Core Competency-Unique Skill-Set Of A Firm

What is Core Competency?

Core competency is the distinctive capabilities and strengths of an organisation, which aid in the growth of business and set it apart from its competitors.

While some define core competencies with respect to an organisations strengths, some associate it with individual competency of the employees and workers. Prahalad and Hamel define it as a “complex harmonization of individual technologies and production skills.”

 Core competency is largely an integrated collection of a company’s resources and capabilities that is essential to generate the desired quality of products and services. It is one of the fundamental assets of an organisation.

It helps the company to grow its business, seize new opportunities and deliver exceptional service to the customers. Core competency is a combination of the pooled knowledge and technical capabilities that helps a company to boost their business and thrive in the competitive market.

Identifying and building core competencies for business

Today’s competitive market gives the customers multiple options to choose from. So, why should they choose your brand over a pool of more lucrative options?

To determine the answer, it becomes essential for a company to identify the key features that your competitors will find hard to imitate. It typically refers to a set of core skills and features of the firm rather than its physical and financial assets. These features become vital to make a company stand out from the crowd.

A SWOT analysis can give you an insight into the organisation’s strengths and weaknesses and help you to focus on its core competencies.

Some of the common distinguishable features of core competency of a company are as follows:

• It is a set of unifying attributes of an organisation, pervasive in all the business strategies of a company.

• Core competencies are essential features that give a company competitive advantage and provide access to a variety of potential customers

• Core competency is unique to every company and is difficult to imitate.

You can ask yourself the following questions to identify the core competency of your company:

1. Does the trait provide a unique value proposition to the organisation ?

2. Is the trait useful only for a single business unit or covers all the products under the umbrella brand?

3. Is the trait useful only for the current business or will it be beneficial for new ones as well?

4. How hard will it be for the competitors to imitate this trait?

 Once you successfully identify the core competency of your organisation, it will provide you with new opportunities for innovation. Businesses can only flourish when they focus on their core competencies and figure out new avenues of growth.

Importance of core competencies for business

One of the most important aspects of core competency is that it gives a long-term competitive advantage. Identifying core competencies is a crucial step to make your business thrive and grow in this competitive market as it provides the guidelines and parameters for diversifying a business.

 It becomes essential for a manager to have a crystal clear understanding of the core competencies of the company. It will help him/her to design specific strategies and leverage them inside and outside the corporation and gain a completive edge. Core competency is like a glue that binds a business together and paves the way for business development.

Here’s how the core competencies help an organisation to achieve successful growth.

• Core competencies facilitate strategic development

The exploration of the core competencies stands as an utmost important factor for strategic development of a company. A company will not be able to achieve its desired growth if the strategies and techniques are not centred on its strengths.

Famous management specialists like Porter claimed in 1996 that an organisation can outperform their rivals only if it establishes its unique strengths within the consumers.

• Core competencies encourage innovation

Core competencies encourage a company to diversify, create effective and profitable strategies and in turn, reach its full potential. Once a marketer identifies his company’s key strengths, he/she will easily generate ideas that extend its business in leaps and bounds.

 These new ideas and innovations will also encourage the employees to improve the organisation’s profit and give it a competitive advantage.

• Core competencies aids recruitment and selection process of employees

The core competencies dictate the behaviours essential to achieve any business strategy successfully. Once you assess the core competencies, it will enable you to form a basic model of the employees you must recruit. The right kind of employee will enhance the company’s business manifold.

It will also help to determine the most effective behaviour required in the workplace and provide a basic pathway to maintain consistency in management practices.

Most importantly, the core competencies provide a basis for identifying various opportunity gaps. It gives you the scope of stretching the goals of your organisation beyond barriers.

What are the Examples of Core Competencies for Marketing?

Some of the companies which adopted the best methods to use their core competencies for marketing are Apple, Amazon and FedEx.

• Apple has been setting the standards for innovation for decades

The company constantly cultivates novelty and fosters new ideas. It has helped them to successfully launch groundbreaking products such as iPod, iTunes, iPhone and iPad. Apple makes it a point to seize the marketplace opportunities and simulate its growth by leveraging its system of employees, suppliers, customers, partners and global network.

• Amazon has simplified online purchase

“Our vision is to be earth's most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online”  - Amazon. Amazon’s core competencies lie in extensive distribution infrastructure, expertise in IT/Analytics, world class logistics capabilities and a deep commitment towards their customers. Their ability to dynamically apply and reconfigure their resource base has helped them to achieve higher growth and revenues.

• FedEx was the first company that pioneered automated customer service centre

FedEx has excelled in logistical management and constantly upgrades its core competencies to retain its position in the global customer base. One of its outstanding features includes SuperTracker handheld computers that provide real time package tracking for each shipment. They also use COSMOS (Customer Operations Service Master OnLine System) that helps a customer to monitor every phase of a delivery cycle.

This helps the customers to track the goods from source to delivery and gives FedEx an advantage over other brands in the market.

Advantages of developing a core competency

It becomes crucial to identify the defining strengths and characteristics of an organisation to come up with resourceful and strategic ideas for developing products and services.

 Here’s how core competencies help you to beat your competitor and reap its benefits:

• Core competencies help in bridging the gap between performance and opportunity

• It helps you to ascertain your company’s growth and stand as the leading marketer in the industry

• Core competency links the traditional business to future scope of development and thereby aids opportunity for success.

• It acts as a guideline for diversification and helps in the activation of the company

• Core competency is an indicator that the resources are used in the right places and in the right amount.

• It also helps in the development of core products.

The story behind the success of all renowned companies has one aspect in common. They have identified their core competencies and exploited it to the fullest to maximise business and profits.  Businesses can also develop their core competencies by identifying their strengths and investing in the capabilities valued by the customers.

How Do Core Competencies work?

To make the best use of a company’s core competencies, a marketer needs to ensure it satisfies three essential conditions.

• Firstly, it must provide potential access to a wide range of markets. This means, once a marketer successfully identifies and develops the company’s core competencies, it must be leveraged over and over again to deliver a wide variety of services and products.

• Secondly, the core competencies must be utilised and cultivated in a way that the end product/products contribute to the customer benefits.

Amazon serves as an excellent example that meets this condition. Amazon’s recent offering ‘Amazon Prime’ clearly shows how it has made the best use of its core competencies. The technological infrastructure and logistics work together seamlessly to deliver maximum consumer satisfaction by providing superfast and inexpensive shipping of products that are always in stock.

• Thirdly, as we have already discussed, it helps a company to retain its market position as the core competency features remain unique to each company. It is hard to imitate and gives the company a competitive edge.

Some of the fine examples of companies that have made best use of their core competencies are Sony, Apple, Google and Walmart. Sony excels in precision and miniature manufacturing.

Apple’s design and software are the best in the crowd. Google’s algorithms and Walmart’s supply chain management work the best as they constantly modify and enhance their core competencies.

How Do You Leverage Your Brand's Core Competency?

It is essential to protect your brand’s core competencies from the competitor brands if one aims to ensure the organisation survive trends and never go out of fashion. You need to keep in mind that the core competency that is effective today might not survive the shifting marketing pattern in the coming years. The core competencies of your company can never be static. It must cope with the market relevance and market value shifts by developing internal strategies.

So, keep brainstorming to evaluate whether your core competencies are up to the mark while constantly looking for ways to change and modify them and identify new ones.

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