The power of focus.Concentration of effort and resources can have positive consequences on the performance of a business. That's a conclusion that can be drawn from the experience of supplier Kolbenschmidt Pierburg AG (Dusseldorf, Germany; www.usa.kolbenschmidt-pierburg.com) which, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Dr. Gerd Kleinert, chairman of its executive board, has undergone a restructuring during the past three years. Kleinert says that not only did parent company Rheinmetall AG focus on two operations--automotive and defense--but Kolbenschmidt Pierburg's strategy has been to focus on five core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
See: Secondary market. aftermarket See secondary market. operations)). The objective, according to Kleinert, is to have a significant presence in each of the areas that the company competes. This means being among the top-three companies in the category. He notes, for example, that last year the electric fuel pump Fuel pump A mechanical or electrical pump for drawing fuel from a storage tank and forcing it to an engine or furnace. The type of pump chosen for a given fuel depends to a great extent on the volatility of the liquid to be pumped. business was sold to TI Automotive (www.tiautomotive.com) because Kolbenschmidt Pierburg had less than five percent market share in that product line--and it was up against companies including Siemens VDO VDO (Vereinigte DEUTA (Deutsche Tachometerwerke GmbH) OTA (OTA Apparate GmbH)) is a manufacturer of information and cockpit systems, navigation, telematics, communication and audio systems and control and fuel systems. Automotive (www.siemensvdo.com) and Bosch (www.boschusa.com). It was concluded that it would be too expensive to compete in that area and that the resources would be better applied elsewhere. [ILLUSTRATION OMITTED] Kleinert says that an objective is to offer the market best-in-class products so that it can compete, primarily, on technology rather than on price. "I don't want to be price-driven," he states. (In areas where there is long-standing business, they do compete on price, which, of course, is a function of improving efficiencies.) In order to achieve this technology leadership, the corporation, which posted global sales of $2.4-billion in fiscal year 2004, increased its R & D spending by 19.4%, to a 5% of sales (or about $124.6 million). "If the technology is there," he notes, "we'll ask for a good price for it." He says that investments in R & D put them "in a strong position for the future." In North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , which accounts for about 14% of the company's overall sales ($314-million in 2004) Kleinert says they're on track to reach approximately $500-million by 2008.--GSV |
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