Core Competence Needed to Provide the Competetive Advantage - Essay Example

?"Core Competence" needed to provide the competitive advantage. The battle for space in the electronics market is getting more and more competitive and challenging for electronics giants like Sony receding back in the Consumer Electronics segment, particularly in the line of LCDs. Sony has been holding to its ground for a long time in the market and product range for digital and video cameras, Walkman stereos, TVs, and semiconductors, manufactured via its associates. Unlike any conventional electronics company, Sony has been into vast assets (Sony, Inc. Company Dossier 1). Off late, R&D section of Sony had lagged behind in strides it used to make in the 1960s with such innovative products as Trinitron and WEGA in the 1990s by using the state-of-the-art technology to be the leader of the horizon of consumer electronics market. With the arrival of digital technology, Sony has lagged behind the competitors in television market. Change in people’s attitude becomes evident unlike the 1940s when brand recognition was the major reason of Sony’s better sales performance. Younger generation takes purchase decision considering a number of factors. Without presenting distinct features, Sony cannot lure the buyers and scope of presenting such features in the digital environment is quite limited. The Korean competitors Samsung and LG are leading the race for market space to Sony in television market. A comparison of the LCD television market can help in finding the causes of Sony’s lost ground (Chang 5). Samsung and LG Electronics have been the leading producers in the flat-screen TV market in 2010, which includes liquid-crystal display (LCD) TVs and plasma display panel (PDP) TVs. Samsung Electronics captured 18.7% market of the flat-screen TVs sold worldwide in2010, the second-in-lead LG were able to capture 13.1% while Sony could gain access to 10.3% share of total flat screen market. This scenario reiterates that Sony is losing ground to its Korean competitors in LCD TV (Asia Pulse par. 3). Analyzing the technological causes of Sony’s lagging behind Samsung is the advantage it has from its Motion Adaptive Dimming algorithm which saves 20 percent electricity through the LED brightness. Comparatively, technology at Samsung is more sophisticated than Sony’s Bravia range. Samsung has mastered the leading technologies through its R&D in LCD technologies. Such features as Motion adaptive dimming and edge-lit LED LCD TVs add to the competitive advantage of Samsung. Let us analyze the cause of Sony receding back from the top position in the LCD television market. During the 1990s the television technology shifted from analog to digital. Sony had invested hugely on its analog technologies for the WEGA line, which was the leading product line of the time. Use of microprocessors made digital TVs more like Personal Computers rather than analog TVs. That time Samsung had gained expertise in the production of DRAM and semiconductors and were capable of introducing LCD TV. By 1996 Sony had taken advances in conducting research on flat panel display technologies in partnership with Tektronix in the U.S. It was the decision of the Sony management not to make advances in LCD technologies, which proved costly. Management at Sony was of the view that PDP and LCD panels were products more suitable to be outsourced to third party for effective supply rather than produced in-house. It concentrated efforts on developing organic light-emitting displays (OLED) (Chang 6). Sony had to pay dearly for its decision later in 2002. Samsung by that time had gained core competency in the production of LCD. It was a leading producer of flat-screen computer monitors and had the capability to gain key supplies of plasma. The technological advantage of flat-panel display manufacturing lies in making semiconductors than regular television sets. Sony made slow advances towards plasma and LCD sets, and could not leverage from its own production units. As a consequence, it has to depend on outsourced suppliers to produce its TVs. The change from CRTs to flat panels happened earlier than imagined. Sony’s delay to shift from analog to digital and not pursuing the LCD display format for flat panels provided opportunity to quick-start companies like Samsung to capture Sony's market of the pie. Had Sony not ignored LCD technologies in 1996, it might still have been at the commanding position it used to be in the past. As Prahalad had stated, ‘When it comes to core competencies, it is difficult to get off the train, walk to the next station, and then reboard? (Hamel and Prahalad 212).OLED could not prove its commercial worth, as a result Sony had to enter into collaboration with Samsung in 2003 to fulfill the market