Core Competence of Sharp Corporation - Essay Example

 Since the advent of 1990s, it has been widely regarded that competitive advantage of a company depends upon how well it exploits its core competencies as opposed to the ideology of diversification into unrelated areas based on portfolio basis. The emphasis is on introvert orientation rather than strategic positioning prevailed in 1980s. Prahlad and Hamel have already documented in their 1990-article in Harvard Business Review that in technology-intensive companies, core competencies were largely responsible for their successful performance by concentrating on their technological capabilities. This is also called Resource-Based View (RBV). There were abundant literatures providing theoretical and empirical support justifying that competitive advantage is derived from imperfectly tradable, imperfectly substitutable and valuable assets. The idea of portfolio approach encouraging diversification into unrelated areas that flourished in 1960s and 1970s lost its fervor to RBV approach advocating diversification into related areas. RBV approach also was critical of multi divisonalisation of a large company that led to corporate fragmentation and short-termism undermining the development of core competencies and innovations. Core competency exploitation led to vertical integration in large companies to achieve competitive advantage. But of late vertical disintegration is being attempted in the globalization tendencies which offer wide opportunities to delegate to external suppliers with highly specialized expertise resulting in more pronounced core competency approach for the given company. (Christensen 2005) Hammel and Prahalad (1994) in their book “Competing for the future”assert that companies should look forward to the share of future opportunity share rather than current market share. They say that successful enterprises will reshape their industries rather than themselves by building upon their unique core competencies without building upon current product lines and that this will lead to creation of new competencies. They advocate new strategy which requires four approaches namely (1) understanding of the shape of future competition; (2) process by which to gauge tomorrow’s opportunities; (3) energizing the company from top-to-bottom to prepare for the future; and (4) overtaking the competitors and arrive at the future first without assuming undue risks. They add that it takes a company 5-10 years or more to achieve leadership position in a given core competence and that if a company does not know how to leverage their existing core competencies, it will be overtaken by the others in the market. A core competence is defined as a combination of skills and technologies that would enable a company to offer an added benefit to their customers. For instance for the benefit of pocketability, core competence has been miniaturization for Sony and for the benefit of on-time delivery, logistics should be the core competence as in the case of Federal express. In order to create a culture of core competence in an organization, it should engage itself in five key competence related tasks. (1) Recognizing the existing core competencies ; (2) Setting up a core competence acquisition program; (3) Developing core competencies which is a long-term commitment; (4) Deployment of core competencies; and (5) Protection and preservation of core competencies. About Sharp Corporation Sharp Corporation is well known for its innovative products ever since its inception in 1912 with two employees. Its first ever product was snap belt knuckle which the founder Tokuji Hayakawa had himself designed. Its first ever innovative product was “ever sharp” mechanical pencil invented by its founder in 1915 and the company has been named after the pencil “sharp”. Today it employs 57,600 (as on April 30, 2007) people worldwide and is at present is a leading manufacturer of liquid crystal displays (LCDs) and digital technologies. It has got the widest range of sophisticated consumer electronics, information technology products and electronic components. Its annual sales for the year ended March 31, 2007 was 3,127,771 million yen. (PRN Wire) Known for its development of LCD technology, Sharp Corporation could withstand the unfavorable economic conditions that prevailed in Japan during 1990s. The well known philosophy of Sharp Corporation is being a manufacturer dedicated to the use of unique and innovative technology for the welfare of people allover the world and also at the same time contributing to their culture and benefits. The company operates in four business domains of entertainment and communications, eco-life, business solutions and next generation electronic components. Its policy is to offer products with original features and it has been changing its product mix from “white goods” to green goods. Its nine business areas where it has got competitive advantage are LCD Color Television, 1-bit digital audio, Home Networks, Mobile Communication Terminals, Green Devices, Photovoltaic power systems, IC Cards, and System LCDs. The company’s organization is divisional system by which 10 business groups having 32 divisions each of which deals with different products. The business groups act as independent investment centers and the divisions as profit centers. Whenever necessary the company forms special teams known as emergency development project teams featuring direct control of the President over each team. Team members are selected from within the company and funds allotted to the team are unrestricted and accounted as general administrative expenses of the president. Its major breakthrough from its R & D efforts is the Liquid Crystal Technology for which it holds maximum number of patents in