Definition of 'Core Competencies'
The main strengths or strategic advantages of a business. Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. Theoretically, a core competency should allow a company to expand into new end markets as well as provide a significant benefit to customers. It should also be hard for competitors to replicate.
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One topic that interested FlexCon managers was a discussion of how core competencies relate to outsourcing decisions. FlexCon management commonly accepted that a core competency was something the company "was good at." This view, however, is not correct. A core competence refers to skills, processes, or resources that distinguish a company, are hard to duplicate, and make that firm unique compared to other firms. Core competencies begin to define a firm's long run, strategic ability to build a dominant set of technologies and/or skills that enable it to adapt quickly to changing market opportunities. The presenter argued that three key points relate to the idea of core competence and its relationship to insourcing/outsourcing decisions:
A firm should concentrate internally on those components, assemblies, systems, or services that are critical to the finished product and where the firm possesses a distinctive (i.e., unique) advantage valued by the customer.
Consider outsourcing components, assemblies, systems, or services when suppliers have an advantage. Supplier advantages may occur because of economies of scale, process specific investment, higher quality, familiarity with a technology, or a favorable cost structure.
Recognize that once a firm outsources an item or service, it usually loses the ability to bring that production capability or technology in-house without committing significant investment.
The manager or team responsible for making an insourcing/outsourcing decision must develop a