The Core Competence of the Corporation

Essay by hopia May 2005

download word file, 3 pages 5.0

The idea of competence in an organization is not new, during the 80s and 90s core competence has changed dramatically, but core competence is quite new as it aims to achieve competitive advantage every now and then. Authors C.K. Prahalad and Gary Hamel introduced the concept in an article in the May-June issue of Harvard Business Review in 1990 managers now considers almost everything as a potential competence. But what is a core competence? The authors describe it as a bundle of skills and technologies that enable a company to deliver fundamental benefits to customers. In the article by Prahalad and Hamel they cite many examples such as Canon who used their skills to integrate microelectronics, optics and precision mechanics to build superior cameras, fax machines, printers and copiers. Other examples included NEC, and 3M their article concerned mainly knowledge of technologies, however the concept of core competences has been extended to entail many types of skills and functions, including process engineering, production, new product idea generation and even corporate identity.

Core competence is a future-orientated approach, which not only determines the current products and services, but more importantly future business opportunities. The impression of core competence also has a major implication for strategy: a company should focus on doing only what is close to its core competence (Strategic Management, Hitt et al, 2003). Organizations need to operate in an industry with good profit potential which is why a core competence should have four features. Firstly, it should be valuable, secondly, it should be rare, thirdly, it should be hard to imitate, and lastly, have no substitutes for its products. These features enable the company to charge a premium for the product over the competitors. If we find that our product is easily imitated it means that the...

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