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Prof Shreeniwas V Bidwai
PGPM SEM IVCLASS OF 2013SECTION COMPETING FOR THE FUTUREBUSINESS STRATEGY II
Strategic Case Analysis- Core Competence at NEC ,JAPAN AndGTE,USA
DATE:
NEC (Nippon Electric Company)
Formerly known as “Nippon Electric Company”
Established: Tokyo, Japan (17th July,1899)
Headquarters: Tokyo, Japan
Key people: Hajime Sasaki (Chairman of the Board), Kaoru Yano (President)
Industry: Electronics
Employees: 154786 (consolidated as of March 31, 2007)
Slogan: Empowered by Innovation
Former NEC logo (1899-1992)
NEC (Nippon Electric Company)
Major operations: IT/ Network solutions/ Mobile/ Personal
solutions business, Electron devices business
Capital: 337.8 billion yen (as of March 31, 2007)
Net Sales: 4652.6 billion yen (fiscal year ended March 31, 2007)
Consolidated Subsidiaries: 342 (as of March 31, 2007)
Present Logo
NEC’s Headquarters
NEC Super Tower, headquarters of NEC Corporation, in Minato-ku, Tokyo, Japan
Change Agents of NEC
Vision of NEC
Corporate Philosophy
“NEC strives through “C&C”
to help advance societies worldwide
toward deepened mutual understanding
and the fulfillment of human potential”
NEC’s Commitment
Attaining customer satisfaction
Developing new technologies
Conducting fair corporate activities
Disclosing information
Preserving the global environment
Maintaining good relations with the community
Conducting thoughtful corporate citizenship activities
Protecting human rights
Valuing employees
Protecting intellectual property and personal information
NEC’s Group Structure
Organization Chart of NEC
Board of Directors
President
Corporate Auditors
Corporate Auditing Bureau
International BusinessPromotion Unit
Software Business Promotion Unit
Marketing Unit
Intellectual Asset R&D Unit
Innovation Unit
Corporate Staff
Domestic Sales Business Unit
Govt, Community, FinancialSolutions business unit
Enterprise solution business unit
Social InfrastructureSolutions business unit
Carrier Network Business Unit
IT Platform Business Unit
Systems Integration Business Unit
Mobile TerminalsBusiness Unit
Personal Solutions Business Unit
NEC’s R&D Center- Organization
NEC’s R&D- Domestic Network
NEC’s R&D- Global Network
Historical Milestones Discovery of single walled carbon nano-tubes by Sumio Iijima
Creation of the Earth Simulator, the fastest supercomputer in the world at the time
World's first demonstration of the one-qubit rotation gate in solid state devices
Invention of the widely used MUX-scan design-for-test methodology
The John M. Cowley Medal 2006 (The International Federation of Societies for Microscopy)- 03/09/2006
National commendation for Invention of a Synchronized Clock Generator for Optical Disc- 19/06/2006
The 2005 The Young Scientists' Prize, The Commendation for Science and Technology by the Minister of Education, Culture, Sports, Science and Technology- 20/04/2005
19th Advanced Technology Award Fujisanke Business.i Prize- 04/07/2005
Strategic Intent of NEC
Principal “Business Segments” of NEC
Principal “Business Segments” of NEC
Principal “Business Segments” of NEC
Products/Brands of NEC
NEC-Early Development
The partnership was established on August 31, 1898 by Kunihiko Iwadare and Takeshiro Maeda using facilities from Miyoshi Electrical Manufacturing Company
Joint venture with US based Western Electric Company who had interest in Japanese phone market headed by Walter Tenney Carleton
Revised treaty on 17th July, 1899 resulted in the birth of NEC
Operations started with the production, sales and maintenance of telephones and switches
Manufacturing plant was established at Mita Shikokumachi in 1901
Adoption of new technology (common battery switchboard) by the Ministry of Communications in 1903
Exported telephone sets to China in 1904
Changes in Plant Management Policy
In 1905, Iwadare visited Western Electric plant to see their management and production control
Discontinued the “Oyakata” system of sub-contracting
Inefficiency was removed from production process
New accounting and cost controls were put in place
Time clocks were installed
NEC-Early Development
Expansion of Japanese Telephone Market
