Core competencies are particular strengths relative to other organizations in the industry which provide the fundamental basis for the provision of added value. Core competencies are the collective learning in organizations, and involve how to coordinate diverse production skills and integrate multiple streams of technologies. It is communication, an involvement and a deep commitment to working across organizational boundaries. Similarly, A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer. Such competences empower an organization to access a wide variety of markets. Executives should estimate the future challenges and opportunities of the business in order to stay on top of the game in varying situations . The term "core competency" is relatively new. It originated in a 1990 Harvard Business Review article. It is also called core capabilities or distinctive competencies. It fulfills three key criteria: 1. It is not easy for competitors to imitate. 2. It can be leveraged widely to many products and markets. 3. It must contribute to the end consumer's experienced benefits

An integration of skill:
A competence is a bundle of constituent skills and technologies, rather than a single, discrete skill or technology. For example, the competence federal express possesses in package transport and delivery includes bar-coding technologies, linear programming skills and much more besides. A core competence represents the integration of a variety of individual skills.

the core competence should be difficult to imitate. it should be something that opens up a good number of potential markets. If it does not. therefore. the competence must give your customer something that strongly influences him or her to choose your product or service. TESTS: Hamel and Prahalad give three tests to see whether they are true core competences: 1. The goal. means that you can sustain its competitive position. A factory. distribution channel or brand cannot be a core competence. Why do we need to worry about core competence? Well. rather than the periphery. This allows you to provide products that are better than those of your competition. I think we need to know what your core competence is for a number of reasons: . Difficulty of Imitation: Secondly. nic he markets. If it only opens up a few small. Breadth of Application: Thirdly. of competitive success. is to focus senior management¶s attention on those competencies that lie at the centre. And because you're continually working to improve these skills. To be considered a µcore¶ competence a skill must meet three additional tests. 3.g. a core competence is not an µasset¶ in the accounting sense of word. but an aptitude to manage that factory (e. Core versus Non-core: We use the terms µcompetence¶ and µcapability¶ interchangeably. Toyota¶s lean manufacturing) or channel (Wal-Mart¶s logistics) or brand (Coca-Cola¶s advertising) may constitute core competence. then it has no effect on your competitive position and is not a core competence. 2.Not an asset: Second. Relevance: Firstly. then success in these markets will not be enough to sustain significant growth.

Core competencies can be developed in all types of organization including service organizations. Core Competencies are corporate resources and they cut across business units New products and services can be created if core competencies are in place Employees who embody the core competencies of the corporation often get a free hand over others. (e) Identify potential competitors. THE LOSS OF CORE COMPETENCIES: Cost-cutting moves sometimes destroy the ability to build core competencies. Core competence is about integrating a number of different technologies as well as organization skills to deliver something of value to the customer. (d) Provides you the basis for understanding the strength of the competitors. and this outsourcing prevents the firm from developing core competencies in those tasks since it no longer consolidates the know-how that is spread throughout the company. 4. decentralization makes it more difficult to build core competencies because autonomous groups rely on outsourcing of critical tasks. IMPORTANCE OF CORE COMPETENCY: 1.(a) To make decisions about diversification. you will neither be able to assess the strength of the tree or that of the competitor. For instance. 2. . (c) Suggest to you as to which competencies you should further develop or build to maintain your competitive advantage in the future. For example. Core Competencies are the basis of long term corporate sustainability. (b) Identify the target market for your business(s). if you just looked at the leaves of a tree or the end products of a company. 3.

