COMPETITIVE ADVANTAGE & CORE COMPETENCE
Attributes of Core Competence:
Core competence is fundamental, unique and inimitable strength of the firm that:
(i) Provides the firm, the access to a variety of products/markets.
(ii) Contributes significantly to customer benefits in the end products.
(iii) Is an exclusive preserve of the firm and cannot be imitated easily by competitors.
Core competence is largely a technological competence, a competence at the root technology in particular. This is because new businesses/new products are largely the result of technology. This is especially true in todayâ€™s technology-driven world, where technology is fast altering existing boundaries of businesses. The core competencies of these corporations are the outcome of their command over several overarching technologies.
Corporations who enjoy a core competence in the root technology / process / expertise keep gaining lasting advantage, through new and proprietary products and fresh value enhancement.
In particular, for firms playing the business game through the product route, core competence is very essential. Often, command over multiple streams of interrelated and overarching technologies, (e.g. tele-computers, fiber optics) confers a core competences to a firm in the composite area, giving rise to many unique products.
Core competence is a knowledge base, which gives rise to a variety of products with widely varying product missions. Core competency Idea does not restrict the number of Businesses.
The core competency concept is sometimes misunderstood as a perspective that restricts the numbers of businesses a company can be in. Firms wrongly assume that when they adopt the concept of core competence, it compels them to remain with a single business.
In reality the core competence perspective helps the firm to operate a number of businesses by having one core skill. The businesses will have a linkage to the core skill. And, with two or three core skills, a firm can have a very large basket of businesses.
3M, for example, is in a multitude of businesses and has over 60,000 products. One core productâ€”sticky tapeâ€”accounts for a large number of end products. Behind such a vast spectrum of products lie 3Mâ€™s core skills / core competencies in making substrates, coatings and adhesives and combining them in multiple ways.
Distinction between Competitive Advantage and Core Competence:
Â· A competitive advantage does not necessarily imply a core competence while a core competence does imply a number of competitive advantages.
Â· A competitive advantage does not constitute a sure success formula for a firm over a long term; a core competence usually does.
Â· A core competence provides a lasting superiority to the company while a competitive advantage provides a temporary competitive superiority. And behind any lasting competitive superiority, one can always find a core competence.
While a competitive advantage accrues from a functional strength in any of the manifold functions performed by a firm, a core competence does not normally accrue from functional strength. The strength has to be at the root of businesses and product; it has to be core strength like a unique capability in technology or process.
A competitive advantage helps a firm in a specific and limited way; a core competence helps it in a general, far-reaching and multifaceted manner. A competitive advantage provides competitive strength to the firm in a given business or product. A core competence helps the firm to excel in a variety of businesses and products.
To conclude, a core competence is fundamental and unique to a firm. A competitive advantage can be easily imitated and competitors catch up fast. Core competence is an exclusive and inimitable preserve of a firm. It is long lasting; competitors cannot easily catch up with the firm. Competitive advantages are not unique to any firm over the long term.