Chapter 1 Introduction

1.1 Core competencies

Core competencies are which differentiate an organization from its rivalry and helps to create a competitive advantage for their organization in the marketplace. These are certain set of skill and abilities which organization used to give the customer great value, it can be a technology competency, or a service competency etc. Basically an organizational core competency helps the organization to create a product which show their flagship abilities which give a product which is unique, means it can’t be copied easily and which give the customer the value which they require at reasonable price is an organization's strategic strength. Honda's core competency for example is its engine and propulsion systems. strategic strength, for example, lies in its engine and propulsion systems. Sony and federal Express has a core competency in miniaturization and logistics customer service respectively.

 

These three tests that are to be fulfilled to call a competency a core competency.

• A core competency can create great product and services but these should be available to wide range of market not to a specific market place.
• It must provide substantial benefits to the customer.
• It should be unique in way that rivalry have hard time intimating the product or service, means organization should excel in that particular work.

Praha lad and Gary Hamel were who introduced the concept of Core Competence. They wrote that a core competency is "an area of specialized expertise that derives from the integration of technology, knowledge, resources and skills, which helps to make the product in less time and less money compare to the competition. They also gave example of Honda's expertise in engines, which indeed helps them to make many great product using these engines like automobile.

To sustain long term competitive advantage, organization should identify and develop its own core competencies. To recognize its own core competency company should be fully aware of its underlying skill sets, technology, experience, ability or process that make the company to provide unique set of services or products. Company should strategically use these core capabilities to gain a competitive advantage in the market. Also core competency are dynamic in nature they grow and develop with time and market circumstances. The company should recognize the need of customer and market scenario so to develop appropriate core competency which helps to grow the company and also provide the customer what they need. Leadership of the company should always continually monitor and reset the strategy according to changing market.

 

1.2 Outcomes of core competencies

• Skills in manufacturing a high quality product
• System to fill customer orders accurately and swiftly
• Fast development of new products
• Better after sale service capability
• Superior know how inn selecting good retail locations features
• Innovativeness in developing popular product features
• Merchandising and product display skills
• Expertise in an important technology
• Expertise in integrating multiple technologies to create whole families of new products

 

 

1.3 Resources, Capabilities & Core Competencies

Resources- Resources are the basis of a firm’s capabilities. Organizational capabilities are formed by bundling resources. In end core competencies are based upon the organizationn capabilities, core competencies are the basis of competitive advantages. Resources could be human, financial, technological, physical or organizational.

Resources are inputs of organization production process, abilities and skills of employees, finances, patents and talented managers. The more valuable, unique and firm specialized the resources are, perhaps more chances, the organization will have core competency. Resources should help the firm to build on the assets and remove the firm’s flaws

Resources are usually classified into two categories as follows.

Tangible resources- These are the inputs that can be seen and measured

• Financial Resources- The firm’s borrowing capacity

                                 -The firm’s ability to generate internal funds

• Organizational resources-The firm’s formal reporting structure and its formal planning, controlling, and coordinating systems
• Physical resources -Sophistication and location of firm’s plant and equipment

                                -Access to raw materials

• Technological Resources- Stock of technology, such as patents, trade-marks, copyrights and trade secrets

Intangible resources- Intangible resources include inputs that typically are rooted deeply in the organization history and have accrued over time.

• Human Resources

             -Knowledge

             -Trust

             -Managerial capabilities

             -Organizational routines

• Innovation Resources

-Ideas

-Scientific capabilities

-Capacity to innovate

• Reputational Resources

-Reputation with customers

-Brand name

-Perceptions of product quality, durability, and reliability

-Reputation with suppliers

-For efficient, effective, supportive, and mutually beneficial interactions and relationships

Capabilities

Capabilities exist when resources are purposely integrated to achieve a set of tasks or specific task . Capabilities often evolve and develop over a period of  time . Critical to the development of competitive advantages, capabilities are often centered upon carrying, developing, and exchanging info and knowledge using the organization’s human capital

