Core Competencies and Functional Strategies

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Core competencies are organizational strengths or abilities, developed over a long period of time, that customers find valuable and competitors find difficult or even impossible to copy. Honda, for example, is recog¬nized for having core competencies in the engineering and manufacture of small gas- powered engines. Those core competencies have helped Honda conquer numerous mar¬kets, including the markets for motorcycles, cars, lawnmowers, jet skis, and home generators. Core competencies can take many forms and even shift over time. IBM used to be known as a computer hardware company. Today IBM’s core competency is arguably its ability to provide customers with integrated information solutions and the consulting services needed to make them work. As a recent magazine article noted, “good IT staffers are hard to find, but IBM Global Services alone has 150,000. That makes IBM the world’s largest IT services provider.” You can imagine how hard it would be for other firms to try to duplicate IBM’s advantage. In some cases, the ability of a firm to manage its supply chain partners may in itself is considered a core competency. The ability of a firm to manage its supply chain partners may in itself is considered a core competency. This is certainly the ease for Dell Computer Corporation, which practices what Michael Dell calls “virtual integration." While not all organizations are dependent on their supply chain partners as Dell is, current industry trends suggest that more and more organizations are focusing on developing only a few core competencies and outsourcing everything else. This puts a premium on an organization’s ability to select good partners and coordinates the flow of information and material between partners. It creates risks, especially if the organization’s selected core competencies fall out of favor in the future.

Functional strategies translate a business strategy into specific actions for the...
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