Core competencies are a firm's unique skills and abilities that distinguish it in the marketplace. They fulfill three criteria: provide access to markets, contribute significantly to customer benefits, and are difficult for competitors to imitate. The document discusses how core competencies facilitate strategy, innovation, and competitive advantage. It provides examples of companies like Apple, 3M, and Starbucks that have differentiated themselves through core competencies. The core competence model outlines how resources, capabilities, competitive advantage, and strategy are related. Management must identify and build upon a company's core competencies to develop successful long-term strategies.

1. Core Competencies

2. What is Core Competencies??
 A core competency is a concept in management
theory and can be defined as "a harmonized
combination of multiple resources and skills that
distinguish a firm in the marketplace".
 Core competencies fulfill three criteria:
 Provides potential access to a wide variety of markets.
 Should make a significant contribution to the perceived
customer benefits of the end product.
 Difficult to imitate by competitors.

3. Facilitates strategy development
Long term competitive advantage
Outsourcing non-core activities
Encourages innovation
An attribute valued by market
Need for Core Competencies

4. Examples
APPLE- Rich design and user experience
3M- Competencies in substrates, coatings, and
adhesives
CANON- Differentiated itself from Xerox
DOMINOS- Integrating multi-channel systems
STARBUCKS- Localized customer experience

5. The Core Competence Model

6. The Core Competence Model comprises four core
competences:
1. Resources-These are the sources for the development and
acquisition of skills and technologies.
2. Capabilities-The various possibilities to build core
competences.
3. Competitive advantage-The challenge to acquire and
develop the largest possible market share of core products.
4. Strategy-The strategy to develop the largest possible
market share of finished products.

8. ( as the image is self explanatory we will tell the people
to explain each quadrant)

9. The Core Competence of the
Corporation

10. Outline of the Article
The article emphasizes the importance of core
competence of a corporation and asks management to
develop their organization based on core competence
 Rethinking the Corporation
 The Roots of Competitive Advantage
 How Not to Think of Competence
 Identifying Core Competencies – And Losing Them
 From Core Competencies to Core Products
 The Tyranny of the SBU
 Developing Strategic Architecture
 Redeploying to Exploit Competencies

11. Rethinking the Corporation
“The critical task for management is to create an
organization capable of infusing products with
irresistible functionality or better, creating products that
customers need but have not yet even imagined.”

12. GTE vs. NEC Example
GTE NEC
Industry
Position 1980
• Sales $9.98B, Net Cash Flow $1.73B
• Well positioned to become major player in
information technology industry
• Active in telecommunications
• Sales $3.8 B
• Comparable technological base and computer
business
• No experience in telecommunications
Management
Concepts
• No strategic intent or architecture Senior
Managers continued to function as
individual business units
• Strategic Focus to bridge gap between
telecommunications and office automation
• Focused on - Semiconductors
• “C&C” – Computing and Communications
Committee
Business Moves • Divested Sylvania TV and Telenet
• Joint Ventures for switching, transmission
and digital PABX Closed down
semiconductors
• Consolidated position in mainframe
computers
• Moved beyond switching and transmission to
include mobile phones, fax machines
Industry
Position 1988
• Sales $16.46B
• Telephone operating company with position
in defense and lighting
• Sales $21.89 B
• World leader in semiconductors and first-tier
in telecommunications

13. Roots of Competitive Advantage
 “The diversified corporation is a large tree.... The root
system that provides nourishment, sustenance, and
stability is the core competence.” Companies using
competencies experience rapid growth:
 Canon, Honda outpaced rivals
 Sony, Casio, Yamaha invented new devices
 Consolidating corporate-wide technologies and
resources into competencies is the key to success

14. Diversified corporation as a large tree
Trunk and Major Limbs = Core Products
Leaves, Flowers and Fruit = End Products
Root System = Core Competency
provides nourishment, sustenance and stability

15. The Root of Competitiveness

16. Core Competence
 Core competence is….
 the collective learning in the organization
 a bundle of skills integrated to make a company unique
 the organizational culture based on people, their skills and
knowledge make a company competitive
 the engine for new business development
 created from the coordination, integration and
harmonization of diverse skills and multiple streams of
technologies
 communication, involvement, and working across
organizational boundaries
 Unlike physical assets, competencies do not deteriorate as they
are applied and shared. They grow.

17. How Not to Think of Competence
 Companies consider themselves as bundles of product
making businesses (remember Marketing Myopia!) and
is focused on price/performance attributes of current
products
 Building core competencies is different from integrating
vertically….have no detailed plan on what, where, how to
build an organization
 Cultivating core competence does not mean outspending
rivals on R&D or getting businesses to become more
vertically integrated

18. Identifying Core Competencies–And
Losing Them
 At least three tests can be applied to identify core
competencies in a company. They are:
 core competencies provide potential access to a variety of
markets
 make a significant contribution to perceived customer
benefits of the end product
 should be difficult for competitors to imitate
 Core competency can be lost…
 through outsourcing (Honda vs. Chrysler)
 by giving up opportunities to establish competencies of
existing businesses (color television perceived as a mature
product)