Company and Core Competency
A total of 764,374 enterprises were established under the Law on Enterprises as of January 1, 2014, of which some 500,000 are in operation in the economy. In the past five years, especially in the last two years, Vietnamese enterprises have captured a lot of business opportunities thanks to international integration. However, the business community has also faced risks arising from macroeconomic instability reflected in inflation and interest rates. Although the Government has introduced many drastic solutions to support businesses, their operations have not recovered much. New business start-ups declined for the first time since the Law on Enterprises took effect. Corporate bankruptcies also accounted for a significant proportion. In three years from 2011 to 2013, over 140,000 enterprises ended operations or were dissolved.
In addition to objective reasons, perhaps, the main cause of this reality is lower competitiveness and business efficiency than required by international integration. This is the biggest existing problem after Vietnam’s accession to the World Trade Organisation (WTO). Due to small business scales and limited governance capacity, a number of domestic enterprises have not built long-term professional business strategies, not focused on core competencies, and not made intensive investment. These shortcomings not only affect their operations, but also contribute to causing economic structural imbalance and unsustainable growth.
The world economy is confronting a lot of difficulties like high inflation on a large scale, spreading debt crisis in Europe, and serious unemployment, not only in underdeveloped countries but also in leading economies. This context has posed a difficult problem for Vietnamese enterprises: How to build core competencies to stay alive and overcome economic recession.2. Core competency2.1 Core competency
A business must be regarded as a chain of added values generated by direct production and business operations and supporting operations. Production and business operations include product creation, marketing, distribution and after-sale services. Supporting operations comprise resources, input infrastructure, leadership, culture, IT and other elements (supporting added value generation and costs reduction). Its competencies are chains of added values of its operations, giving it competitive advantages over competitors, and making profits for it.
2.2 Determining core competency 2.2.1 Analysis tools
According to corporate governance theorists, to determine its core competencies, a business must always build itself three competence analysis tools to analyse competences of generating added values in its operations: (1) Strengths and weaknesses analysis; (2) Competitors analysis; and (3) Competitiveness analysis.
(1) Strengths and weaknesses analysis helps identify the strengths and weaknesses, as well as the threats and opportunities related to a given activity.
(2) Competitors analysis analyses the value chain activities of strategic competitors to identify the competitive advantages and capacities of competitors.
(3) Competitiveness analysis plays a decisive role in selecting, building and developing core values. In this analysis, a company must first identify the market and market share of its products to work out long-term sustainable investment in a professional manner for core competency development. Or in other words, it must answer questions about the position, stability, forecast development and other aspects of the markets and customers it targets at. In addition, to analyse conditions of industry production elements, including direct, traditional basic inputs costs like raw materials, fuel, labour and other indirect input costs which carry sector competitiveness like services, packaging, quality, research, development, technology, finance and logistics. Moreover, competitiveness analysis also covers the study on the connectivity of support industries like research, training, promotion, transport, finance, customs and land.
2.2.2 Core competency positioning
Core competency of a business is usually positioned and developed in four levels.
(1) Fundamental core competency: Competences help the company avert risks and grasp opportunities
(2) Special core competency: Competences out of reach of competitors
(3) Hard-to-imitate core competency: Competences which competitors would have difficulty building and developing because of natural conditions and historical conditions (relationship).
(4) Irreplaceable core competency: Competences relating to intellectual property, brand and corporate culture
3. Conclusion
In the corporate competition strategy, developing core competencies plays an important role in ensuring the long-term development of a company. Staying far from the core values will result in non-sustainability and failure, particularly in the economic crisis time. However, it is obvious that no core competency is an eternal comprehensive and absolute competitive weapon. Moreover, failure to maintain core competencies over a very long time will erode creativity and innovation. Therefore, the continuous development and improvement of core values and the reasonable balance between building strategic core values and building partner linking strategies will play a decisive role in the success of a company in the process of corporate restructuring and economic transition period in order to enhance the competitiveness and sustainability of the company. The development of a company based on the construction and development of its core competencies will ensure the effective international economic integration of Vietnam, as it heads towards the ASEAN Economic Community (AEC) to 2015.
Dr Doan Duy Khuong VCCI Vice President Co-chair of ASEAN- BAC Vietnam
Đăng ký: VietNam News