the world. R & D activities are spread over five overseas subsidiaries in Washington, U.S.A., Oxford, England, Bracknell, England, Taipei, Taiwan and Bangalore, India besides 19 domestic centers. It controls its overseas operations through the Head Office in Japan and does not delegate decision making to local units. (Nishimura and Willet pp 189-203) Why has Sharp been so successful for so long? For the founder Hyakava, it was the second life in 1924 when he resumed his company after he lost his wife and two children and employees in the Great Canto Earthquake in 1923. Sharp Corporation owes its success to the streak of innovativeness in the products introduced by its founder in succession living up to the philosophy of innovativeness for the benefit of the people throughout the world. Over time, many trusted lieutenants joined him notably Sakei who was the vice president of Hayakawa Electric in which name Sharp had been known as. Until 1969, the company was only an assembler and on his visit to Rockwell in 1969, Sakei was awed by the success of Apollo mission due to semiconductor technology. Though Sakei was mainly a finance and accounting person, his chance visit to Rockwell with the trait of entrepreneurship made him grab the opportunity of a new technology associated with great risks of potential failures and losses. It has been observed that right from inception, the company has been quick to seize the opportunities before others do and the ability to move first in their domain has given them the first-mover advantages contributing to the sustainable competitive advantage. This in turn helps the company develop core-competencies. Their courage to make the first move along with their ability grasp the maximum benefit from the market before competition sets and their focus on customer-friendly or rather consumer-friendly orientation help keep afloat for so many years with success. For example as part of new-life products, the company introduced 3-door refrigerator featuring the freezer at the bottom pursuant to its market research that people had to bend more frequently (80%) for coolers and less frequently (20%) for freezers. Traditionally freezers had always been at the top. The company gave importance to color and design f the products which its competitors took lightly. This resulted in 10% increase in the company’s growth during late 1970s and early 1980s during which period the industry in general registered only 3% growth. In what ways does being a Japanese company contribute to Sharp's success? The ‘sincerity and creativity’ creed followed by the company is characteristic of Japanese culture. Throughout the company’s career, its presidents and chief executive officers have been of Japanese origin. As in most Japanese companies, Sharp is having a paternalistic relationship with its employees as in a family, or community whose members are expected to cooperate. Most of the employees have been having life time careers with the company and it has had very little employee turnover. Whenever a research or project is wound up, its employees are absorbed elsewhere in the company and not sent home as could be done by way of contracts at the time of recruitment for a particular project. The same H.R. policies are observed in its branches outside Japan. In America itself, the Sharp Corporation first celebrated 10th anniversary with almost half the strength of its 230 strong workforce. The company’s salary structure and promotion policies are based on merits and to retain even the persons not loyal to the company but otherwise capable, by proper motivation. There is no hire and fire polices pursued in the West. Since H.R. is one of the components of core competencies, the right mix of the employees and men of Japanese origin heading the divisions even outside the country makes it unique as a Japanese company thus contributing to its success. By keeping the identity of a Japanese company in tact, the company has been able to earn the patronage from the consumers as “Japanese” is associated with efficiency and innovativeness. People are tuned to buy even blindly from the very word “Sharp” synonymous with Japan. What historic strategic technologies does Sharp choose to invest in? Taking a cue from the Apollo mission which used LCD technology, Sharp developed its know-how in electronic products of integrated circuits (ICs) and Liquid Crystal Displays (LCDs) for manufacture of end products such as Automotive 4” Colour LCD TV, view cam LCD Camcorder, LCD Museum Wall Mount Color LCD TV and Wizard Electronic Organizer. The company’s track record shows that it always had a foresight of shape of things to come and accordingly the company used to invest in strategic technologies. For instance, in 1953, expecting unfolding of TV era, it obtained license for manufacture of black and white TVs and by 1955, it emerged as a leading TV manufacturer enjoying 25% market share. Encouraged by successful TV launch, it gradually entered manufacture of Colour TVs, refrigerators, washing machines, and air conditioners Then it also covered microwave ovens in 1962 sequel to its learning of the technology while working with Litton, the U.S. pioneer for microwave ovens. Due to this diversification, the TV and Radios which accounted for 84% of sales in 1960 were reduced to 53% by 1965. When in 1961, Japanese Government refused to grant license for making main frame computers restricting it to six already selected companies, it chose to manufacture desktop electronic calculators for which there was a massive consumer market. Its focus on computer related research resulted in the company’s introduction of world’s first all transistor-diode desktop calculator named Compet weighing about 55 pounds measuring 25 centimeters thick priced at $1,500 