Core Competence for Sustainable Competitive Advantage

Topics: Strategic management, Management, Core competency Pages: 16 (5043 words) Published: October 31, 2011
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IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 1, FEBRUARY 2002

Core Competence for Sustainable Competitive Advantage: A Structured Methodology for Identifying Core Competence Khalid Hafeez, YanBing Zhang, and Naila Malak
Abstract—Core competencies are the crown jewels of a company and, therefore, should be carefully nurtured and developed. Companies can determine their future business directions based on the strengths of competencies. However, because generalized terms such as resource, asset, capability, and competence are not clearly explained in connection with competence theory, these posing difficulties in understanding many contemporary management concepts. In this paper, we provide a summary of the recent management theories by comparing their salient features. We then propose a linking mechanism between assets, resources, capabilities, competencies, and core competencies. We provide a methodology to identify core competencies by isolating unique and flexible capabilities of the firm. We use this framework to identify the core competencies of a U.K. manufacturing company. The results of our analyses is to help the company to make more informed strategic management decision regarding capability development, outsourcing, focusing, or diversification, with regards to new products, services, or markets. The framework is generic in nature and is applicable to benchmark a manufacturing, public, or service sector organization. Index Terms—Assets, capability, competence, core competence, resource, strategic flexibility, uniqueness.

competition. The term “core competence” was used by Prahalad and Hamel [3] to deal with capabilities within diversified firms. Several measures have been proposed how to identify unique resources and capabilities [4]–[9]. However, because generalized terms such as resource, asset, capability, and competence are not clearly explained in connection with competence theory, they become an obstacle in understanding many contemporary management concepts. In this paper, we provide a summary of the recent management theories by comparing their salient features. Then, we propose a set of working definitions by categorizing resources into physical, intellectual, and cultural assets. Using our definitions, a conceptual framework is presented showing relationships between assets, capabilities, competencies, and core competencies. We show how to isolate competencies from capabilities by evaluating the collectiveness and unique attributes of capabilities, and how to further determine core competencies by evaluating the strategic flexibility of competencies. We use this framework to evaluate the competencies and core competencies of a U.K. manufacturing company. II. NEW WAVES OF STRATEGIC MANAGEMENT In recent years, three approaches have emerged as “a counterpoint to market structure analysis of competitive strategy” [10]. A brief account of these are given in the following and a summary of their salient features is shown in Table I. A. Resource-Based View In resource-based view, a firm is understood to be a bundle of assets and capabilities. The competitive advantage is acquired by accumulating strategic assets and capabilities. This is opposed to the competitive forces approach where industry structure and/or market segments are the competitive factors. However, the resource-based view argues that firms are heterogeneous to one another due to possessing of some unique assets and/or capabilities. These unique assets and capabilities, often known as strategic resources, can make all the difference in creating competitive advantage for a firm. Therefore, management efforts should be focused toward nurturing and exploiting these strategic resources [4], [9]. B. Competence-Based Perspective Competence-based perspective argues that it is the core competencies of a firm, not discrete, individual assets, which are the

I. INTRODUCTION RADITIONAL “competitive forces theory” asserts that in...

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Khalid Hafeez received the Ph.D. degree from the University of Cardiff, Wales, U.K., in 1991. Currently, he is a Principal Lecturer in information systems at the Sheffield Hallam University, Sheffield, U.K. From 1993 to 1994, he served as the Publication Chairman of the U.K. Information Technology and its Application Society and co-chaired many conference and track sessions. He has been an Invited Speaker in many conferences under the themes of supply chain management, competence management, and information society and knowledge clusters. He has participated in many U.K. and European grants and has supervised many Ph.D. students. His current research interests include knowledge management, human capital management, supply chain management, organization learning, and system dynamics. Dr. Hafeez is a member of Institute of Logistics and Transport U.K.
YanBing Zhang received the B.S degree from the University of Beijing, China, and M.B.A. and Ph.D. degrees from the Sheffield Hallam University, Sheffield, U.K., in 1999. Prior to receiving his degrees, he was a Commercial Engineer with the China Research Enterprise, Beijing, China. He has presented his work in many notable conferences and has been published widely. His research interests include core competence, supply chain management, and application of Analytic Hierarchy Process.
Naila Malak received the B.Sc. degree from the University of Northumbria at Newcastle, U.K., and the Ph.D. degree from Leeds University, U.K., in 1995. She has served as an Analytical Chemist at Smith-Kline Beecham, U.K. (currently Glaxo-Beecham). Currently, she is involved with various European projects at the Enterprise Center, Sheffield Hallam University, Sheffield, U.K. Her current research interests include economic regeneration and project management in the Biotechnology fields. She is an associate member of Institute of Management.
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