Core Competencies and Competitive Advantages

1680 WordsSep 24, 20127 Pages
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…show more content…
Failure to recognize core competencies may lead to decisions that result in their loss. For example, in the 1970's many U.S. manufacturers divested themselves of their television manufacturing businesses, reasoning that the industry was mature and that high quality, low cost models were available from Far East manufacturers. In the process, they lost their core competence in video, and this loss resulted in a handicap in the newer digital television industry. Similarly, Motorola divested itself of its semiconductor DRAM business at 256Kb level, and then was unable to enter the 1Mb market on its own. By recognizing its core competencies and understanding the time required to build them or regain them, a company can make better divestment decisions. Core Products Core competencies manifest themselves in core products that serve as a link between the competencies and end products. Core products enable value creation in the end products. Examples of firms and some of their core products include: • 3M - substrates, coatings, and adhesives • Black & Decker - small electric motors • Canon - laser printer subsystems • Matsushita - VCR subsystems, compressors • NEC - semiconductors • Honda - gasoline powered engines The core products are used to launch a variety of end products. For example, Honda uses its engines in automobiles, motorcycles, lawn mowers, and portable generators. Because
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