Transcript NEC and GTE Team Neptune Spring 2008 “Core Competencies at NEC and GTE”

NEC and GTE
Team Neptune Spring 2008
“Core Competencies at NEC and GTE”
Group members
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Agenda
History of NEC
 History of GTE
 Analysis
 Conclusions
 New Challenges
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NEC and GTE History until 1980
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NEC (Nippon Electric Corporation) lead by
Kunihiko Iwardare as a joint venture with
western investment
NEC first products were telephone lines and
equipment made with western technology
By 1926,NEC started to manufacture its own
systems and products
By 1930 company’s sales 40% by Japanese
military, but by 1945 increased to 97%
After WWII, NEC took advantages of postwar rebuilding and created a new era in
NEC’s operations
1947 development of the transistor provided
the forerunner of modern semiconductors
By 1950, the company began to expand
internationally to Asia
In 1977, CEO Kobayashi believed that the
integration of computer and communication
was inevitable (Internet?)
His vision became “C&C” Computers and
Communications
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GTE as General Telephone started by three
entrepreneurs, John O’Connell, Sigrid
Odergard and John Pratt
Rapid growth in the early post WWII due to
the US demand for telephone services
Initial line of business was local telephone
services, but later expanded to produce
telephone directories and communications
equipment manufacturing and operations
1959 merger with Sylvania and the name
became GTE (General Telephone &
Electronics Corporation
The merger created a diversified electronics
and communications group
In the 1960s and 1970s the merger marked
a period of big expansion
By 1970, GTE consolidated and reorganized
its management
The GTE Products Group was formed to
bring worldwide manufacturing and
marketing under a single entity
NEC and GTE History 1980 to 2000
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NEC constituted a C&C committee to
oversee the development of core products
and core competencies
By 1980 NEC consumer electronics
products were exported throughout the
world
By 1984 NEC foreign sales peaked to the
35% of total sales and declined to 25% by
1989
In the 1990s, NEC was one of the most
admired corporations, but soon faced new
challenges
The Japanese economy and the banking
crisis hidden during the prior decade growth
helped to face those new challenges
NEC lost its status as the world’s largest
semiconductor maker to Intel
By 1998, NEC had slipped to third place in
memory chips behind Samsung Electronic
Company and Hyundai Electronics
Industries
In 1999, NEC decentralized its operations
and returned to separate business unit
model
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The AT&T settlement left GTE as the only
company in the US with its own
manufacturing arm
GTE decided to realign its business
portfolio, it will focus on three “core”
business: telecommunications, lighting and
precision materials
GTE acquired a long distance telephone
services company and began offering
mobile phone service and developing
satellite communications services in 1984
By 1989, GTE was the first cellular phone
provider to offer service nationally in the US
At the end of the 80s GTE was in the midst
of restructuring into six operating groups
Telephone Operations, Electrical Products,
Government System, Information Services,
Mobile Communications and Spacenet
GTE developed substantially in the 1990s
Merger with Contel Corporation and
acquisitions of additional cellular properties
In the 90s, GTE focused on new enhanced
communications business
Analysis
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What went wrong at NEC?
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Japanese economic crisis
Competition from government
subsidized Asian companies
Competition from specialist
companies
Loss of domestic Japanese
PC market to American
companies
Defense procurement scandal
By focusing on core
technologies, NEC insulated
itself from market conditions
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What went right for GTE?
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Deregulation of US
Telecommunications Industry
 Investing in emerging markets
 Core business strategy
 Core business model leads to
economy of scope which
cannot be reproduced with the
core competency model
Conclusions
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Core Competency approach sounds good ,and may be
more efficient than SBUs of large diversified corporation,
but in practice loses out to core business model in its
ability to create economies of scale in a commoditized
business.
New Challenges to NEC for The
New Millennium
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2000 – NEC and Mitsubishi Electric joint venture to create U.S.
based display monitor company
2001 – NEC announced a new global corporate statement
“Empowered by Innovation”
2002 – NEC announced semiconductors business will be separated
to become a new company “NEC Electronic Corporation”
2003 – NEC establishes LCD technologies and customized products
2004 – NEC and Hitachi established a joint venture specialized in
backbone Ronter/switches
2005 – NEC establishes outsourcing company for mobile network in
Honk Kong
2006 – NEC and Sony made a joint venture in the optical disc and
drive business
New Challenges to GTE for The
New Millennium
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In 2000, GTE and Bell Atlantic created a merger that is well know as
Verizon
Verizon is actually the second largest wireless telecommunications
network after AT&T and Cingular merger in 2005
THE END
Thank you very much
Anyone has a question?