Wang. 2006). and this loss resulted in a handicap in the newer digital television industry. is beneficial for an enterprise to reach an advantageous position (Hsu. . 2006). reasoning that the industry was mature and that high quality. the differentia from the competitors. Lo. 2002) Besides. 1994). the advantages of core competence is that. In the process. the enterprise resources should be used efficiently and therefore. Hamel. decrease the working hours and capitalize cost can be seen as the core competence of the general hotels. a company can make better divestment decisions. For example. 2003. the characteristics represents an accumulation of the past experience. Kang. 2002. establish the organization and reduce the capitalize cost and working hours. in order to produce. Yang. Hsu. In Taiwan. potential market and strategies can be developed (Collis. and then was unable to enter the 1Mb market on its own. which is different from general competence (Tampoe. By recognizing its core competencies and understanding the time required to build them or regain them. As Jui (2000) mentioned. 2000. which is a combination of the technology and the professional skills.1994. low cost models were available from Far East manufacturers. difficult-to-imitate and dynamic characteristic. the crucial competence. the core competence of an enterprise is exclusive. 2004. 1994. Motorola divested itself of its semiconductor DRAM business at 256Kb level. 2003). 1994. expand. 2006. LITERATURE REVIEW: Core competence is an invisible competence that can integrate and coordinate the technology and information and provide the product or service with crucial competitive advantage. environment and human resource. Ho.Failure to recognize core competencies may lead to decisions that result in their loss. most of the research focused on the enterprise core competence and mainly discussed the strategic originality. the competence to integrate and coordinate the varied competence. the core value of the customers. which might be the factors affecting the operation accomplishment (Huang. unique. 2005. Hamel (1994) pointed out core competence involves value. in the 1970's many U. manufacturers divested themselves of their television manufacturing businesses. in order to increase the competitive advantages. Lin.S. they lost their core competence in video. Chen. To sum up. Similarly. from the enterprise¶s perspective. a unique competitive advantages and an integrated application (Shen.

Their central idea was that over time companies may develop key areas of expertise which are distinctive to that company and critical to the company's long term growth. The Core Competence of the Corporation. For a ceramics manufacturer. For a software company the key skills may be in the overall simplicity and utility of the program for users or alternatively in the high quality of software code writing they have achieved. central areas of the company where the most value is added to its products.K. so its Core Competencies will have to adapt and change. As a business evolves and adapts to new circumstances and opportunities. related knowledge and attributes that allow an individual to successfully perform a job or an activity within a specific fuction. Core Competencies should change in response to changes in the company's environment.The Work of Hamel and Prahalad According to Hayes (1979) competencies are generic knowledge motive. The main ideas about Core Competencies were developed by C K Prahalad and G Hamel through a series of articles in the Harvard Business Review followed by a best-selling book Competing for the Future. or the collective learning and coordination skills behind the firm's product lines. Core Competencies are not seen as being fixed.' C K Prahalad and G Hamel 1990. Similarly. . 'In the 1990s managers will be judged on their ability to identify. cultivate. they could be the routines and processes at the heart of the production process. For example. key areas of expertise could be in the design of the electronic components and circuits.indeed. trait of a person or a firm that is linked to superior performance on the job. another author Unido (2002) said that they are set of skills. skill. They are flexible and evolve over time. for a manufacturer of electronic equipment. These areas of expertise may be in any area but are most likely to develop in the critical. and exploit the core competencies that make growth possible . C. Prahalad and Gary Hamel coined the term core competencies. they'll have to rethink the concept of the corporation it self.

The business units of the corporation each tap into the relatively few core products to develop a larger number of end user products based on the core product technology. This flow from core competencies to end products is shown in the following diagram: .They made the case that core competencies are the source of competitive advantage and enable the firm to introduce an array of new products and services. For example. According to Prahalad and Hamel. Core products are not directly sold to end users. core competencies lead to the development of core products. they are used to build a larger number of end-user products. motors are a core product that can be used in wide array of end products. rather.

Core Competencies to End Products End Products 1 2 3 4 5 6 7 8 9 10 11 12 Business 1 Business 2 Business 3 Business 4 Core Product 1 Core Product 2 Competence 1 Competence 2 Competence 3 Competence 4 .