demand for LCD panels. Sony entered into a cross license agreement with Samsung in 2004 to work on common portfolio platform but the agreement did not include ‘differentiation Technology Patents’ and design rights. Samsung’s unlicensed patents to Sony were related to Digital Natural Image Engine (DNIe), and Samsung’s Home Networking Technology. Additionally, the agreement did excluded TFT-LCD and Organic Light Emitting Diode (OLED) display patents. Sony was thus at a loss by not getting knowledge of the LED technologies in the absence of its own LCD capabilities. Currently, Samsung is a renowned company for offering innovative products and management excellence on global platform (Michell 193). Sony could not compute the cost of core competency. It lost on not getting the leverage of developed core competency. The cause was not taking the decision to invest in bettering the leading technologies, which were in-house developed by Sony. Prahalad has rightly stated that if a company does not develop its core competencies, it cannot expand its product to newer markets (Hamel & Prahalad 121). Sony can possibly reverse the scenario to lead the television market by observing what other players are doing to come out of the situation, as Motorolla did. Motorolla lost its grip on the core competencies in the 1980s but entered into partnership with a Japanese company for technical know-how in 1-megabyte generation of DRAM. Similarly, Sony should focus on developing newer technologies in-house and get leverage by introducing them in new products. Sony needs to segregate the core competencies from other technologies. It should create its stronghold on core technologies. The role of R&D is very crucial in the changeover to get competitive advantage in the long term. To capture the lost market once again, Sony can use the developed technologies efficiently by intermingling them with other positive elements of business. It should, first of all, capture the identified technologies and leverage from the present opportunities accrued from the new business possibilities. From a number of patent technologies, it needs to search its partners in LCD technology, as we see that LG also possesses a stronghold on LCD technologies with its partnership with Phillips, which adds to its competitive edge in the LCD TV market. Sony needs to test all viable options by collaborating with similar giants such as Phillips or it can get the license of the technology from Phillips. If the purpose is still not met, Sony can contact the patent sellers, inventors or the smaller companies the like of Equator, Stereo display or Megica, carrying certain core competencies in technological know-how. Sony can enter into joint ventures with more than one company; it is a positive trend if other companies are willing. Sony can indulge in cross-selling of its own patents in LCD, 3DTV and OLED technologies to lure them into joint ventures, as some of Sony competencies are in areas like gaming, entertainment and brand value to inspire these companies to collaborate with Sony. Such strategic partnerships can help Sony in developing core competencies quickly and at lesser cost. The purpose behind such partnerships should be to incorporate their skill sets in Sony’s processes. External core competencies have better scope of getting leading market share than developing newer competencies in-house. Here lies the management capability of creating a stronghold on available technologies for getting competitive market edge and manufacturing acumen quickly to capture the desired market share of business as per the emerging opportunities (Hamel & Prahalad 127). Cost is another crucial factor affecting market share of any company. Product pricing strategy of Sony should provide the leverage by offering competitive rates, which can be made possible by transferring manufacturing locations to such regions as China where reduced labor cost can be helpful in reducing product pricing. At the same time, it cannot afford to ignore its R&D functions, which play a critical role in leading the market in a technology based manufacturing industry. Works Cited Asia Pulse. "Samsung, LG Lead Global Flat-screen TV Market in 2010." Asia Pulse. 21 Feb, 2011. 3 October 2011. Chang, S-J., Sony vs Samsung: The Inside Story of the Electronics Giants Battle for Global Supremacy. John Wiley, 2008. Michell, T. Samsung Electronics: And the Struggle for Leadership of the Electronics Industry. John Wiley. 2010. 3 October 2011. Hamel, G. and Prahalad, C.K. Competing for the Future: Breakthrough Strategies for Seizing Control of Your Industry and Creating the Markets of Tomorrow. Boston, MA: Harvard Business School Press, 1994. 327pp. "Sony, Inc. Company Dossier." LexisNexis. Company Dossier. Web. 01 Mar.2010. 3 October 2011. Read More