Number of telephone subscribers rose from 35000 to 95000
Entered the Chinese market in 1908
Established its first foreign sales office in Seoul (Korea) in January, 1908
Between 1907-1912, sales rose from 1.6 million yen to 2 million yen
NEC-Early Development
Setback by Ministry of Communications
Delayed the third expansion plan of the phone service in March, 1913
Sales fell 60% between 1912 and 1915
During the interim, Iwadare imported appliances including electric fans, kitchen appliances, washing machines and vacuum cleaners to prop up company sales
In 1916, the government resumed the delayed plan adding 75000 subscribers and 326000 km of new toll lines and successfully completed the installation of its own telephone lines in Hankow and Wuchang in China
In 1919, NEC started its first association with Sumitomo Corporation
The Great Kanto earthquake in 1923
NEC-Early Development
Stable growth
NEC was chosen to modify automatic telephone exchange equipment from European and US manufacturers
NEC started radio communications business and established a radio research unit in 1924
NEC started developing electron tubes in 1925
By 1930, it was manufacturing the first 500 W radio transmitter
Developed photo-telegraphic equipment in 1928
It provided the Japan’s Ministry of Communications with the A-type switching system in 1929
In 1939, it made history by laying one of the world’s longest telephone cable lines; 3000 km from Tokyo, through Korea and into China
NEC-Post World War II Destruction during World War II:
In 1938, the Mita and Tamagawa plants were placed under military control
On December 22, 1941 the “enemy property control” law was passed
The “Munitions Company Law” was passed in October, 1943
Fire bombings affected both the plants reducing its capacity by 40% Domestic Growth:
It began transistor research and development in 1950
It started exporting radio broadcast equipment to Korea in 1951
Computer research and development began in 1954
Very strong demand from NTT (Nippon Telegraph and Telephone)
It began integrated circuit research and development in 1960
Nippon Electric New York (Now, NEC America Inc) was incorporated in 1963
NEC-In an expansionary mood International Operations:
In the late 1950’s, NEC exported large-scale communications equipment for public telephone networks to the Middle and Near East
It established its first marketing subsidiary for communications equipment in North America in 1963
Operations in Latin America began in the 1960s with the sale of microwave communications systems
Entered the European market by shipping satellite communications earth stations and microwave communication systems
Began operations in Africa in the 1970s to promote economic development
It introduced its first digital switching system in 1977 for overseas market
In 1977, Japan’s National Space Development Agency launched the NEC’s geostationary meteorological satellite, named ‘Himawari’
NEC- “C&C” Era International Operations:
The concept of “Computers and Communications” (C&C) was adopted
NEC America Inc opened a plant in Dallas (Texas) to manufacture PABX and telephone systems in 1978
Acquired Electronic Arrays Inc to start semiconductor chip production in US
In 1980, created the first digital signal processor, the NEC PD7710
NEC Semiconductors (UK) Ltd was established in 1981
In 1983, NEC stock was listed on the Basel, Geneva, Switzerland exchanges
NEC Information systems Inc started manufacturing computers and related products in US in 1984
In 1986, it delivered its SX-2 supercomputer to the Houstan Advanced Research Center
In 1987, NEC Technologies (UK) Ltd was established to manufacture VCRs, printers and color TVs for Europe
GTE (General Telephone and Electronics Corporation)
Founded: 1918
Headquarters: Irving, Texas, USA
Industry: Communications services
Products: Internet access, local wireline and wireless telecommunications services
Website: www.verizon.com (Verizon took over GTE in 2000)
GTE corporate logo, 1971-2000
Products/Brands of GTE (Now, Verizon)
GTE- Early Development Was conceived as a corporate entity when John.F. O’Connell, Sigurd L.
