The concept of core competence


In this article we start with mentioning that for strategies to work, the firm must possess relevant competitive advantage and it is a commonly known fact for people in the businesses. It is also known that for long-term success, the competitive advantages have to be durable. And, a durable competitive advantage can emanate only from a strength that is unique to the firm. It thus follows that no firm can keep succeeding over the long term, without such unique strength. This takes us to the subject of core competence.

A Durable and Unique Competence:

In practice, most firms find over period of time, that there is nothing extraordinary about their competitive advantages and that their competitors have erased these competitive advantages. They have converged with the firm on the various attributes that gave the firm its differentiation advantage. This happens mainly because the competencies on which the firm’s competitive advantages were based could be imitated by competitors. After all, in the nature of things, competitors always endeavor to catch up with a firm that has built up some superiority.

Examples of Core Competence:

Firm>>>Core competence

Sony: Capability for miniaturization; it can Make any product tiny.

Philips: Optical media expertise.

3M: Capability for making substrates, Coatings and adhesives and combining them in multiple ways

Honda: Capability for making engines, which Gives it an advantage in diverse products like cars, motorcycles, lawn-owners and Generators

Dupont: Unique strength in chemical technology

ITT: Unique strength in electronics

NEC: Unique strength in telecom, semi-conductors and computing

Canon Unique strength in optics, imaging and microprocessor controls; microprocessor controls; together, they lend Canon an advantage in diverse product as copiers, laser printers, cameras, and image scanners.

JVC Unique strength in video recording/ videotape technology which has given JVC many unique novel products

And, as long as the competencies are imitable, the competitive advantages that are based on such competencies will be imitated. This means that if a firm has to maintain its superior position over a long period, it must possess some unique strength, which cannot be easily imitated by the competitors. From this unique strength, newer and stronger competitive advantage will keep emerging to the benefit of the firm. Only firms who enjoy such a strength—a strength which is fundamental and unique to the firm—keep winning in an enduring manner. Such strength constitutes a core competence.

Stated differently, it is through core competencies, that firms acquire lasting competitive advantages. Core competence is a fountainhead from which such advantages keep sprouting. It can be a competency in technology/process; it can also be a competency other than technological; it can be a special expertise.

The point is that it has got to be an extraordinary competency that lies at the root of the firm’s businesses/products. And, it has got to be the exclusive preserve of the firm. Or, it should be available to the firm in a substantially larger measures compared to its competitors. Such a preserve of strength is a core competence.

Writing on the subject in the Harvard Business Review, CK Prahalad and Gary Hamel provide an insightful presentation on the concept of core competence and its role in building long term competitive advantage.

Through an examination of a large number of globally successful corporations and their world famous pro-duct, Prahalad and Hamel drive home the point that it is not a particular product or product category that lends these corporations the dominant position. Behind the product/product category, there is the core competence, a unique strength in technology, process, or some other unique expertise. The battle for global market leadership is waged more on the strength of the core competencies of the competing firms than on the strength of the products/brands put out by them. Behind the visible battle of the products/brands, lies the substantive war of core competencies of the corporations.