Core competencies are the bundle of skills and resources that allow a company to compete successfully, achieve profitability and be the foundation of competitive advantage. (Johnson, Whittington, Scholes, 2011).Business in the past would have considered core competencies something that was to be held in house and closely guarded. The increasing complexity of businesses means that what a core competency is and how it should be controlled has become less obvious. The ability to keep these competencies in house is almost impossible (Shreefal, 2007). At Holden, for example, a core competency would be the design of cars. Even within this core competency there are many aspects that would be outsourced. For example: they wouldn’t write the software that is used to draw the car and they probably use outside design houses, engineers and mathematicians to look at certain aspects of a new design. Dell for example looks like it has computer manufacturer as a core competency, but doesn’t make anything just assembles the parts. The complexity, high level of dynamism (rate of change) and number of manufacturers with in the computer market mean the power of suppliers is low enough that it doesn’t need to keep these competencies in house. In the past the outsourcing of core competencies has been cyclical in nature. Companies have been prepared to outsource more in good times and as times get tough or there is a problem they are brought back in-house again. With the rise of better communications, complexity of projects and efficiency of transport infrastructure many companies will be forced to outsource core competencies to compete (Merrifield, 2006). Taking this to its logical conclusion is outsourcing everything. This leads to the issues that are demonstrated by the local tool “manufacturer” GMC, who did none of their manufacture in house, which made outsourcing a core competency. The problem created was that large retailers such as Bunning’s also have manufacturers that they can buy the same product from direct, save money and just bypass GMC. In 2008 this left GMC in receivership and the issue of controlling core competencies unresolved and even less clear (ABC, 2008).
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