Core Competency & Strategic
Capability
Competencies
• Efficient configuration of resources provides a company with competencies
• Competence-Group of attributes a firm requires to be able to compete in the
marketplace
• It is a prerequisite for competing within a industry
• It is derived from a bundle of resources the firm possesses
• For Example-To compete in the automobile Industry,companies must have
knowledge of design/engine/body [Link] this base knowledge it
will not be able to compete effectively in that industry irrespective of their
resources
Core Competencies
• Prahalad and Hamel(1990) advocate that the critical task of management is to
create an organisation capable of creating products which customers need but
have not yet [Link] achieve this companies must successfully operate across
organisational boundaries rather than focus on individual SBU’s
• Core Competencies derive from collective learnings of individual members within a
company and their ability to work across organisational boundaries
• Core Competence or Strategic Capability –Cluster of attributes that a company
possesses which in turn allows it to achieve competitive advantage
• Possible that the company has configured its collection of resources in a way it
allows it to compete more effectively
• Dell-Direct sales model-Not easy to imitate by other competitors
Core Competencies
• Core competence should provide access to a wide variety of markets
• Honda’s capability in engine design and production has enabled it to compete in
markets such as cars,lawnmower s,power boats
• Core competence should make a significant contribution to the percieved
customer benefits of the end [Link]-BMW has distinctive capabilities in
engineering which allow it to produce high quality cars and charge a premium
• Core competence should be difficult for competitors to [Link] have lasting
value,the competitive advantage derived should be sustainable.
• Example-Southwest Airlines/Tesco/Apple
• Core competence is enhanced as it is applied and shared across the [Link] is
the glue that binds business together and results in new business development
Toyota’s Core Competencies
Toyota Prius-Electric and petrol hybrid that has sold well in America
Planning to put hybrid engines in a range of other cars and SUV’s
Since its re launch in 2003,Toyota has sold over 150000 worldwide
Hybrid engines are an very expensive products and puts off many customers
It is spending huge amounts on research to master fuel saving technology faster
than rivals
Target till 2010-1 million hybrid vehicles worldwide
Distinctive Capabilities
Kay(1993) argues it is distinctive capabilities of a company’s resources that are
important in providing it with competitive advantage
They derive from a characteristic which other firms do not have
Possessing a distinctive characteristic is a necessary but not a sufficient criteria
for [Link] needs to be sustainable and appropriable
For being sustainable it needs to persist over time
For being appropriable it needs to benefit the organisation which holds it rather than
employees/customers/competitors
Distinctive capabilities derive from 3 areas-
Architecture
Reputation
Innovation
Distinctive Capabilities
Architecture
Relational contracts which exist inside and outside the organisation
Internal architecture-company,s relationship with employees,between employees
External architecture-relationship with its suppliers,customers,vendors,stakeholders
Organizational routines/systems/processes developed over time are more significant
than individual leaders/groups
Architecture does not create extraordinary organizations by collecting extraordinary
[Link] does so by enabling very ordinary people to perform in extraordinary ways
Architecture is the ability of the organization to create organizational knowledge
which is more than the sum of the individual employees.
It includes the organization’s ability to respond effectively to changes taking place in
its external environment,as well as its exchange of information within and outside the
company
Distinctive Capabilities
Reputation
Specially important in those markets where consumers can acertain the quality of the
product from their long term experience
Example-Firm of architects
Consulting firms-KPMG,E &Y,PWC etc
Sony-Reputation for good quality [Link] to secure repeat business and charge
[Link] in entering related/unrelated markets
Distinctive Capabilities
Innovation
Ability to innovate remains the biggest source of distinctive capability which is
sustainable and appropriable
Apple itunes,iPOD,iPAD,iPHONES
The competitive advantage that emanates from innovation may be seen to derive
from an organization’s [Link] can develop innovative processes which are
embedded within the routines of the company and difficult for competitors to copy
By seeking patents and copyrights,companies can protect innovative products and
ensure enhanced value realisation from their use
