Core Competence

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C e n t r e o f M a n a g

Core Competence
Introduction:core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a core competency is a specific factor that a business sees as being central to the way it, or its employees, works. A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication, best Human Resource Management (HRM), good market coverage etc. Core competencies are particular strengths relative to other organizations in the industry which provide the fundamental basis for the provision of added value. Core competencies are the collective learning in organizations, and involve how to coordinate diverse production skills and integrate multiple streams of technologies. It is communication, an involvement and a deep commitment to working across organizational boundaries. Few companies are likely to build world leadership in more than five or six fundamental competencies. Hamel and Prahalad (1990) introduced the concept of Core Competency in a Harvard Business Review. They defined that a core competency is "an area of specialized expertisethat is the result of harmonizing complex streams of technology and work activity." They gave the example of Sony , which had to ensure that technologist, engineers, and marketershave a shared understanding of customer needs and of technological possibilities, in order tobring miniaturization, their core competency, to their products. Similarly, in the service industry, Citicorp’s competence in systems had provided them with the means to differentiate itself from many financial service institutions.Today, many firms are able to recognize and leverage on their core competencies to bring compelling products to the market.This paper will give a short introduction on the concept of core competency and then discuss the case studies on the core competencies of some recognized firms. A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer. Such competences empower an organization to access a wide variety of markets. Executives should estimate the future challenges and opportunities of the business in order to stay on top of the game in varying situations.In 1990 with their article titled The Core Competence of the Corporation, Prahalad and Hamel illustrated that core competencies lead to the development of core products which further can be used to build many products for end users. Core competencies are developed through the process of continuous improvements over the period of time. To succeed in an emerging global market it is more important and required to build core competencies rather than vertical integration. NEC utilized its portfolio of core competencies to dominate the semiconductor, telecommunications and consumer electronics market. It is important to identify core competencies because it is difficult to retain those competencies in a price war and cost cutting environment. The author used the example of how to integrate core competences using strategic architecture in view of changing market requirements and evolving technologies. Management must realize that stakeholders to core competences are an asset which can be utilized to integrate and build the competencies. Competence building is an outcome of strategic architecture which must be enforced by top management in order to exploit its full capacity. In Competing for the Future, the authors Prahalad and Hamel show how executives can develop the industry foresight necessary to proactively adapt to industry changes, discover ways of controlling resources that will enable the company to attain goals despite of any constraints. Executives should develop a point of view on which core...
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