Odegard and John A. Pratt purchased the small Richland Telephone Company
Name was changed to “Commenwealth Telephone Company” two years hence
Later, the corporation purchased “Long Beach”, a California based telephone company and a holding company called “Associated Telephone Utilities” (ATU)
Stock market crash of 1929 and Great Depression affected the corporation
Subsequently, the corporation was reorganized to “General Telephone Corporation”
Its initial line of business was provision of local telephone services
In 1955, General Telephone acquired Theodore Gary and Company
Acquisition of Peninsular Telephone of Florida added another 300000 customers
By 1957, General Telephone was providing the telephone services to 2.8 million customers in the US, Canada and Dominican Republic
GTE- Merger and Expansion In 1959, it got merged with Sylvania Electric Products and the name of the parent
company was changed to “General Telephone and Electronics Corporation”
It resulted into diverse range of businesses including halogen automobile headlights, cutting tools, telecommunications equipment, cameras, television sets, atomic reactor fuel elements, anti-missile defense systems and space frame systems for buildings
During 1970s, GTE expanded by acquiring phone companies in British Columbia, Quebec, Hawaii and several Western and Mid-western US states
1970s also saw GTE consolidating and reorganizing its management; corporate headquarters was relocated to Stamford, Connecticut from New York City
In 1981, the company sold its electronic holdings to North American Philips
GTE ‘Mobilnet’ was formed to construct and operate cellular systems in 1981
In 1983, it bought infant long-distance carrier ‘US Sprint’
By the end of 1980s, it had annual revenues exceeding $17 billion employing more than 159000 people operating throughout the US and 40 other countries
NEC, GTE and the Core Competence of the corporation
“Consider the last 10 years of GTE and NEC. In the early 1980s, GTE was well positioned to become a major player in the evolving information technology industry. NEC, in contrast, was much smaller. It had a comparable technological base and computer business, but it had no experience as an operating telecommunications company
In 1980, GTE’s sales were $9.98 billion. NEC, in contrast, was much smaller at $3.8 billion in sales
Yet look at the positions of GTE and NEC in 1988. GTE’s 1988 sales were $16.46 billion and NEC’s sales were considerably higher at $21.89 billion
Why did these two companies, starting with comparable business portfolios, perform so differently? Largely because NEC conceived of itself in terms of “Core Competencies” and GTE did not.”
-Gary Hamel and C.K Prahlad
What is Core Competency
“Core competencies are the collective learning in the organization, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies”
- C.K Prahlad and Gary Hamel
3 Tests to identify a Core Competency
It must have the potential to form the basis for entry into new product markets
The competence must make a significant contribution to customer perceived value
It should be difficult for competitors to imitate
Core Competency of NECNEC developed a strategic intent to exploit the convergence of computing and communications (C&C)
NEC’s top management set up a C&C committee to oversee the development of core products and core competencies
Entered into strategic alliances to build competencies at low cost
Clarity of strategic intent and strategic architecture
Believed that competitiveness depends on the ability to build core competencies faster than competitors and at a low cost
Ability to exploit technological capabilities
Concept of core competency acts as collective learning in the organization
Core competency involves communication, involvement and a deep commitment to working across organizational boundariesNEC had integrated view of its business unitsTo develop core competency, there is no need to spend more on R&D
C&C Architecture
What does Core Competency achieve..?
