Core competencies of an Organization

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Description: In the article published by C.K Prahalad and Gary Hamel, “The Core Competencies of the Corporation�, they first stressed upon the term core competencies. According to them, core competencies are the source of competitive advantage for any organization. Core competencies help in developing core products. These core products are not directly used by the end consumers but are a mean of building numbers of products for end consumers. For instance, motor is known to be a core product that develops different product for consumers. Business units of a company often tap into few core technologies to make core products. The flow of core competencies to end products is illustrated below:

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A firm can make a variety of different products by setting core competencies and matching them with the market needs. Without core competencies an organization is just doing an insipid business. It serves as glue for making a successful cohesive portfolio.

To identify a core competency an organization should see if it:   

has access to greater market is contributing to the end product is difficult for the competition to replicate

Core competency is developed by the integration and coordination of different departments in an organization. For instance, a firm may hire the best scientists, but this will not develop a core competency in technology. To achieve that there must be proper integration and effective coordination in all the departments. Core competencies creation is not always expensive. A firm may achieve it by filling vacant space of core competency, which can be achieved by mergers and alliances agreements with different businesses. This will help the organization to share the core competency with effective utilization and with very little or no cost.

A lot of misconception is there in the market about achieving core competency. According to Prahalad and Hamel, core competency is not spending more on R&D than your rival or distributing costs among business units or the vertical integration. They might help in attaining core competencies but these factors alone are nothing.

There has been a lot of stress on the implication of core competencies by the authors. Many managers are just concerned with developing end products and delivering it to the market rapidly without paying attention to the core competencies and distributing its knowledge in the departments. This way without the direction of seniors, the strategic units under-invests in core competencies causing the organizations to lose the market share in the long run.

Reference: http://www.researchomatic.com/Core-Competencies-Of-The-Corporation-22485.html

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