Core Competence Analysis – Gaining Competitive Advantage

Core Competence Analysis – Gaining Competitive Advantage

Introduction

The core competencies of a company may comprise of mechanics, micro-electronics, and fine optics. The core competency results from a set of skills that give additional value to the customer and these enable organizations to access multiple markets. The concept of core competencies can be said as one of the best business ideas that are revolutionizing the world. In this article, we will discuss Core Competence conceptualized by Gary Hamel and C.K. Prahalad and help you with how to use Core Competence Analysis on personal as well as corporate level.

Origin of Core Competence

The concept of Core Competence has been introduced by Gary Hamel and C.K. Prahalad in management theory. It is a combination of multiple skills and resources that distinguish an organization in the market place. Core competencies accomplish three criteria that are as follows.

  • Potential access to a broad array of markets
  • Difficulty in imitating by competitors
  • Making an important contribution to the consumer advantages of end-products.

Prahalad and Hamel, the authors of ‘In Competing the Future’ showed how executives can develop the foresight necessary to adapt the changes in industry. They explained how the executives discovered different ways of controlling resources that will help company achieve its goals, in spite of obstacles. Executives should develop a view to build core competencies for future to revitalize the process of creating a new business.

Core Competences in Detail

As the business focus more on their efforts, they will perform well and outsource as much as possible. You can make the most out of the opportunities open to you by using Core Competence Analysis.

  • Core competence will help you channelize your efforts to develop a unique level of expertise in the areas that are really important to your customers. As a result of this, you will obtain rewards.
  • You will be able to develop your skills in such a way that it complements the core competence of your company. You will win the desired respect and flourish by acquiring the skills that your company values the most.

Prahalad and Hamel used examples of slow growing corporations that failed to capitalize on their strengths. They compared these companies with star performers who had a very clear idea of what they are good at. As these companies had focus on their core competencies, their products were more advanced than those of their competitors. Not only this, customers were prepared to pay more for their products. As they switched away from areas where they are weak and focused on areas of strength, their products managed to have an impressive market lead. The following tests can be performed to know if they are true core competencies.

  • 1. Relevance – The competence should give customers something that influences them to choose your products/services. If it fails to do the same, then you can say that it has no effect on your competitive position.
  • 2. Difficulty to imitate – The core competence should be in such a way that it cannot be imitated by competitors. This allows you to provide unique products and services that are far better than your competitor’s products/services. You can sustain the competition by developing the skills continuously.
  • 3. Range of application – The range should be something that opens up potential market. If you narrow down the niche market, the success rate will not be sufficient enough to have significant growth

Identifying core competencies

Organizations can recognize the core competencies by evaluating their capabilities for developing innovative products and services. This helps them to cater to a broader group of customers. You can gain competitive advantage by mastering these competencies. Once your organization has identified core competencies, it should develop a strategy for developing their potential. This helps the company to deliver great value to its customers.

Developing core competencies

Organizations can develop core competencies by coordinating with various production groups to deliver a quality product or service in the market. In this process, companies should isolate some of the organizational strengths and key abilities to ensure that they are developing capabilities that the customers value. Organizations can even outsource or make vendor managed arrangements to access their core competencies that are not available in the organization.

A good way to identify and develop Core Competence Analysis is to list the products and services from the view of manufacturer. You should be able to answer questions like the following.

  • Which area you are better at - research, marketing or distribution?
  • In what skills your company can add more value than competitors?
  • In what functional disciplines can your company add value to the customer?
  • Does the activity provide unique potential access to the market?
  • Will it be difficult or easy for competitors to imitate the activity?

There are different set of core competencies in each company that lead to a successful business. The list of core competencies is relatively short in most of the cases. However, when this short list is developed, it provides great opportunity to leverage the company’s strategy. The more unique is the performance of the company, the more economic value will be there for the company as well as the customer. The reverse condition is also important. You can build more uniqueness and distinctiveness into the core competencies of the company which leads to better performance.

Summary

Core competencies are related to the product portfolio of any organization. The core products contribute to the competitiveness of a broad array of end-products. In the recent years, approaches for identifying the portfolio of products with respect to core competencies have been developed. If you want to use it in your business or career, it is better to brainstorm the existing competencies and things that you can perform well. Think of the time-consuming and expensive things that you do either as a company or as an individual. If any of these fail to contribute to core competencies, then you should consider outsourcing them.

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