Organisation's core competency to develop future plans.

Organisation must always pursue expansion strategies if they sink well with their core
competency.Organisations must Understand their core competences inorder to be
successful.This guides them on how to enusre that their expansion are a success.A core
competency is a management concept theory fronted by C. K. Prahalad and Gary Hamel who
are buisness authors.They view core competency is a specific central factor for a business .It
is not easy for competitors to copy and reuse.It is the business best kept secret.

You can never takeover market you have failed to penetrate before.

Rush for mergers with a mindset.

Organisation's core competency is something an organisation has expertise in doing.In

summary a core competence is the equivalent of the family treasure which should not be
pawned or sold for short term gain. It is an organizations strategic strength. Though true core
competences are hard to define precisely and are often discovered retrospectively. That is, as
you experiment, you define your competences by simply describing your successes and
failures. A Core competence must meet the following criteria: Invisible to competitors,
difficult to imitate essential to long-term survival in short and long term, Unique to the
corporation, a mix of skills, resources and processes, few in number, and Marketable.

Most common example of core competency world over is Burn Philp.Its core competency
was Yeast..This case discusses the diversification of a major Australian multinational, Burns
Philp and Company Limited (Burns Philp), into the international food spice business in the
1980s and 1990s. It tracks the strategic mistakes made by management that were driven by a
fundamental lack of understanding of the company's core competencies and the competencies
needed in the international spice business. It was this dissonance that caused poor investment
decisions to be made and also created a competency vacuum within the firm that lead to
problems in the management of the new businesses.The information available for the Board to
consider was not inadequate. in the subsequent management of the businesses there were
unrealistic expectations, a lack of understanding of market dynamics, poor planning and a
tendency to hide bad news, leading to poor performance and high costs.

Core competencies allow small businesses to deliver value to their customers.Innovative

companies have a competitive edge in the marketplace. For example, one of Apple's core
competencies has been its ability to produce cutting edge and "cool" designs.

Conservatism had helped the company register growth but when it was ignored,it failed.For
example returns become low and management rushed to acquisitions ina haphazard manner
with no propoer planning.Invested in almost all sectors which was hard to manage since their
core competency was one.
Unrelated diversification strategy affects performance of an organisation,Overly ambitious.
They wanted to expansion to global spice business replicating their success story in the Yeast
and vinegar market.

Busieiness was differenct and yet they thought it would be beneficial.

This concept is believed to have first appeared in a 1990 Harvard Business Review article.
They wrote that a core competency is “an area of specialized expertise that y the result of
harmonizing complex streams of technology and work activity. They also suggested that core
competences are the collective learning in the organization especially how to co-ordinate
diverse production skills and integrate multiple streams oytf technologies.

A core competency differentiates not only between firms but also inside the firm among
several competencies. In other words, a core competency guides a firm recombining its
competencies in response to demands from the environment. In their view a core competency
is a specific factor that a business sees as central to the way the company or its employees
work. It fulfils three key criteria: It is not easy for competitors to imitate, it can be reused
widely for many products and markets, it must contribute to the end consumer's experienced
benefits and the value of the product or service to its customers.

They claimed that once the core competence of the organization is understood it enables
executives and strategists to take a more rational and unbiased view of future opportunities
which lie beyond their existing markets, and current products or services.

David (1995) argues that ‘Core competence has too often become a ‘feel good’ exercise that
no one fails’(pg118).Whilst the arguments for understanding and using core competences is
compelling, there is little literature on how an organization can set out to identify and use its
core competences.

This case study discusses the diversification of a major Australian multinational, Burns Philp
and Company Limited (Burns Philp), into the international spice business in the 1980s and
1990s. It tracks the strategic mistakes made by management that were driven by a fundamental
lack of understanding of the company's core competencies and the competencies needed in the
international spice business.It was this dissonance that caused poor investment decisions to be
made and also created a competency vacuum within the firm that lead to ongoing problems in
the management of the new businesses.

Burn Philp failed in the International spice business due to the following reasons:

Disruptions in management contributed to the failure of Burns Philp.Leadership team and

management style was wrong. This led to failure. It was a One-man rule, a non-participating
board, an unbalanced top team, a weak finance function, a combined chairman and chief
executive officer, a lack of management depth. For example the board would not question the
CEO.Turnbull was unable to carry out many of his responsibilities and the board was
unwilling to question the direction of the business while their long-term friend was unwell.
Their engagement in the spices market was a new venture for Burns Philp and they were not
well informed about it hence blunders.The.1996-97 board of the Company was comprised of
one manager and one former manager, two lawyers, an engineer, an accountant and financial
adviser. All the members had no direct knowledge and extensive work experience in the
international spice business.

The problems that led to failure arose due to the fact that Burns Philp 'paid too much for its
assets and did not manage them appropriately’. Acquisitions were sold off at low values after
they were bought at overvalued high prices. There was no sustainable financial muscle to
support the company.

Burns Philp failed to understand and plan for its Competitor McCormick. When Burns Philp
started to enter the spices business, McCormick already held significant shares of both the
European and North American markets. A particular feature of the North American market at
this time was the payment of “slotting fees” to supermarkets to obtain the right to shelf space.
In many cases the payment of a slotting fee ensured that supermarkets would not carry
competitors’ products. Burns would not compete with Slotting payments.

Poor resource Management. Conservatism had helped the company register growth but when
it was ignored, it failed. Returns become low and management rushed to acquisitions in
haphazard manner with no proper planning. Over $200m was invested in seventeen major
acquisitions Invested in almost all sectors which were hard to manage since their core
competency was one. They acquired over 100 types of businesses in the cosmetic, mining, car
rentals, insurance, hardware with most performing poorly. Sold their stake in companies at a
low cost which would not support their expansion drives. For example they sold BBC chain
for little more than nine times the 1992 earnings. Failed to initiate a process to get
International buyers in time when they wanted to sell their spice business. This affected its
value and hence the last resort of selling it off at a lower price.

They did not fully assess the competitive reaction from McCormick. Competitor was a
significant factor in the difficulties experienced by the Burns Philp business. A large
proportion of Burns Philp’s capitalised slotting fees were subsequently written off against
profit. Burns did not pursue a possible merger or takeover of its competitor MC cormick but
went into buying its competition which was wrong.

Flawed strategy explains the failure of the Company. The Burns annual report that stated that
they identified herbs and spices as natural extension to their existing food ingredient business.
It mentioned that their core business (yeast) was mature and crowded, the management
ventured into flawed. Spice. Business was different and yet they thought it would be
beneficial. The market was different and their strategies in markets and distribution were not
feasible despite strong profits from their food ingredient business.

Conservativeness and lead to their initial success story as they hard a direction.
Poor corporate governance. In Many cases, clear managerial oversight was responsible for
effective risk assessment. It was argued that it centralized operations leading to a beaucratic
tendency.

Conclusion

Burns invested in almost all sectors which was hard to manage since their core competency
was one. They acquired over 100 types of businesses in the cosmetic, mining,car
rentals,insurance,hardware with most performing poorly. Burns Philp failed to preserve core
strengths even as management expanded and redefined the business. It is still a puzzle whether
Burns had to compete or lose its market share .It is possible that revenue had decreased due to
competition from McCormick but exacerbated by the slotting and debts

Ivan N Baliboola

PR and organisational diagnosis specialist.

nbaliboola.WordPress. com