Core Competences.

Essay by mainiacA+, December 2005

download word file, 2 pages 2.3

A Core Competency is a deep proficiency that enables a company to deliver unique value to customers. It embodies an organization's collective learning, particularly of how to coordinate diverse production skills and integrate multiple technologies. Such a Core Competency creates sustainable competitive advantage for a company and helps it branch into a wide variety of related markets. Core Competencies also contribute substantially to the benefits a company's products offer customers. The litmus test of a Core Competency? It's hard for competitors to copy or procure. Understanding Core Competencies allows companies to invest in the strengths that differentiate them and set strategies that unify their entire organization.


To develop Core Competencies a company must:

* Isolate its key abilities and hone them into organization-wide strengths;

* Compare itself with other companies with the same skills, to ensure that it is developing unique capabilities;

* Develop an understanding of what capabilities its customers truly value, and invest accordingly to develop and sustain valued strengths;

* Create an organizational road map that sets goals for competence building;

* Pursue alliances, acquisitions and licensing arrangements that will further build the organization's strengths in core areas;

* Encourage communication and involvement in core capability development across the organization;

* Preserve core strengths even as management expands and redefines the business;

* Outsource or divest noncore capabilities to free up resources that can be used to deepen core capabilities.

Common Uses.

Core Competencies capture the collective learning in an organization. They can be used to:

* Design competitive positions and strategies that capitalize on corporate strengths;

* Unify the company across business units and functional units, and improve the transfer of knowledge and skills among them;

* Help employees understand management's priorities;

* Integrate the use of technology in carrying out business processes;

* Decide where to allocate resources;

* Make outsourcing, divestment and partnering decisions;

* Widen the domain in which the company innovates, and spawn new products and services;

* Invent new markets and quickly enter emerging markets;

* Enhance image and build customer loyalty.

A company's core competency is the one thing that it can do better than its competitors. A core competency can be anything from product development to employee dedication.

If a core competency yields a long term advantage to the company, it is said to be a sustainable competitive advantage.

It is important to distinguish between individual competencies or capabilities and core competencies. Individual capabilities stand alone and are generally considered in isolation. Core competencies are more than the traits of individuals. They defined core competencies as "aggregates of capabilities, where synergy is created that has sustainable value and broad applicability." That synergy needs to be sustained in the face of potential competition and, as in the case of engines, must not be specific to one product or market. So according to this definition, core competencies are harmonized, intentional constructions.


Andrews, Kenneth. The Concept of Corporate Strategy, 3d ed. Dow Jones/Richard D. Irwin, 1987.

Campbell, Andrew, and Kathleen Sommers-Luch. Core Competency Based Strategy. International Thompson Business Press, 1997.

Drejer, Anders. Strategic Management and Core Competencies: Theory and Applications. Quorum Books, 2002.

Hamel, Gary, and C.K. Prahalad. Competing for the Future. Harvard Business School Press, 1994.

Prahalad, C.K., and Gary Hamel. "The Core Competence of the Corporation." Harvard Business Review, May/June 1990, pp. 79-91.

Quinn, James Brian, and Frederick G. Hilmer. "Strategic Outsourcing." Sloan Management Review, Summer 1994, pp. 43-45.

Quinn, James Brian. Intelligent Enterprise. Free Press, 1992.

Schoemaker, Paul J.H. "How to Link Strategic Vision to Core Capabilities." Sloan Management Review, Fall 1992, pp. 67-81.

Waite, Thomas J. "Stick to the Core--or Go for More?" Harvard Business Review , February 2002, pp. 31-41.