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Competitive advantage vs core
competence
Nov 13, 2019 | Marketing |     

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There is a close relationship between core competence and competitive

advantage because both of these provide an edge to the company over other
companies in their field by distinguishing them from their competitors. There
are several areas that companies can focus on to get an advantage over their
competitors. Companies can stand out from the rest when they possess unique
characteristics because of which they are considered better than their
competitors. Core competencies refers to these unique qualities of a company,
which may be in the form of skills or resources because of which a company
gains a competitive advantage. When companies are successful at developing
their core competencies, they are more likely to get past the competition and
acquire benefits like higher market share, increased profits, and customer
satisfaction and loyalty.
This is why it is important to elaborate on the two concepts and understand the
differences between the two, as well as how they are related to each other.

Definitions and meanings

Competitive advantage
Competitive advantage refers to an edge that a company has over its competitors
in terms of its products, services, competencies, strategies etc., because of which
it is able to generate a greater number of sales or profit margins and/or sustain
more customers in comparison to other firms in the market. In other words, a
competitive advantage is something that takes a company ahead of its
competitors.
There are different kinds of competitive advantages that a company may have,
such as its unique product offerings, cost structure, customer support
and supply and distribution channels. A company that has a competitive
advantage is able to create a greater value for the firm, its shareholders and its
customers. The greater the sustainability of the competitive advantage, the more
challenging it is for the competitors to move ahead of the company.
There are three main ways in which companies can acquire a competitive
advantage, which are cost leadership, differentiation and market segmentation.
Cost leadership is when a company is able to offer goods to its customers at a
low price. This can be achieved by increasing the efficiency of organizational
processes. Differentiation occurs when a company offers unique and improved
products to its customers. To achieve differentiation, companies need to
inculcate innovation and creativity in their operations. Finally, market
segmentation, also known as focus, requires companies to comprehend the
particular needs of the target market better than the competitors.
Core competence
Core competence refers to the particular skills and experience possessed by a
company that makes it different from its competitors. It is made up of a mix of
different resources, skills and knowledge through which a company acquires a
unique position in the market

Core competence of a business is something that fulfills three key criteria.

Firstly, a core competency should offer the potential to gain access to several
markets. This shows that the product has an initial value, and is capable of
acquiring greater value in the future. The second feature of core competency is
that it is beneficial for the consumers with respect to decrease in costs and
improved quality of products. Finally, core competency is a unique attribute that
cannot easily be copied or reproduced by the competitors. When it is not
possible for a competitor to copy the core competency of a company, it means
that is not capable of achieving the same degree of success as that company.

Some examples of core competencies possessed by companies are technological

expertise, skilled labor, supply channels and procedures, customer
relationship management skills, and so on. Companies that are quite successful
have managed to develop core competencies, which they use to maximize their
profits. For example, the objective of Amazon is to become the most ‘customer-
centric company in the world’, and this represents its core competence that
offers it a competitive advantage over various other retailers.
Differences between competitive advantage
and core competence
The main difference between competitive advantage and core competence is
explained below:
1. Meaning
Competitive advantage is a particular feature or aspect of a company that makes
it stand out from the rest of the companies in the market. Core competence, on
the other hand, is a combination of skills and strengths possessed by the
company that offers it a competitive advantage in the market.

2. Success duration
Competitive advantage does not ensure that the company will remain successful
in the long term, while core competence ensures that the company remains
successful for an extended time period.

3. Benefits
A company with a competitive advantage is able to acquire competitive strength
in a specific product or business, whereas core competence ensures that a
company gains superiority in a number of businesses and products.

4. Effect
The impact of competitive advantage on a business is restricted and specific to a
given area, while core competence has a more widespread impact on the
business because it helps the company progress on the whole.

5. Strategies
Competitive advantage can be achieved by companies by adopting three key
strategies: cost leadership, differentiation and focus. Companies can develop
core competence when they encourage innovation in development of
products/services and offering improved products and value to customers by
determining ways in which niche target markets can be served, services can be
offered in a timely and efficient manner and product quality can be enhanced.
6. Criteria
Core competence is one that fulfills three criteria: provides access to several
markets, increases benefit to customers and is difficult to be reproduced by
other companies. Competitive advantage, however, exists when a company
stands out from the rest of the companies in the market.

Competitive advantage vs core competence

– tabular comparison
A tabular comparison for competitive advantage and core competence is
presented below:

COMPETITIVE ADVANTAGE VS CORE COMP

Meaning

That aspect of business that enables the company to exhibit better The particular skills, know-how and e
performance that its competitors in the market companies that cannot be copied by th

Success duration

Short-term Long-term

Benefits

Competitive edge achieved in a particular business or product Superiority and excellence is achieved
and business of the company

Effect

Restricted to a given business area More widespread impact; brings progr

operations

Strategies
 Cost leadership, differentiation, market segmentation (Focus) Innovative production processes, offer
customers

Criteria

Exists when a company stands ahead of all others in the Access to markets, benefits to custome
market/industry reproduced or copied

Conclusion – competitive advantage vs core

competence
It is the core competencies of a company that are a significant source of
achieving competitive advantage in a company. In addition, core competence
helps in identifying those areas that should be concentrated upon by the
company. It facilitates the company in determining potential opportunities that
improves value for its customers. In contrast, competitive advantage is what
helps a company receive an edge over other companies in the market. Therefore,
both of the concepts are crucial for the success of the business.
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 1 Comment

1.
Nikhil c c on February 23, 2020 at 7:51 am
thanks for the content, very useful
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