equivalent to the price of a passenger car then. Since these calculators consumed more electricity using Bipolar ICs, the company felt that it should make them energy efficient and switched over to MOS ICs as they consumed less electricity by which strategy the company quickly reached leadership position in electronic calculators and credit for which should go to Dr Sasaki, a researcher who came from Bell Laboratories. Mr. Sakei has also been credited with recommending use of semi conductor technology for introducing which they sacrificed participation in international exhibition for one year in order to save US $20 million for the project of semi conductor technology. Thus it became the 13th manufacturer of semiconductors in Japan. However due to lack of technological know-how, it incurred losses of $1.3 to 2 million for the first five years. Saeki soon became the Company’s Chairman in 1970 and the company was also renamed as Sharp Corporation. Again due to coming of Casio calculators in the market in 1972 at a low price of $ 40 at the time, Sharp forayed into manufacture of calculators using for the first time ever by any one LCDs which consumed 1/100 of the electricity consumed by conventional fluorescent models. This was because of the knowledge gained by a Sharp Engineer from a television program about the U.S.A. which showed the use of LCD by the RCA which however had since stopped its production little realizing the potential of the market for LCDs. This move made Sharp seize nearly 50% of the market for electronic calculators which opportunity the company also used for diversification into manufacture of information equipment. As a result there came out a stream of products of micro-computers, and electronic cash registers in 1971, liquid toner copiers in 1972, personal computers, and word processors in 1979 and facsimiles in 1980. By 1985, Sharp’s sales fell by 10% and profits by 60% due to strengthening of Yen. Under the leadership Tsuji as president during this difficult period, in their journey of innovation, the company introduced new life range of products such as electronic organizers which had been know as Wizard in the U.S.A., dual swing door refrigerators, home use fax machines, and cordless telephone and cordless answering machines. This enhanced the company’s reputation as user-friendly. Its experience and deep expertise in LCD technology, enables the company in due to bring out LCD TVs, and range of products using lCD technology, such as LCD Computers, word processors, thin film transistors (TFT) by which it brought 3-inch in 1983 LCD and 14-inch LCD in 1988 followed by first in the world products like 110-inch color LCD video projector, 8.6 inch wall mount LCD monitor, and View Cam Corder with 4-inch color LCD monitor. .What is the main difference between Sharp today and 30 years ago? Sharp was mainly an assembler until 30 years ago. This soon invited competition and erosion of profits. Owners, management and employees had always under the constant fear of competition from no where and losing of the market and ultimately ruin of the company. But even since it launched vertical integration and sustained development of core competencies, the company was able to utilize new technologies and it has now become a world leader with unique products not easy to imitate. With its original philosophy of bringing welfare for the people throughout the world, the Sharp Corporation has attained the status of an innovative manufacturer today from the status of a mere assembler 30 years ago. Should Sharp enter into an alliance with Apple or Intel? Alliance with Intel envisages manufacture of flash memory for which Intel already enjoys 85 % of the market. This alliance is featuring an investment $ 500 million by Sharp for plant to be erected in Japan and the flash memories so produced or purchased from Intel could be used in the products of Sharp, Alliance with Apple on the other hand would enable Sharp to enter the emerging multimedia era by manufacturing Personal Digital Assistant by incorporating the know how of Apple for the Apple’s computer systems and software know how and the LCD technology of Sharp. The latter alliance with Apple will give an edge to Sharp since it amounts to equal partnership in sharing of technical know in which Sharp and Apple have their respective core competencies. The project gives immediate scope for furthering its LCD technological know so that possible saturation in existing LCD based products can be offset by this newly emerging opportunity. This will mean also to fully recover the capital investment made for the development of LCD technology and if already recovered, it does not envisage any further investment unlike in the case if Intel entailing an investment of $ 500 million. Even with the said investment, the flash memory technology is new to Sharp and hence it will take longer time to cash in on the alliance than it would in the case of Apple which offers ready market for its LCDs without any further capital investment. This is an obvious advantage of core competence a company can rely upon and benefit from. Works Cited Christensen Froslev Jens 2005 Withering Core Competency for the Large Corporation in an Open Innovation World? to appear in Henry Chesbrough, Wim Vanhaverbeke and Joel West, eds., Open Innovation: Researching a New Paradigm, Oxford University Press (2006). Nishimura Akira and Willet Roger 2004 Management Accounting in Asia, Chapter 8 Cengage Learning Asia, 2004 PRN Wire, Sharp and Toshiba to Form Alliance in LCD and Semiconductor Businesses 11 August 2008 http://www.pressreleasenetwork.com/newsroom/news_view.phtml?news_id=234 8 Bibliography Noda Toma, 1995, Sharp Corporation: Technology Strategy, Harvard Business School Review April 3, 1995 Read More