RESEARCH INTO THE EXTENT TO WHICH CORE COMPETENCIES GIVES ORGANIZATIONS IN THE AUTOMOTIVE AND POWER GENERATION SECTOR IN THE UK AND AFRICA, COMPETITIVE ADVANTAGE
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Abstract
Table of Content
Overview
The unique aspect of this project is that it
involves research into the extent to which core competencies gives organizations
in the automotive and power generation sector in the UK and Africa, competitive
advantage.
It also intends to researching the occurrence
of similar or dissimilar core competencies development (and/or deployment)
patterns within the two industries
It is an intention to deduce the core ideas and
processes involved in the development and deployment of these core competencies
in order to evaluate how these can be transformed into relevant, specific
ideas/processes for other companies.
Aims of dissertation
The project aim is to assess the
extent to which core competencies impact on sustained business success.
The major reasons for the project is that it is
hoped that the knowledge gained from the project will be deployable across
different industries and also possibly provide a framework for future work on
how to further improve organizational performance through core competencies in
most industries.
These major reasons for carrying out the
project are further elucidated in the following points.
To provide a means of improving an
organization’s competitive positioning through the application of the
knowledge from the thesis
To provide a means of improving an
organization’s overall performance.
Objectives
·
To understand the concept of core
competences and how they fit into the operational structure of an organization.
·
To research the business
development of the automotive and turbine sectors in general, and in the UK and
Nigeria in particular and to understand the reasons for development.
·
To identify the differing core
competencies within each industry and to compare and contrast the change of
these overtime.
·
To research the impact that core
competences can have, in theory, on business success.
·
To relate this theory to practice
to determine the extent to which core competences have impacted on, and are
impacting, sustained business success.
·
To identify barriers to adoption
of core competence best practices within both industries, and to make
recommendations for the future.
Chapter 1: Introduction
The issue of core competencies is an essential
one for businesses today. Its importance not just to the engineering
environment, but also beyond it, cannot be overstated.
Organizations are increasingly observing that
it is no longer enough to be better than their competitors; they must also be
able to learn faster than them and develop greater abilities to meet existing
and expected customer satisfaction requirements.
Historically, companies have sought to find
market niches, to develop particular areas in which their competence can be
developed, deployed and exploited. The current state of high as well as changing
customer satisfaction requirements necessitates that companies evolve their
strategy such that they can develop competencies to match the trends of customer
requirements.
However, being able to develop core
competencies that will create enabling environments for sustainable success
requires that organizations be able to:
·
Learn from other organizations
that have been able to adapt and/or evolve their core competencies.
·
To identify customers
requirements and identify the differing core competencies accordingly.
This thesis fits into an industrial framework
by proposing a framework for developing, implementing as well as adapting core
competencies, evaluating their effect on organization performance and their
impact on competitive positioning.
Chapter 2: Background
Ideally, UK’s automotive industry
does involve pivotal part of UK manufacturing sector as it is true that such,
automotive firms are leaders in global practice in the area of manufacturing
that does provide ample resource for such operations to function well and will
develop positive competence among other leaders of the industry as a whole.
Thus, there maybe instances that UK and Nigeria in terms of competence and
sustainable factors will stabilize such management reality that may come along
their business that will help such sectors as a means of inward investors to
bring in such acceptable degree of sustainable culture and knowledge within the
organization. Aside, certain operational practice and skills within the business
industry, the automotive and power generation in particular does provide good
process in which such competence and sustainable environment will be in the best
service. For instance in UK, the situation that Britain leads Europe as a
diverse and productive vehicle manufacturing location and as global center of
excellence for engine development and production as there were more than 40
companies manufacture vehicles in the UK. The industry then is supported by
dynamic supply chain including many of the world’s major component
manufacturers, technology providers, design and engineering consultancies; and
it benefits from a world-renowned knowledge base.
Generally, the impact of
competence and sustainability within such business can be noted that such
industries within UK is being characterised by significant foreign direct
investment and high exports, equivalent to 11% of the UK’s exports of goods.
