Development and expansion organizations’ core competency is one of the main success factors of many organizations. However, if organizations do not apply correct measures when transferring core competencies for one business to another, the likelihood of failure is high. Transfer of core competencies is one of the most important business diversification strategies of ensuring organizations reduce costs of starting over again in new business ventures.
It mostly works via capitalizing on operational relatedness, primarily applying the constrained multi-product strategy This strategy offers organizations a chance of realizing and exploiting economies of scope, a crucial pathway for gaining a competitive advantage over other businesses. In addition, it guarantees organizations opportunities for utilizing existing expertise and resources; hence, opportunities for business expansion with minimal expenditure (Rekers p.1).
Transfer of core competencies goes hand in hand with activity sharing, although they are a little bit different depending on mechanisms of sharing resources as organizations endeavor to achieve economies of scope. It is important to note that, transfer of core competencies primarily works best with intangible resources because they are easy to alter or modify to fit a particular market segment.
In addition, the transfer of core competencies is important more so when organizations want to continue running their existing strategic assets while enhancing the quality delivery of these assets in different corporations. On the other hand, this strategy can be important when businesses want to maximize the use of developed competencies building new strategic assets in new market segments.
Considering the costliness of expanding into new markets, this strategy provides an easy way of expanding business opportunities using minimal costs, hence in case such expansions fail an organization will not incur any losses. In addition, the transfer of core competencies offers organizations opportunities for enhancing their identity and expanding their market segments. This is because; it gives organizations a chance of showing their products in markets they have never ventured into or a chance of utilizing newly developed technologies in the attainment of revenue goals.
Although a good strategy, it faces many challenges because depending on areas of operation different businesses employ different operational and corporate strategies. In addition, this differentiation makes the transfer of intangible resources a hard task, hence making it hard for organizations to achieve economies of scope (Hoskissson, Ireland and Hitt pp.158-160).
BlockBuster on Transfer of Core Competencies
Although some companies for example, IBM and ZTE have been successful in transferring their core competencies, the case is different to other companies; Blockbuster being one of them. Blockbuster failed its quest to transfer its core competency of brick and mortar videos marketing, a factor that is almost causing the downfall of this giant video seller. Blockbuster attempts to increase its customer reach hit a snag when this marketing strategy failed due to factors related to prices of its products, accessibility, and failure to meet customer needs.
In attempts to increase its market segment, Blockbuster collaborated with TiVo to include its movies in TiVo’s DVDRs. The collaboration was to see Blockbuster increase its video rental services not only via the demand service, but also via its mail service, a venture its management never realized could lead to its downfall. This is because to Blockbuster, the only way it could beat its competitors for example Netflix and Amazon video was incorporating this additional service (because through offering same services as its competitors, its management though it could succeed) (Slattery p.1).
In addition to having its movies on the DVDRs, Blockbuster went ahead and included TiVo products in its sales, something y had tried previously leading to failure of its set-up box. As Rayburn (p.1) argues, inability to create a media strategy was the main reason for Blockbusters failure. This is because the company tried to transfer its video distribution skills to fields it has little expertise on due to differences in operational strategies between the two companies. In addition, owing to this operational strategies, majority of customers currently avoid TiVo’s products, a factor that has greatly contributed to decreased volumes of Blockbusters rented movies.
In conclusion, the main reason for Blockbuster’s failure was due to poor core competency transfer of its marketing skills; an important factor for customer satisfaction, hence increased revenues from business ventures.
Works Cited
Hoskisson, Robert, Ireland, Duane and Hitt, Michael. Strategic management: competitivenessand globalization. 8th Ed. Boulevard Mason: South-Western College Publication, 2009.Web.
Rayburn, Dan. Ten years later, Blockbuster still lacks a digital media strategy (BBI). Business of video. 2009. Web.
Rekers, Matthew. Build on your core competency. Powerhome biz. 2009. Web.
Slattery, Brennon. Blockbuster copies Netflix, Heads to TiVo. PC world, 2009. Web.