Enables the creation of new products and servicesMakes a significant contribution to the customer valueHelps create sustainable competitive advantage
NEC- Post 1990In 1990, a new head office building (‘Super Tower’) was constructed
Joint venture agreements were established to manufacture and market digital electronic switching systems in China
NEC Europe Ltd was established as a holding company for European operations
NEC C&C research laboratories (NEC Europe Ltd) was opened in Germany (1994)
NEC (China) Ltd was established as a holding company for Chinese operations in 1996
In 1998, NEC opened the world’s most advanced semiconductor R&D facility
Marketing effort: Sponsored English football club [Everton (1985-1995)], Harlequin RUFC and RLFC rugby teams from London
Faced some challenges too in the same decade:
Japanese economy came to a standstill
NEC lost its status as the world’s largest semiconductor maker to Intel and was also behind Samsung and Hyundai electronics in the memory chip business
Compact computer corporation (US) stunned the Japanese PC market by waging a price war
NEC- In the new MillenniumIn 2002, NEC electronics corporation was separated from NEC as a new semiconductor company
NEC Laboratories America Inc was created in November 2002 as a merger of NEC Research Institute and NEC’s USA’s Computer and Communications Research Laboratories
NEC built the ‘Earth Simulator Computer’, the fastest supercomputer in the world from 2002 to 2004
NEC- Financial Results for 2006-07 (fiscal year ended March 2007)
Profitability
FY-06 Sales/Operating Income by Segment
FY-06 IT/NW Solutions Business
FY-06 Mobile/Personal Solutions Business
FY-06 Electron Devices Business
FY-07 Financial Forecasts
FY-07 Sales/Operating Income
by Segment
FY-07 IT/ NW Solutions Business
FY-07 Mobile/ Personal Solutions Business
FY-07 Electron Devices Business
Challenges in FY-2007 Reinforcement of growth strategy
Steady execution of NGN business strategy
Growth in global market
Further improvement of non-profitable businesses
Solidifying mobile terminal business’ profitability
Support of NEC electronics’ turnaround as the largest shareholder
Thorough enhancement of profitability
Further pursuit of production/ development efficiency as NEC group
NEC- Stock Price Information
NEC Corporation (TSE)
19th February, 2008
Last 438
Previous Close 428
Open 435
High 441
Low 427
Change +10
Percent Change +2.34%
Currency YEN
Volume 8,474,000
NEC-Composition of Shareholders
NEC in INDIA
NEC strengthens its business capability in India through establishment of new company (NEC India Pvt Ltd) for IT/Network business
NEC signs India-Sri Lanka contract
NEC Solutions (US) joins hands with Niteo Partners Inc in Chennai to integrate offshore software delivery and BPO capabilities into its solutions business in the US
NEC enters the Indian PC market in 2005
NEC and Sify form strategic partnership to promote thin client computing in India
NEC enters into a joint venture with HCL (India)
GTE- Post 1990US economy was doing well- saw dramatic expansion of most communications services with data applications and growing demand from the internet spaceAnnounced merger with Contel Corporation, a major local telephone and cellular service providerEntered into an agreement to merge with Bell Atlantic (1998)Also, announced an alliance with Vodaphone Airtouch (1999) to form the largest wireless communications company in the USDuring the decade, it introduced new advanced switching modes, interactive video services, wireless data and personal communication services, international roaming services, internet access services, online servicesReached agreements with Lycos (online services), Qwest (fibre optic networks) and Cisco (internetworking capabilities)Announced a joint venture with SOVINTEL to provide instantaneous, high quality telephone service from the Soviet Union to the West and AsiaBegan operations in Argentina, Belgium, Mexico, China, Japan, Taiwan and Puerto RicoIn June, 2000, Bell Atlantic bought GTE, renaming it “Verizon communications”
Verizon Communications Inc
Founded: 1983
Headquarters: New York, USA
Industry: Communications services
Products: Broadband internet services, television service, local wireline and wireless telecommunications services
Chairman of the Board and CEO: Ivan Seidenberg
Revenue: $90 billion (2007)
Net income: $6.12 billion (2007)
Employees: 239000 (2007)
Slogan: We never stop working for you, America’s most reliable network, It’s the network
Website: www.verizon.com
Verizon- Statistics(As of year end 2007)
Verizon Wireless:
Retail Customers: 63.7 million
Total Customers: 65.7 million
US markets served: 49 of top 50
Employees: 69000
Verizon Wireline:
Wireline broadband connections: 8.2 million
US Wireline Access Lines : 41.4 million
International presence: 140 + countries
Employees: 161000
Verizon- Wireline Presence
Verizon- Wireless Presence
Verizon- Financial Performance(year ended 2007)
Consolidated Revenue and Operating margin
Wireless Customer Growth
Wireless Revenue Growth
Wireline Customer Growth
Wireline Revenue Growth