Overall, automotive manufacturing provides 194,000 jobs and contributes some
£9.5 billion value-added to the UK economy. The companies based in the UK
operate in Europe’s third biggest automotive market with UK customers in 2007
accounting for the purchase of more than 2.4 million new cars that can be
equivalent to 17% of European vehicle registrations.
Thus, there is impact on setting
standards for operations as the industry is at the forefront of process
improvement setting standards for other sectors, such as aerospace and is
characterised by economies of scale and low unit costs, despite the increasing
complexity of its products. In 2007, 1.5 million cars and just over 216,000
commercial vehicles were produced in the UK. Of these, more than 77% of the cars
and 61% of the commercial vehicles were exported. There are around 2,600
component manufacturers in the UK, ranging from the global players to small and
medium-sized businesses. Together they contribute over £4.5 billion added value
and employ around 115,000 people. The components sector exports over £5 billion
worth of goods annually, 75% destined for Europe. The UK is also an increasing
force in power train design and production (the components making up the power
transmission system of a motor vehicle from engine to final drive), with a
particular strength in engines. There is a long-established, independent, design
engineering sector offering the full spectrum of services from concept design
through to limited-series vehicle production. The sector is recognised
internationally for its flexibility and responsiveness and for the innovative
qualities of its engineers. It continues to evolve and the last five years have
witnessed a succession of acquisitions, closures and re-emergences in response
to the changing demands of its global market. The UK is also strongly
influential in vehicle styling, with many British designers and graduates from
British institutions directly employed by vehicle manufacturers around the
globe. As a direct result of this expertise, Nissan recently moved its design
studio from Germany to London.
In addition, it may also have
impact on environmental protection and safety legislation are set to strongly
influence the number and type of vehicles that will be manufactured, marketed
and used. The focus within Europe will be on securing these environmental
benefits while generating competitive advantage. However, some of known industry
analysts expect South East Asian manufacturers to dramatically increase their
global market share. But with the UK’s close focus on efficiency, productivity,
innovation and value-added manufacturing and its cross-section of international
manufacturers, the industry is well placed to face these challenges with
confidence.
Moreover, one evident outcome
points to globalization of business and its marketing industry as the industries
were truly dynamic as the major automotive companies are attracted to the UK by
an unrivalled combination of engineering excellence, skilled and flexible
workforce and such government that strives to create an excellent business
environment for companies to prosper by whether domestic or with foreign
parents. One of the great strengths of the UK automotive industry is a deep
understanding of globalisation and an ability to continuously evolve and create
new opportunities in the face of change. Over the last 20 years there has been a
revolution in the way vehicles are manufactured, with a streamlining of
production processes, elimination of waste and focus on quality, cost and
delivery. It can be said that the automotive industry in the UK now rivals that
in any country in the world for its combined efficiency, quality and unit cost.
Due to ample competence and
adaptation of sustainable milieu there can be impact on foreign investment that
such sector does include some 3,300 firms. The majority of vehicle manufacturers
and first-tier component suppliers are overseas owned, all treated equally by
the Government. Seven of these are volume car manufacturers with a number of
truck, van and bus companies, supported by 19 of the world’s top 20 suppliers.
The list includes, many more. Then, there are a number of
manufacturers producing high value and luxury vehicles serving niche markets,
including . There are also major companies from the construction equipment,
heavy plant and off-road sectors such as all manufacturing in the UK.
