Harrison, Jeffrey S., Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland. (2008) “Competing for Advantage”, Thomson South-Western, United States, 2008.
Core competencies are the defining capabilities or advantages that a business may have that distinguish it from the competition. Core competence is the foundation for sharpening a company's competitive edge, and it guides brand reputation, business growth, and marketing strategy. Learn more about core competencies and their role and benefit in business and your personal life. Core competencies are distinct, hard-to-replicate competitive advantages. In business, the concept of core competence originated as a resource-based approach to corporate strategy, introduced by C.K. Prahalad and Gary Hamel. In their 1990 book "The Core Competence of the Corporation," they describe various core competencies as meeting three universal conditions:
Such a strict definition of core competence excludes the strengths of small businesses, however, as most would not be able to meet the third condition. The concept of core competencies can also be applied to someone's personal skills and working advantages. Personal core competencies can include:
Core competence has evolved over the past 30 years, but it remains based on exploiting several competitive advantages. Core competencies are what make it difficult for other businesses to duplicate a product or service, and then outperform the competition. Successful businesses tend to have more than one of the following core competencies:
Walmart and Apple are two companies that have continuously showcased the power of core competencies. Walmart's primary core competencies are its buying power and supply chain management. The size of Walmart's operations allows them to buy products in massive bulks at prices lower than their competitors can receive. Because of these low purchase prices, they can undercut their competitors on price and attract more consumers. Apple's main core competency is innovation. They have a long history of developing unique and innovative technology products, including the Mac computer, iPod, iPhone, iPad, Apple TV, and Apple Watch. Even when it's not the first company to develop a new product, Apple is often the one that's able to take a new product, engineer it in a unique fashion, and make it an enormous commercial success.
The release of the iPhone has often been credited as what killed the sales of Blackberry devices. One of the most important benefits of possessing core competencies is that it gives businesses a better shot at being competitive long-term. It's one thing to have a product or service that's initially successful, but if competitors can easily duplicate it, you will eventually be fighting for market share and searching for other ways to differentiate yourself.
Take Snapshot Stories, for example. Snapchat was the original social media platform to introduce 24-hour disappearing stories, but Instagram easily duplicated the concept, and it caused Snapchat to lose 3 million daily users within two years of its release. As job markets become increasingly competitive, it's more important than ever to set yourself apart from the competition. While creating your resume, including a core competencies section can allow you to use the limited space to highlight characteristics that make you unique. Employers are also increasingly using Applicant Tracking Systems (ATS)—which scan resumes for keywords—to prescreen candidates. Including core competencies on your resume can help the ATS software identify keywords provided by the employer and further you in the hiring process. Issues may arise when a company incorrectly assigns a core competency to itself, leading to overemphasizing weaknesses or ignoring potential strengths. For example, suppose a company believes marketing is its core competency when, in reality, it's innovation. In that case, it may use too many resources producing marketing campaigns and not enough innovating its products and services—which will allow it to remain competitive in the long-term.
A core competency is a concept in management theory introduced by C. K. Prahalad and Gary Hamel.[1] It can be defined as "a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace" and therefore are the foundation of companies' competitiveness.[2] Core competencies fulfill three criteria:[1]
For example, a company's core competencies may include precision mechanics, fine optics, and micro-electronics. These help it build cameras, but may also be useful in making other products that require these competencies.[1] A core competency results from a specific set of skills or production techniques that deliver additional value to the customer. These enable an organization to access a wide variety of markets. In an 1990 article titled "The Core Competence of the Corporation", C. K. Prahalad and Gary Hamel illustrated that core competencies lead to the development of core products, which can further be used to build many other products for end users. Core competencies are developed through the process of continuous improvements over the period of time rather than a single large change. To succeed in an emerging global market, it is more important and required to build core competencies rather than to do vertical integration. For example, NEC utilized its portfolio of core competencies to dominate the semiconductor, telecommunications, and consumer electronics market. The use and understanding of the concept of core competences can be very important to enterprises. They can use core competences in order to excel at the contrivance of core products.[1] Enterprises could also use core competences to raise the values of customers and stakeholders.[3] Alexander and Martin (2013) state that the competitiveness of a company is based on the ability to develop core competences.[4] A core competence is, for example, a specialised knowledge, technique, or skill. The core capability is the management ability to develop, out of the core competences, core products and new business. Competence building is, therefore, an outcome of strategic architecture which must be enforced by top management in order to exploit its full capacity.[citation needed] Importantly, according to C. K. Prahalad and Gary Hamel (1990) definition, core competencies are the "collective learning across the corporation". They can, therefore, not be applied to the SBU (strategic business unit) and represent resource combination steered from the corporate level. Because the term "core competence" is often confused with "something a company is particularly good at", some caution should be taken not to dilute the original meaning. In Competing for the Future, the authors C. K. Prahalad and Gary Hamel show how executives can develop the industry foresight necessary to adapt to industry changes and discover ways of controlling resources that will enable the company to attain goals despite any constraints. Executives should develop a point of view on which core competencies can be built for the future to revitalize the process of new business creation. Developing an independent point of view of tomorrow's opportunities and building capabilities that exploit them is the key to future industry leadership.[vague] For an organization to be competitive, it needs not only tangible resources but intangible resources like core competences that are difficult and challenging to achieve.[5] It is critical to manage and enhance the competences in response to industry changes in the future. For example, Microsoft has expertise in many IT based innovations where, for a variety of reasons, it is difficult for competitors to replicate or compete with Microsoft's core competences. In a race to achieve cost cutting, quality, and productivity, most executives do not spend their time developing a corporate view of the future because this exercise demands high intellectual energy and commitment. The difficult questions may challenge their own ability to view the future opportunities but an attempt to find their answers will lead towards organizational benefits. Core competencies are related to a firm's product portfolio via core products. Prahalad and Hamel (1990) defined core competencies as the engines for the development of core products and services. Competencies are the roots of which the corporation grows, like a tree whose fruit are end products.[6] Core products contribute "to the competitiveness of a wide range of end products. They are the physical embodiment of core competencies."[7] Approaches for identifying product portfolios with respect to core competencies and vice versa have been developed in recent years. One approach for identifying core competencies with respect to a product portfolio has been proposed by Danilovic & Leisner (2007).[8] They use design structure matrices for mapping competencies to specific products in the product portfolio. Using their approach, clusters of competencies can be aggregated to core competencies. Bonjour & Micaelli (2010) introduced a similar method for assessing how far a company has achieved its development of core competencies.[9] More recently Hein et al. link core competencies to Christensen's concept of capabilities, which is defined as resources, processes, and priorities.[10][11] Furthermore, they present a method to evaluate different product architectures with respect to their contribution to the development of core competencies.
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What are the sources of core competencies?
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