Core Competencies and Competitive Advantages
Core Competencies
A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a core competency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria:
1. It is not easy for competitors to imitate.
2. It can be re-used widely for many products and markets.
3. It must contribute to the end consumer's experienced benefits.
C.K. Prahalad and Gary Hamel coined the term core competencies, or the collective learning and coordination skills behind the firm's product lines. 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.
According to Prahalad and Hamel, core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, motors are a core product that can be used in wide array of end products. 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:
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
The intersection of market opportunities with core competencies forms the basis for launching new businesses. By combining a set of core competencies in different ways and matching them to market opportunities, a corporation can launch a vast array of businesses.
Without core competencies, a large corporation is just a collection of discrete businesses. Core competencies serve as the glue that bonds the business units
A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a core competency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfills three key criteria:
1. It is not easy for competitors to imitate.
2. It can be re-used widely for many products and markets.
3. It must contribute to the end consumer's experienced benefits.
C.K. Prahalad and Gary Hamel coined the term core competencies, or the collective learning and coordination skills behind the firm's product lines. 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.
According to Prahalad and Hamel, core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, motors are a core product that can be used in wide array of end products. 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:
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
The intersection of market opportunities with core competencies forms the basis for launching new businesses. By combining a set of core competencies in different ways and matching them to market opportunities, a corporation can launch a vast array of businesses.
Without core competencies, a large corporation is just a collection of discrete businesses. Core competencies serve as the glue that bonds the business units