According to research, BMI has restated its full-year sales estimate for the UK
car market in the latest despite the upturn in new car registrations reported in
November 2007. During that month, new car sales jumped by 2.2% year-on year
(y-o-y) to 158,735 units, while they rose by 2.49% y-o-y during the period
January-November 2007 to 2,266,047 units. While industry observers such as the
UK's raised their outlook for the remainder of the year, BMI expects sales
to have slowed in December, a traditionally slow month for car sales. By
carmakers, Ford maintained its lead on the market even though the company's new
car registrations tumbled by 10.7% against the same month a year earlier to
21,072 units. Ford's sales were nevertheless buoyed by the popularity of models
such as the Focus, which, during the period January-November 2007 lifted the
carmaker's sales to 327,126 units. Second-ranked Vauxhall continued to close the
gap on Ford, with sales during the 11-month period of 311,061 units, an increase
of 9.11% y-o-y. Volkswagen completed the top three, with its sales edging up by
3.35% y-o-y to 184,116 units. As mentioned above, BMI maintains its sales
forecast of 2.309mn units given that December is a traditionally slow month
during which sales will decline. We have also adjusted our forecast for imports
to reflect the close relationship between these two items. We are also cautious
going forward given that questions are being raised about the sustainability of
current levels of consumer spending. According to BMI research, personal debt
levels continue to increase and now stand at a massive GBP1.3trn. Consumer
confidence may fall this year, particularly given the high exposure to shocks
such as the recent credit crisis. Indeed, SMMT is preparing for a tough time in
early 2008. In terms of industry developments, Fiat continues to target sales
growth in the UK. According to industry sources, the Italian carmaker will open
a new dealership in the heart of the country's capital in early 2008. will be
located close to London's busy Oxford Street ensuring maximum foot flow, with
customers being able to learn more about the carmaker's complete range of
vehicles.
NIGERIA
Nigeria's recently privatized automotive industry is at a crossroads, with the
potential for considerable growth limited by an unfriendly business environment
and lack of proactive government support for the objectives set down by the
National Automotive Council (NAC), according to BMI's latest Nigeria Automotives
Report.
Most of Nigeria's six vehicle assembly lines operate well below capacity,
although some are well equipped. Throughout 2006 and 2007, the federal
government and some state governments reduced their ownership of the automotive
industry. However, with a relatively small and volatile domestic market and
enduring problems of corruption and political instability, foreign partners have
largely lost interest in Nigeria. Consequently, the new core investors are
locally-owned firms, which lack the expertise and capital to revive the sector.
The NAC has established the Automotive Development Fund (ADF) to award loans at
low interest rates and favorable repayment terms. In October 2007, the NAC
announced that it disbursed a total of NGN5.27bn (US$44.5mn) under the ADF to
motor companies between 2004 and September 2007. BMI believes the sums disbursed
are too small and mostly not directed towards the assembly and manufacturing
sector and therefore are unlikely to make a significant impact on the automotive
industry. The Nigerian government is coming under increasing pressure to protect
domestic car manufacturers from imported new vehicles. The new owners have
complained that the government's preference for imported vehicles as one of the
major factors in the industry's struggle to survive. As the federal government,
state governments and oil companies make up a large bulk of Nigerian automotive
purchases; their purchasing policies have a significant impact on the local
manufacturing sector.
BMI estimates that automotive sales raised 15% y-o-y in 2007 to 84,398 units on
the back of strong economic growth, the appreciation of the naira, public sector
purchases and the government's car loan program for civil servants and members
of the armed forces. Fuel shortages and the rising cost of living were the main
limiting factors in the automotive market. In the medium-term, public sector
spending on car fleets and public transportation is likely to be a key
determinant of the automotive sector. With NGN94.36bn (US$800mn) allocated to
transportation in the 2008 budget, the automotive market is likely to be buoyant
over the next two years with BMI forecasting a peak in the market in 2010, when
total sales will amount to around 95,700 units.
By 2010, total automotive sales will be up 13.4% over 2007 levels, with car
sales up 11.9% and commercial vehicle sales (including buses) up 22.5%. However,
with economic growth dipping below 4.0% in 2011 and 2012, the government is
likely to consolidate spending by cutting its transportation capital budget and
the car loan program coming to an end, the automotive market will contract, with
total sales falling to around the 2007 level.
