A core competency can be defined as the defining capability that gives a competitive advantage.

It is
said as before 1980’s executives were mostly judged based on their ability to restructure and delayer
their corporations but in the 1990’s they were mostly judged upon the ability to identify and exploit
the core competency. This means that they have to rethink the concept of the corporation which
can be best explained with an example of two company GTE and NEC. GTE was a company with 9.98
billion and NEC a company with 3.8 billion in 1980. Later NEC has sales were higher than GTE since it
has moved their business beyond public switching and transmission. NEC was more successful than
other companies as it has considered the core competencies.

In western countries, top management should understand and be responsible for the competitive
decline and should rethink of a corporation. They should shift the resources to strengthen their
components and should be able to accumulate more core competencies.

The diversified corporation is a large tree. The trunk and major limbs are core products with business
units being the branches. The end products will be the leaves, flowers, and fruits. The root system
that gives strength to the tree is nourishment and stability which is the core competency.

One of the major aspects of a company should be how not to think of competences. Since
companies are in a race to build competencies that determine global leadership, they have stopped
themselves as bundles of business making products. Building competencies is more ambitious and
different than integration.

Three tests should be done before identifying a core competence-

First one, the core competence should provide potential access to a wide variety of markets (Casio’s
core competence which has a lot of products)

The second one, a core competence should make a significant contribution to the customer that he
gets the benefits of the end products.

The last one, a core competence should be different for competitors for copying.

Companies tend to lose their core competence. This happens due to companies might have
forgotten about the evolving opportunities and they might not have a clear set of goals that define
the competence. core competence should be resulting in core products. SBU is one of the major core
competencies, top management will allocate capital and talent.

Core competencies are well inspired by business development. They should constitute the focus of
strategy at the corporate level. Managers have to win manufacturing leadership in core products
and capture global share through brand-building programs.