (MNCs)

Areas in which MNCs look to develop their „core competences” to compete with small businesses Where economies of scale play important role: –high fixed costs or/and investments –High risk: high R&D spending, advertising campaign Where benefits of learning curve play important role: –mass production –standardised processes Benefits of global reach play important role:: –currency risk dispersion –risk of business cycle dispersion Michel E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Chapter 13 Robert Uberman, Multinational Corporations (MNCs)

Core competences – summary Best companies built their success not on a mere ownership of tangible resources (mineral deposits, ground plots) but on commitment to nurturing organisational capabilities (talents, technologies, also leading to identify and develop valuable mineral deposits). Brand has a real value only if it is supported by core competences resulting from MNC’s traditions (vide Honda vs. General Motors). Robert M. Grant: Contemporary strategy analysis, Blackwell Publishing, Maiden, 2005, 5th ed. pp Robert Uberman, Multinational Corporations (MNCs)