Organizational capabilities are generally an outcome of organizational processes, system and control mechanisms. These have intangible nature. It might be that an organization has exclusive and valuable resources, but if it lacks the capability to fully utilize these resources effectively and productively, then the organization cannot form a core competency. The organizational strategies can create or develop new resources and capabilities or it might work on making the existing resources and capabilities stronger, hence building the core competencies of the organization                                                                                   

Example: Client-particular capabilities often develop from constant interactions with clients and the learning about their needs

Knowledge is gained through observation, experience and inference and knowledge is an intangible resource. Organizations must also be able to use the knowledge that they have and share it among their business units and various departments.The company’s challenge is to make an environment that allows workers to integrate their individual knowledge with each other in the organization so that, collectively, the organization has signifiant knowledge

 

Resources and capabilities are the base upon which a firm make and execute value-adding strategy so that a firm can earn reasonable returns and attain strategic competitiveness.

  

1.4 Building core competencies

If you are ready to describe core competencies or improve the existing ones, then we have to start with a clean slate. Developing core competencies are not an easy task,they take time .But this time pay its worth as not only it provide you an competitive advantage but also help you identify  what to invest in and outsource,service,development of new products, and helps to move to larger marketspace.

So how do you get started?

1. Begin with your Mission and Vision Statements

To begin with, organization should be crystal clear about his goal/mission and vision for the organization, as clear perspective results in strong competencies

1. Understand your Business

It appears simple and insignificant, but do you really understand what your company does, how it does it and who does what? Top authorities can use numerous tools to complete this step. Inputs from staff about the organization speciality can be taken through questionnaire. A complete analysis of all roles to better understand what everyone does is required. Whatever it takes to understand the organization helps.

1. Draft Your Core Competencies
   Drawing, brainstorming, meeting’s, survey etc. should be done to draft the competency in an effective way. Competency-based software can also help with this process. The methods are endless and some will be more suitable to your association than others. 

If needed, do web research, compare yourself against your rivals, interact with your clients, customer and refer your distributors and partners.  Sometimes it is tough to see your own core competencies, except through other peoples’ perceptive.

As this is crucial step therefore right set of people are required around the table. After you have identified the core organizational competencies it then becomes possible to identify the core competencies of the employee that will drive your firm down the road to achievement. 

 

 

1. Validate your Core Competencies

Competencies should be built keeping in mind the employee perspective, customer and partners. So it should be finalized after keeping these things in mind.

1. Preach the Core Competencies

It will be of no use if core competencies are collecting dust over it in the corner, means after creating the awareness which is required is not kept. Example: a company has core competency of safety; they start there every meeting with safety tips so that core competency is always alive in the organization.

1. Implement the Core Competencies
   Putting a lot of effort here is critical to ensure that your competencies sustain and provide organization with some value. To actually make a difference in the organization, the core competences must be practised into regular practises.

Set measurable objectives for your core competency implementation and report back on your progress to everyone in your organization. More the employee participates into it more the output will be fruitful.

Developing a core competency require time, effort and investment, but to implement it in a way that have effect on the business and is sustainable is big task

 

Four Criteria of Sustainable Competitive Advantage

• Capabilities that are valuable.
• Rare
• Costly to imitate.
• Non substitutable.

 

 

 

 

 

 

Chapter 2 Literature Review

2.1 Literature review

Prahlad and Hamel (1990) defined core competencies as collective learning in a organization, especially the integration of multiple streams of technologies and synchronize wide range of production skills. ‘In the short run, a firm’s competitiveness originates from the price or performance attributes of products whereas in long run, it originates from the ability to develop more quickly and at a lower expenditure than rivals’. Prahlad and Hamel (1994), described ‘uniqueness, extendibility and customer value’ as the main conditions to state any capability a core competency. Using core competency, a company should be able to provide benefit to customers as well as expand into new markets. Also, competitors should find it hard to replicate.

Core competency thinking promotes approach to mobilize and focus on an organisation’s resources. Technology executives and

Impressum

Verlag: BookRix GmbH & Co. KG

Tag der Veröffentlichung: 05.06.2020
ISBN: 978-3-7487-4457-3

Alle Rechte vorbehalten