hahaha
Core Competence: What Does it
Mean in Practice?
Mansour Javidan
P
RAHALAD AND HAMEL’ INFLUENTIAL ARTICLE, “Core
S
Competence of the Corporation”‘
9
has generated substantial interest in the notion of core competencies and capabilities and has helped popularize a new school of economic thought called The Resourcebased View of the Firm.2-7~g~17~1g~22 article has made
The
two important contributions to the literature in strategic management; it proposed a new complementary approach to strategic planning and it provided a conceptual tool for a multi-business corporation to achieve better synergies among its various business units. Better Planning
In a typical planning process, the corporation starts with an identification of external threats and opportunities. It analyses the macro environment, the stakeholders, the industry, competitors and customers to isolate potential trends and developments and to determine their implications.
The company then develops strategies by identifying and assessing various options to address the threats and opportunities.
The last stage in the process is a determination of implementation plans through which resources are allocated and steps are put in place to execute the plans. Prahalad and Hamel proposed a different approach, not to replace the traditional planning process but to supplement it. While the traditional approach is an outside-in process where the planner starts with external analysis and then performs internal analysis, the process advocated by the authors is inside-out. It starts with internal analysis and then examines the external environment.
The authors suggested that companies need to understand fully their core competencies and capabilities in order to successfully exploit their
Pergamon
PII: s0024-6301(97)00091-5
resources. This suggestion is consistent with the arguments by the proponents of The Resource-Based
View
of the Firm. This
Mean in Practice?
Mansour Javidan
P
RAHALAD AND HAMEL’ INFLUENTIAL ARTICLE, “Core
S
Competence of the Corporation”‘
9
has generated substantial interest in the notion of core competencies and capabilities and has helped popularize a new school of economic thought called The Resourcebased View of the Firm.2-7~g~17~1g~22 article has made
The
two important contributions to the literature in strategic management; it proposed a new complementary approach to strategic planning and it provided a conceptual tool for a multi-business corporation to achieve better synergies among its various business units. Better Planning
In a typical planning process, the corporation starts with an identification of external threats and opportunities. It analyses the macro environment, the stakeholders, the industry, competitors and customers to isolate potential trends and developments and to determine their implications.
The company then develops strategies by identifying and assessing various options to address the threats and opportunities.
The last stage in the process is a determination of implementation plans through which resources are allocated and steps are put in place to execute the plans. Prahalad and Hamel proposed a different approach, not to replace the traditional planning process but to supplement it. While the traditional approach is an outside-in process where the planner starts with external analysis and then performs internal analysis, the process advocated by the authors is inside-out. It starts with internal analysis and then examines the external environment.
The authors suggested that companies need to understand fully their core competencies and capabilities in order to successfully exploit their
Pergamon
PII: s0024-6301(97)00091-5
resources. This suggestion is consistent with the arguments by the proponents of The Resource-Based
View
of the Firm. This
References: 1. American Productivity and Quality Center, Planning, Organizing, Benchmarking Activities, A User’ Guide, Houston (1992). 2. FL Amit and P. J. H. Schoemaker, Strategic asset and organizational Management Journal Jan., (1993). Long Range Planning 27(6), (1994). (1991). 5. D. J. Collis and C. Montgomery, Competing Business Review July-Aug., (1995). (1991). 7. K. P. Coyne, Sustainable competitive Horizons Jan-Feb., 54-61 (1986). dimensions of quality management, Strategic ManagementJournalSummer 91-112 (1994). Review Spring, 114-135 (1991). 10. R. M. Grant and J. C. Spender, (ed.) Knowledge Management Journal 17, (1996). 11. R. H. Hayes and K. B. Clark, Exploring Level, Wiley, New York (1985). Studies23,401-416 (1986). Executive 10(2), 20-37 (1996). of Economics 13, 418-438 (1982). 15. C. C. Markides and P. Williamson, Related diversification, core competences, corporate performance, Strategic Management Journal 15, (1994).