Core competencies are a theory in management originally advocated by two business strategists; CK Prahalad and Gary Hamel in the ’90s. Talking about the concept, core competencies is a deep proficiency that enables a company to deliver unique value to the customer. It implies a pool of exceptional skills, strategies, moves, or technologies that distinguish between a leader and other average players in the industry. It is the key source of competitive advantage for a firm over its competitors which leads to characteristic capabilities or excellences.
The idea of taking competitive advantage is one of the most important business ideas currently shaping our world. To help you understand better, we have briefly explained the idea of core competencies and how we can identify and take a competitive advantage in the corporate world.
The Merit of Uniqueness
Any idea which is taking place as a business has to have a thought process that their business needs to offer something that customer uniquely value if they are to make good profits. “Me too” business (“Me too – Immediate adapter of any trend or blind follower”) have nowadays become doomed to compete on lower prices. The only thing they are competing for is their dropped prices and despite that the margin becomes flat. That is the reason why there’s such an emphasis on building and selling USPs in business. If you’re able to offer something uniquely good, customers will desire to choose your brand/products and will be willing to pay even more for that.
Core competency Model
According to the Core Competency Model or Hamel and Prahalad Model, organizations can move into new markets and market growth possibilities more easily by using their core competencies.
As part of their research on this concept, Prahalad and Hamel developed a Core Competency Model. The model focuses on a compound of specific, collaborative, integrated, and applied knowledge, skills, and attitude. The model, which should not focus on fighting off the competition, but on creating a new competitive space, comprises four core competencies which are mentioned below:
Identifying the core competency permits an organization to safely and wisely outsource non-core activities. It also builds the conditions for association both within the organization and outside of it. In other words, it depicts, “Do what you do best, and offshore the rest!”
They have also an emphasis on the following lines “The aim is to build a powerful feeling of community and to a great extent their loyalty should be to the integrity of the core competence area they represent and not just too particular businesses,”
Core competencies categories
Now the question arises, from where this uniqueness comes from and how it can be sustained. So following are the categories of core competencies from which we can identify whether the business has a competitive advantage or not.
The competitive advantage must give your customer something unique that strongly influences them to choose your product/services. If it does not, then it has no effect on your competitive position and is not a core competence. Let us explain to you with an example of Apple. Apple Company has style & simplicity as its core strength which outstands its products among all competitors. Of course, we are not trying to offend the android fans here.
Difficulty of Imitation
The core competence should be difficult to imitate and are better than your competitors which eliminates the chances of tough competition and because you’re continually working to improve these skills, means that you can sustain your competitive position. Taking the example of Tesla cars, it will be really difficult for competitors to beat their technical & branding advantage. Which makes the company the strongest in their competitive strategy.
Breadth of application
Core competence has to be something that opens up a good number of potential markets. If it only opens up to a few niche markets then success in these markets will not be enough to sustain significant growth. For example, One of McDonald’s competitive advantages is its focus on consistency of quality products, production of food, and use of same raw materials all around the world.
Steps to identify core competencies
Now if you are the newbie to the term core competence and don’t know how to identify your business’s competitive advantage then the following are the steps you should follow to know the core competence of your business and how you can nurture core competencies to sustain in the market.
Hiral Shah, A Business Analyst, who has qualified Masters in management, and currently working on conceptual creation as product developer and also handling marketing activities at J.hirani. She loves to visualize the thoughts and putting the same into action with creative touch is what makes her stand out from the crowd. She is punctilious and approachable by her nature.
About J.hirani: J.hirani is a Strategic Transformation team which works as a growth partner for different organisations in various industries by providing services like Agile transformation, Scenario mapping, Strategic alignment, Balance scorecard, Digital transformation, Incubating new ventures, Operation excellence and Aligning human capital.
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