Business

The Core Competence of the Corporation

Identifying opportunities in the external environment and adopting a pre-active response to changes in the consumer markets is a fundamental element in organizations developed around core competencies (Hamel and Prahalad, 1990. 1994). One example of this is the case of Preussag AG. Preussag had traditionally been a company focusing on logistics, information systems and ‘old economy’ business lines such as metal trading, mining and construction (Dittmann et al., 2008). In 1997 the company estimated that the ‘old economy’ business needs to be minimized as possible and that new diversified (or unrelated) markets needed to be exploited. In that year Preussag acquired the German Hapag-Lloyd corporation which specialized in cruises, travel agencies and airline services. The latter company-owned as much as 30% of the German tour operator TUI. Eventually, in 2001 Pressaug was renamed to TUI and almost 70% of its operations were in the tourism sector. TUI today is one of the most successful operators with profitable business yields and increased market shares. The entrance of the former Preussag into the tourism industry was largely affected by the exploitation and leverage of the company’s core competencies. Theuvsen (2004) states that the core competence of Preussag was the ability to vertically integrate unrelated businesses – particularly the company had proceeded into the acquisition of 17 different firms, all with successful results. In that sense, Preussag (renamed to TUI) focused on developing such networks and acquiring business firms that although may seem non – relevant to its core business, they eventually added significantly to its core competencies (Barnes, 2008).A perfect example of a telecommunication services organization leveraging its core competencies in the attempt to diversify in other business markets is that of ATT. The company established in 1984 has marked a successful performance in providing telecomservices.

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