On the other side, there has been greater
engagement with a globalized economy is energizing the African power generation
industry. According to rising economic growth in the region will allow the
power generation industry to achieve additional sustained turbines capacity.
Notwithstanding the risks involved with operating in Africa, the power
generation industry will continue to grow, especially in Nigeria, South Africa
and some countries of North, Central and East Africa. Current supply levels are
incapable of meeting the ever-increasing demand for electricity, analysts said.
As a result, African countries are seeking to expand the installed capacity of
their power plants. The presence of large, proven reserves of fossil fuels and
natural gas will complement the growth of conventional power plants,
particularly that of steam and gas turbine power plants. Considering the vast
opportunities apparent in the long term, analysts said market participants will
need to view growth opportunities in a pan-regional, rather than
country-specific, manner. Enhanced external support in terms of funding
mechanisms and trade are expected to rise due to the ongoing developmental
phase, thereby cementing the basic fundamentals needed for the turbines market
to move ahead.
However, political instability and lack of
security will cause serious concerns to foreign participants entering the
African markets. Analysts said such volatility might deter prospective entrants,
despite the exciting opportunities that exist in the region. "Although the
political situation may be reasonably favorable in some countries, the numerous
risks associated with doing business in Africa, especially the lack of security
for equipment and people, is seen as a key challenge," said . "Due to this
reason, foreign investors and multinational companies are wary of entering the
African market." Analysts said potential entrants need to establish themselves
in stable markets initially before moving to capitalize on the opportunities
existing in other countries with relatively higher risk profiles. As the
situation improves, they could foray into newer markets, thereby gaining a
competitive edge.
Chapter 3: Literature review
The concept of core competencies is far
reaching and diverse. It is a major source of competitive advantage to
organizations that seek to gain the leading edge by innovation or
specialization. The starting point for analyzing core competencies is
recognizing that competition between businesses is as much as race for
competence mastery as it is for market position and market power. As such it
applies to virtually every industrial set up.in 1990 defined core competency as
the collective learning in an organization, especially how to coordinate diverse
skills. Core competencies also relates to various industries as it relates to
how each is able to make its most significant contribution(s) to customer
satisfaction as well to differentiate themselves from competitors. The
implication of this is that the extent of the thesis ranges from companies who
simply want to be better than their next door competitors to those that want to
be best in industry or even world class.
Therefore, in view of the size of the topic,
the scope of this work will be restricted to core competencies across two
different industries, automotive industries and installation and maintenance of
power generation turbines. This is to be able to deduce trends in core
competence that have resulted in improved organizational performance in these
industries and how these can be improved upon and adopted in other
organizations, it will also involve the geographical location of industries in
Nigeria and UK, company strength which is about medium or large and finally the
time scale of industries, the author is looking at which is between 10 to 15
years of existence.
The term “competitive advantage” has
traditionally been described in terms of the attributes and resources of an
organization that allow it to outperform others in the same industry or product
market In contrast, the term “sustainable” considers the protection such
attributes and resources have to offer over some usually undefined period of
time into the future for the organization to maintain its competitiveness.
Within this context, “sustainable” can assume a number of meanings depending on
the frame of reference through which it is viewed. It can be interpreted to mean
endurable, defensible, bearable, tolerable, supportable, passable, acceptable,
justifiable, negotiable and penetrable. For example, if the organization is to
protect its existing value added against its competitors then the term
“sustainable” associates itself with “endurable” and “defensible”. Most
discussions of sustainable competitive advantage focus on defensive strategies
based on existing resource strengths. For example, considers the
sustainability of the competitive advantage along the dimensions of durability,
mobility and replicability. Durability determines how long the competitive
advantage can be sustained and is considered in terms of the ability of
competitors to imitate through gaining access to the resources on which the
competitive advantage is built. This in turn can be considered in terms of
mobility, referring to the extent to which resources can be transferred between
competitors together with replicability which describes the ease with which
resources can be copied by competitors. An example, where durability, mobility
and replicability are particularly pertinent, relates to many retailers who
derive their competitive advantage through identifying, acquiring and
maintaining well-located outlets in addition to the value added stemming from
their services and offerings.
