Chapter 2 Flashcards
Core competencies
company’s most important FSA, its vital routines and
recombination capabilities
Core competencies include:
shared knowledge, organised in routines, and the ability to integrate multiple technologies, or recombination capabilities, carried by the key employees.
core products
represent areas of technological leadership in the form of key
components from which end products are developed and created.
The core products are put together to create end products.
3 characteristics to identify core competencies
1 Be difficult for competitors to imitate
2 Provide potential access to a wide variety of markets
3 Make a significant contribution to the perceived customer benefits of the end product
The loss of the core competence would have an important negative effect on the firm’s present and future
performance.
Strategic architecture
A road map of the future that identifies which core competencies to build and their corresponding technologies
The incentive system should be designed so that…
Managers who act in the interest of the firm rather than their own are rewarded. This reduces bounded reliability problems
Bartmess and Cerny provide five criteria to assess
the need for colocating
activities instrumental for further recombination.
These five determine the scope of the bounded reliability problem that must be
solved.
The five criteria to assess the need for co-locating activities instrumental to further recombination are:
Complexity
Required level of interaction
Similarity of background and expertise of the individuals involved
Requirement of a prior relationship
Concreteness of information
Complexity:
If the information that has to be communicated is
complex this requires geographic proximity
Required level of interaction
Low predictability of information content and need for two-way information requires close geographic proximity of the activities.
Similarity of background and expertise of the individuals involved
Less similarity between the individuals makes it more difficult to communicate from a distance
Requirement of a prior relationship:
There are types of sensitive communication that require a prior relationship between the communicating parties. A prior relationship leads to confidence between the parties. The absence of such a relationship requires a need for closer geographic proximity.
Concreteness of information
The less concrete the information, the greater the need for face-to-face communication and thus geographic proximity.
Key critique on core competence approach
Prahalad and Hamel do not include country factors in their analysis. They overestimate’ the role of strategic management and underestimate role of (host) country location factors.
Five management takeaways
1 Identify and nurture your company’s core competences.
2 Develop a strategic architecture to guide your firm in acquiring and building core competencies.
3 Make sure you understand the economic potential and drawback of acquiring FSAs through external strategic alliances.
4 Do not overestimate the transferability of the FSAs across borders. Also be sure to understand the costs involved in resource recombination.
5 When expanding internationally or investing abroad reflect on colocation requirements.
