CORE COMPETENCIES - AN ESSENTIAL FOR ORGANIZATIONAL
SUCCESS
BY
SMART
LEARNING WAY
What is Core Competency?
Core competency is a unique skill or
technology that creates distinct customer value. For instance, core competency
of Federal express (Fed Ex) is logistics management. The organizational unique
capabilities are mainly personified in the collective knowledge of people as
well as the organizational system that influences the way the employees
interact.
As an organization grows, develops and adjusts to the new
environment, so do its core competencies also adjust and change. Thus, core
competencies are flexible and developing with time. They do not remain rigid
and fixed. The organization can make maximum utilization of the given resources
and relate them to new opportunities thrown by the environment.
Resources and capabilities are the building
blocks upon which an organization create and execute value-adding strategy so
that an organization can earn reasonable returns and achieve strategic
competitiveness.
Resources are inputs to a firm in the
production process. These can be human, financial, technological, physical or
organizational. The more unique, valuable and firm specialized the resources
are, the more possibly the firm will have core competency. Resources should be
used to build on the strengths and remove the firm’s weaknesses. Capabilities
refer to organizational skills at integrating it’s team of resources so that
they can be used more efficiently and effectively.
Organizational capabilities are generally a
result of organizational system, processes and control mechanisms. These are
intangible in nature. It might be that a firm has unique and valuable
resources, but if it lacks the capability to utilize those resources
productively and effectively, then the firm cannot create core competency. The
organizational strategies may develop new resources and capabilities or it
might make stronger the existing resources and capabilities, hence building the
core competencies of the organization.
Core competencies help an organization to
distinguish its products from it’s rivals as well as to reduce its costs than
its competitors and thereby attain a competitive advantage. It helps in
creating customer value. Also, core competencies help in creating and
developing new goods and services. Core competencies decide the future of the
organization. These decide the features and structure of global competitive
organization. Core competencies give way to innovations. Using core
competencies, new technologies can be developed. They ensure delivery of
quality products and services to the clients.
Core Competency Theory of Strategy
Core Competency Theory
The core competency theory is the theory of
strategy that prescribes actions to be taken by firms to achieve competitive
advantage in the marketplace. The concept of core competency states that firms
must play to their strengths or those areas or functions in which they have
competencies. In addition, the theory also defines what forms a core competency
and this is to do with it being not easy for competitors to imitate, it can be
reused across the markets that the firm caters to and the products it makes,
and it must add value to the end user or the consumers who get benefit from it.
In other words, companies must orient their strategies to tap into the core
competencies and the core competency is the fundamental basis for the value
added by the firm.
Core Competencies and Strategy
The term core competency was coined by the
leading management experts, CK Prahalad and Gary Hamel in an article in the
famous Harvard Business Review. By providing a basis for firms to compete and
achieve sustainable competitive advantage, Prahalad and Hamel pioneered the
concept and laid the foundation for companies to follow in practice.
Some core competencies that firms might have
include technical superiority, its customer relationship management, and
processes that are vastly efficient. In other words, each firm has a specific
area in which it does well relative to its competitors, this area of excellence
can be reused by the firm in other markets and products, and finally, the area
of strength adds value to the consumer.
The implications for real world
practice are that core competencies must be nurtured and the business model
built around them instead of focusing too much on areas where the firm does not
have competency. This is not to say that other competencies must be neglected
or ignored. Rather, the idea behind the concept is that firms must leverage
upon their core strengths and play to their advantages.
Some Examples
If we take the examples from real world
companies and evaluate their core competencies, we find that many firms have
benefited from the application of this theory and that they have succeeded in
attaining competitive advantage and sustainable strategic advantage. For
instance, the core competencies of Walt Disney Corporation lie in its ability
to animate and design its shows, the art of storytelling that has been
perfected by the company, and the operation of its theme parks that is done in
an efficient and productive manner. Hence, Walt Disney Corporation would be
well advised to configure its strategy around these core competencies and build
a business model that complements these competencies.
Closing Thoughts
The important aspect to be noted is that core
competencies provide the companies with a framework wherein they can identify
their core strengths and strategize accordingly. Of course, the identification
and evaluation of core competencies must be done as accurately and reliably as
possible since the divestment of non-core areas must not lead to the firm
missing key areas of operation and competitive advantage. Finally, care must be
taken when building the organizational edifice around the core competencies to
avoid the situation where many or too few of the competencies are identified
leading to redundancies or scarcity.
BIBLIOGRAPHY
John A. Pearce II , Richard B Robinson , JR.,
Amita Mital “Strategic Management” 10th Addition Tata Mc Graw Hill
Education Pvt.Ltd New Delhi.
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