While the importance of defensive
strategies in protecting and exploiting existing resource strengths cannot be
underestimated, securing the long term future of an organization must consider
how to derive unique areas of value added in the future. For this purpose
sustainability has to assume a different meaning which points itself towards
penetrability, for example, in terms of new breakthroughs. This is because the
speed at which the uniqueness of the resources of an organization becomes
accessible dictates the speed at which the competitive advantage of an
organization diminishes. In fast-moving competitive environments, sustaining
competitive advantage involves creating safe-havens from cut-throat competition
by continuously creating gaps through unique resources that cannot be easily
bridged by the competitors
Sustainability is essentially dynamic
with many subsets, each depending on the nature of the strategic task. For this
reason, sustainability is best considered as a dynamic process rather than a
static concept that is locked in time. This dynamic process shows organization
functioning within its changing environment over time. In this model, intended
strategy is concerned with how the organization sees its environment developing
and what resource configuration is best suited for that environment. It will not
determine what will happen as the outcome is influenced by unpredictable events
such as competitive responses and changes in market value.
Thus, sustainability within the
context of competitive advantage is considered in terms of the organization
positively embracing change, constantly adapting to altered ways and new demands
through introducing new resource configurations, while at the same time
preserving the best of its past. Viewed in this way, sustainable competitive
advantage assumes two primary pillars: resource management and resource
development. The former is concerned with meeting the competition today while
the latter aims to satisfy the competitive challenges of tomorrow. The main
difficulty, however, lies in the inherent conflict between delivering today and
tomorrow. The central focus of the former is on the present using the resources
developed in the past, whereas the primary concern of the latter is the future
and the resources that will have to be developed for future competitiveness.
Without considering both the present and the future there is no context for
sustainability. In resolving this conflict, the concept of competitive advantage
will not suffice. A new concept is required which helps the organization to
develop the ability to remain competitive in the future while exploiting
existing opportunities. This concept which is referred to as strategic advantage
is necessary if organizations are not to become the prisoners of their past
through entangling themselves with resource management to the detriment of
resource development.
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Furthermore, found that the
strategic factors generally involved in market share gains relative to the
growth rate of the served market included increases in new product activity,
increases in relative product quality and increases in sales promotion.
concluded that “followers” who gained share typically improved quality and they
maintained or increased all categories of marketing expenses at rates faster
than the growth rate of the served market. The literature also suggests that
high growth companies are characterized by superior performance on a number of
competitive devices such as product quality, premium prices and the introduction
of new products 1 High growth companies grow by building on existing
strengths and by emphasising corporate relatedness Businesses
that diversify but restrict their range of activities to a central skill or
competence show a higher rate of profitability and growth than firms that
diversify into unrelated areas Of the nine categories of firms that
identified the two constrained categories, “dominant constrained” and “related
constrained”, were almost always superior in profit performance. Organizations
are constrained by the external environment they operate in and consequently
organizational growth can be explained in terms of these environmental forces
Industry factors have a significant impact on both levels of profitability and
the levels of growth For those businesses that achieve growth,
profitability may be inherent in the growth itself and not due to managerial
choices Other research has suggested that periods of high demand
conditions, such as industry growth and industry maturity, increase the chances
of organizational survival and the growth prospects of businesses,
Environmental pressures make
competition for resources the central force in organizational activities. The
fundamental argument made by proponents of the population ecology model is that
growth is a function of environmental selection. This suggests that the choice
of an organization’s environment is crucial to that organization’s growth
potential, and that the choice of environment is more critical to growth than
any strategic choices concerning behavior within an environment.
Chapter 4: Research methodologies
Chapter 5: Data Analysis and findings
Chapter 6: Discussion and Conclusions
Recommendations for future work
Personal Reflection
References/Bibliography
Appendices
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