Core Competencies of Business Strategy
CORE COMPETENCIES OF BUSINESS STRATEGY
Core competence an important business capability that gives it a competitive advantage, core product made from a business’s core competencies, but not for final consumer or ‘end’ user. To be of commercial and profitable benefit to a business, a core competence should:
• provide recognizable benefits to consumers
• not be easy for other firms to copy, e.g. a patented design
• be applicable to a range of different products and markets.
According to Hamel and Prahalad, core competencies lead to the development of core products. Core products are not necessarily sold to final consumers. Instead they are used to produce a large number of end-user products. For example, Black & Decker, it is claimed, has a core competence in the design and manufacture of small electric motors. These core products are used in a huge variety of different applications from power tools, such as drills, to lawnmowers and food processors. It is important to realize that a business might be particularly good at a certain activity – it might have competence in this activity – but this does not necessarily make it a core competence if it is not exceptional or is easy to copy. So, a computer-assembly business might be very efficient and produce computers at low cost, but if it depends on easily available and cheap bought-in components from suppliers, this is not a core competence. It does not make the business very different from many other computer assembly firms. Developing a core competence, according to Prahalad and Hamel, depends on integrating multiple technologies and different product skills that probably already exist in the business. It does not necessarily mean spending huge amounts on R&D – although patented production processes, such as Pilkington’s float-glass process, may give a core competence. If a management team can effectively bring together and co-ordinate designers, production specialists, IT experts and so on, into a team
Core competence an important business capability that gives it a competitive advantage, core product made from a business’s core competencies, but not for final consumer or ‘end’ user. To be of commercial and profitable benefit to a business, a core competence should:
• provide recognizable benefits to consumers
• not be easy for other firms to copy, e.g. a patented design
• be applicable to a range of different products and markets.
According to Hamel and Prahalad, core competencies lead to the development of core products. Core products are not necessarily sold to final consumers. Instead they are used to produce a large number of end-user products. For example, Black & Decker, it is claimed, has a core competence in the design and manufacture of small electric motors. These core products are used in a huge variety of different applications from power tools, such as drills, to lawnmowers and food processors. It is important to realize that a business might be particularly good at a certain activity – it might have competence in this activity – but this does not necessarily make it a core competence if it is not exceptional or is easy to copy. So, a computer-assembly business might be very efficient and produce computers at low cost, but if it depends on easily available and cheap bought-in components from suppliers, this is not a core competence. It does not make the business very different from many other computer assembly firms. Developing a core competence, according to Prahalad and Hamel, depends on integrating multiple technologies and different product skills that probably already exist in the business. It does not necessarily mean spending huge amounts on R&D – although patented production processes, such as Pilkington’s float-glass process, may give a core competence. If a management team can effectively bring together and co-ordinate designers, production specialists, IT experts and so on, into a team
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