The Core Competence of the Corporation

28 01 2010

Core Competencies are like the roots of a tree. The strength of a tree is found in its roots, much like a company's strengths are found in their core competencies.

This article, by C.K. Prahalad and Gary Hamel, explains that strategy is directly tied to the core competencies that a corporation possesses. Being able to “invent new markets, quickly enter emerging markets, and dramatically shift patterns of customer choice in established markets” (80) are all key characteristics of successful companies.

However, this “most powerful way to prevent in global competition is still invisible to many companies” (79).

How do we identify Core Competencies?

  • “Core competencies provide potential access to a wide variety of markets” (83).
  • They “make a significant contribution to the perceived customer benefits of the end product” (84).
  • Core competencies “should be difficult for competitors to imitate” (84).

Core competencies include the whole company working together to effectively coordinate their skills together. This article describes the corporation as a large tree, with the trunk as the core product, the small branches as business units, and the leaves as the final end products. The roots give strength, stability, and nourishment to the company. The roots symbolize the core competencies of the company. They may not be visible at first glance, but without a strong, healthy root system, the tree can not survive. This is similar to a company, it can not survive or be effective without its core competencies.

Competitive Advantage is also a key point of core competency.

What makes a Core Competency?

  • “Core competence is communication, involvement, and a deep commitment to working across organizational boundaries” (82).
  • “Core competence does not diminish with use. Competencies are enhanced as they are applied and shared” (82).

Remember, a Core Competency is NOT:

  • Spending more money on research and development than competitors.
  • Sharing costs with another SBU (Strategic Business Unit)
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