Core competency

A core competency is a specific factor that a business sees as being central to the way it, or its employees work. It fulfils three key criteria:

1. It provides consumer benefits
2. It is not easy for competitors to imitate
3. It can be leveraged widely to many products and markets.

A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers.^[1] It may also include product development or culture, such as employee dedication.

Core competencies are particular strengths relative to other organizations in the industry which provide the fundamental basis for the provision of added value. Core competencies are the collective learning in organizations, and involve how to coordinate diverse production skills and integrate multiple streams of technologies. It is communication, an involvement and a deep commitment to working across organizational boundaries. Few companies are likely to build world leadership in more than five or six fundamental competencies.

The value chain is a systematic approach to examining the development of competitive advantage. It was created by M. E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization. The 'margin' depicted in the diagram is the same as added value. The organization is split into 'primary activities' and 'support activities'.

See also

• Core business
• Dunning–Kruger effect, the tendency for incompetent people to grossly overestimate their skills

Notes

References

• Prahalad, C.K. and Hamel, G. (1990) The core competence of the corporation, Harvard Business Review. pp. 79–91.
• Galunic, D.C. and Rodan, S. (1998). Resource recombinations in the firm: knowledge structures and the potential for Schumpeterian innovation. Strategic Management Journal 19. p. 1193-1201.