Guillaume JACQUOT Unternehmensführung

Core Competencies
To introduce this subject, I want to emphasize that core competencies are necessary to be
competitive because core competencies are the source of competitive advantages. Core
competencies enable firms to create a lot of new services and/or products.

What are core competencies?

To answer this question, we can describe core competencies in few points:

- supplying consumer benefits

- not easy for competitors to imitate
- influence many products and markets
- contribute to the end product/service benefits

The last point shows us that core competencies are not used for only one final product or service. It
could be a little part of the system, but this part makes the difference than other systems.

As I said previously, core competencies serve as a source of competitive advantages. But core
competencies create competitive advantages on long-term. So, we can also look at Hanson’s model
that uses 4 criteria to identify long term competitive advantages:

- Valuable, it refers to swot analysis because it allows using opportunities and/or disabling
threats.
- Rare
- Costly to imitate
- Non-substitutable

These 4 elements are equivalent to the previous points that describe core competencies.

Core competencies don’t only concern R&D and final products. It could also be a process, an
organization evolution, and human resources methods and so on.

In case study about Harley Davidson, we can read that they pick a production organization from
Japan. This organization was a core competency in the Japanese firm.

Generally, we say that core competencies can be sold or bought. But core products/services, and so
core competencies, could be bought in some cases. I think to Black & Decker: one of these core
products is small electric motors; these motors could be bought by other firms to build a final
product.

But there are some barriers which provide innovation and develop core competencies. For example,
outsourcing is dangerous. When we use outsourcing, we have to be sure that what we outsourced
can’t be improved.

Another point, maybe important, is the protection of core products/services. I don’t know how it is in
Austria, but in France when someone wants to prevent imitation there are patents. These patents
could be a good solution to protect new products/services and see ROI. Without patents, risk is
imitation and so don’t have ROI.

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Guillaume JACQUOT Unternehmensführung

Finally, I just want to add that core competencies come from inside of each individual. Because in my
mind, core competencies deal with innovation and innovation is the fruit from one or a group of
persons. For me, a good firm is a firm where every one could develop his/her personality and so
develop new competencies. For a long time, we don’t use skills from every individual in firms but
now there are more an more firms that encourage employees to participate in firm life.

Sources

http://www.quickmba.com/strategy/core-competencies/

http://tutor2u.net/business/strategy/core_competencies.htm

http://en.wikipedia.org/wiki/Core_competency