Without core competencies. By combining a set of core competencies in different ways and matching them to market opportunities. Core competencies serve as the glue that bonds the business units together into a coherent portfolio. then great! Work on them and make sure that you build them as far as sensibly possible. 4. Review the two screened lists. 5. then the competence they value may be "component integration and miniaturization". screen them against the tests of Relevance.g. and work to build them. and see if any of the competences you've listed are core competences. 2. Difficulty of Imitation and Breadth of Application. a corporation can launch a vast array of businesses. IDENTIFICATION OF CORE COMPETENCES: To identify your core competences. For the list of factors that are important to clients. Then dig into these factors. cell phones). brainstorm the factors (for example) that people use in assessing you for annual performance reviews or promotion. and identify the competences that lie behind them. or for new roles you want.) If you're doing this for yourself. 2. If you're doing this on behalf of your company. screen them using these tests to see if you could develop these as core competences. As a corporate example. use the following steps: 1. identify the factors that influence people's purchase decisions when they're buying products or services like yours (make sure that you move beyond just product or service features and include all decision-making points. Brainstorm your existing competences and the things you do well. For the list of your own competences. if customers value small products (e. . Brainstorm the factors that are important to your clients. then look at ones that you could develop. a large corporation is just a collection of discrete businesses. and think about them: y If you've identified core competences that you already have. 3.The intersection of market opportunities with core competencies forms the basis for launching new businesses. y If you have no core competences.

are you still doing your own cleaning. clearing down time so that you can focus on core competences. then either there's something else that you can use to create uniqueness in the market (see our USP Analysis article). or think about finding a new environment that suits your competences. and the degree of consensus that attaches to . ask yourself if you can outsource them effectively.y If you have no core competences and it doesn't look as if you can build any that customers would value. ironing and decorating? As a small business. Thus the clarity of a firm¶s definition of its core competencies. If any of these things do not contribute to a core competence. as an individual. Think of the most time-consuming and costly things that you do either as an individual or a company. are you manufacturing non-core product components. HR and payroll? As a bigger business. or performing noncore activities? MANAGING CORE COMPETENCE: There are four key tasks in the management of core competencies. For example. 1: selecting core competencies 2: building core competencies 3: deploying core competencies 4: protecting core competencies y Selecting core competencies: A firm cannot actively µmanage¶ core competencies if managers do not share a view of what those competencies actually are. 6. are you doing you own accounts.

and into new markets. Capabilities are considered core if they differentiate a company strategically. One way of reducing the costs of competence building is to borrow skills and technologies from other companies. Companies intent on competence-than vertically integrated. To protect core competencies. Another determinant of a company¶s ability to build core competencies at low cost is its capacity to leverage. y Building core compentencies: The capacity to integrate the individual strands into a core competence requires a rich pattern of cross discipline communication and learning. y Protecting core competencies: Protecting core competencies from erosion takes continued vigilance on the part of top management.that definition.A core competency differentiates not only between firms but also inside a firm it . or amortize. a company must be able to distinguish between a bad business and the potentially valueable competencies buried within that business. y Deploying core competencies: To leverage a core competence across multiple businesses. is the most rudimentary test of a company¶s capacity to manage its core competencies. its competence-building efforts across a broad range of products or geographic markets. it is often necessary to redevelop that competence internally-from one division or SBU to another.

http://www. In order to remain competeteive.html .com/research/the-concept-of-core-competence/ http://www. REFRENCES: Prahalad. 68.mindtools.amongst several competencies. 3) pp. (1990) The core competence of the corporation. G. and Harvard Business Review (v. no.investopedia. it is also important to harmonize the supply chain with the company¶s focus by algning business partners to the company¶s core competencies and establishing strategic alliances to reduce cost. C.htm 79±91. They have to be contiously inproved with resource and development.asp http://www. reacting to the market changes. a core competency guides a firm recombining its competencies in response to demands from the environment. In other words. In short core competencies help the company to shift from one leading product to another.

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