Core Competencies

What are ‘Core Competencies’?

• A core competence is something unique that a business has, or can do, strategically well

Prahalad and Hamal developed the Concept of Core Competencies:

• They said ‘The key to competing in the future is building, deploying, protecting and defending core competencies..’

Core Competencies are:

• Collective learning within the business

• Ability to integrate skills and technologies

• Ability to deliver superior products and services

• Ways a business is differentiated to be competitive

Examples of Core Competencies:

• Ikea:

  • Innovative design capabilities

  • Unique organisational culture

• Apple:

  • An integrated ecosystem of software and devices

  • Design built around the user

• Dominos:

  • Integration of multi-channel systems

  • A profitable franchise model

• Starbucks:

  • Localised customer experience

  • Differentiated global brand

The 3 key conditions:

1. Does it provide consumer benefits?

2. Is it easy for competitors to imitate?

3. Can it be leveraged widely to many products and markets

Applied to Ikea:

1. Provides consumer benefits?

2. Not easy for competitors to imitate

3. Leveraged widely to many products and markets?

What Prahalad and Hamel suggested business should do:

• Focus on core competencies

• Outsourced non-core activities

Criticisms of the core competencies approach:

• Over-zealous outsourcing has damaged business competitiveness

• Difficult to identify genuinely unique core competencies

• Possible for a business to become complacent about its core competencies