University of Cumbria: MNGT7905 Report on Core Competencies

This report critically examines the concept of core competencies within the framework of strategic management. It begins by defining core competencies as a combination of tangible and intangible resources that differentiate a firm in the market, providing a competitive advantage and access to new markets. The report traces the evolution of the concept, highlighting its origins and its increasing significance in today's competitive business environment, emphasizing the importance of continuous improvement and adaptation. It then explores how core competencies align with other strategic management concepts, such as generic strategies and the blue ocean strategy, demonstrating their role in developing competitive advantages. The report analyzes the ways in which core competencies contribute to business success by fostering product innovation, customer satisfaction, and long-term profitability, using examples such as Apple Inc. to illustrate practical applications. The report includes a detailed discussion and analysis of the concept. This report is a comprehensive analysis of core competencies in the field of strategic management.

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PART A
Introduction
Core competency is one of a concept that is used in the strategic management theory. The
concept was introduced by C.K. Prahalad and Gary Hame. Core competency can be defined as a
combination of various tangible and intangible resources required to differentiate a firm offering
common goods and services in the market. Henceforth core competency is the competitive
advantage of the business organization. As mentioned by Adomßent and Hoffmann (2013), it
helps to provide potential access of various markets and makes significant contribution to the
benefits of the customers. The core competencies of a business organization make it dissuades
the competitors to imitate the products and services offered by the company (Chouhan and
Srivastava 2014). The core competencies might include the fine optics of a camera, precision
mechanics, and other elements unique to the products and services offered by the business
organziation. It can be explained as that particular skill or technique of a particular business
organization which enables the organization to deliver additional values to the customers. The
core competency of the business organization also provides additional access to new makets. It
has been illustrated by C.K. Prahala and Gary Hamel that core competencies might positively
impact the business organziation and its operations (cK Prahalad 1990). This can be used further
to develop variety of products for the end users. Therefore, understanding the concept of core
competences can be beneficial for the companies operating in the highly competitive business
environment. This is used by the firms to raise the values of the stakeholders and the customers.
The purpose of this report is to critically examine the concept of core competencies and define
the concept. It provides arguments for and against it concerning its adaptation. Further, it

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explains the concept and the ways in which it fits in the present scenario and its relevancy in
meeting the business goals and challenges. Lastly, it sums up the main points and concludes the
report.
Discussion and analysis
Definition and concept of core competencies
The core competencies can be defined as a combination of various resources and skills of
the business organization to differentiate itself in the marketplace. As mentioned in an article
titled: the core competence of the corporation” by C.K Prahala and Gary Hamel, core
competencies are developed by continuous improvement during a period of time rather than
introducing a huge change cK Prahalad (1990). In the emerging global market, it is highly
essential for the business organization to build core competencies. For example, NEC introduced
its portfolio of core competences which enabled the company to dominate the
telecommunications and electronics market. Business organizations can use core competencies to
gain success at contrivance of core products. It has been stated by David and David (2019), that
the overall competitiveness of the business organization is based on the ability to develop and
enhance its core competencies. It involves the ability of the organization to develop the core
products, the new business, and the core competences. It is therefore, an outcome of business
strategies which can be enforced by the highly level management to utilize the skills and talents
to its full capacity. As defined by C.K. Prahalad and Gary Hamel (1990), core competencies are
known as the “collective learning across the corporations” (cK Prahalad 1990). C.K. Prahalad
and Gary Hamel (1990), illustrates the ways in which the top management or the senior

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executives of the business organization can develop foresight which enables it to adapt to the
necessary changes and find out ways to effectively utilize the resources in the organization. As
mentioned by ENGİNOĞLU and Arikan (2016), there must be a point of view based on which
the core competencies of the business organization can be build. It has been stated by Foss and
Knudsen (2013), that there must be a particular point of view concerning the future opportunities
and building ways to exploit them. This can enable the business organization to become future
industry leader. According to Goetsch and Davis (2014), in order to be competitive in the
market, the business organization requires both tangible and intangible resources such as core
competences and strategies. It is essential for the business organization to manage its
competencies in corresponding to the changes in the industry in the future. For example,
Microsoft Corporation’s expertise in IT related innovations and improvements such that it is
difficult for the competitors in the same industry to imitate or compete with the core
competencies. However, it has been argued by Gökkay and Özbağ (2015), that most business
executives or the top management do not develop a corporate view of the future in the race to
achieve cost reduction, enhance quality and improve productivity as it requires high level of
commitment and high intellectual energy. As explained by Prahalad and Hamel (1990), the core
competencies are the engines for the development o core products and services. They are
considered as the roots on which the overall business organization grows like the tree whose
products are the fruits of the tree. It is believed by Hsu et al. (2014) that the core competencies
contribute to the competitiveness of wide range of products. Therefore, it can be said that the
core competencies of the organization enables it to stand out among the crowded market and the
competitors. It ensures maximum value to the consumers. As stated by Kabue and Kilika (2016),
it sparks new strategies and anticipates customer satisfaction. It ensures future growth and

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profitability of the business organization. For example, Apple Inc has gained its reputation for
highly innovative product design and styling. The unique style and product designing is the core
competency of business organization. This has gained the company recognition, reputation, and
loyal customers on a global level (Kashirin et al. 2016).
Evolution of core competencies
Core competency is a comparatively new management theory which has been originated
in Harvard Business Review article 1990 by Prahalad and Hamel titled, “The Core Competence
of the Corporation” (cK Prahalad 1990). There are mainly three activities in order to have a core
competency that is it must be superior and beneficial for the consumers, it must be difficult for a
competitor to imitate, and it must be rare. According to Kim, Lee and Cho (2016), different
intangible resources such as brand equity, patents, talent pool and other assets of the business
organization makes significant contributions to the core competencies of the business
organization. The core competencies are mainly based on the industry in which the company
operates. For example, McDonald relies on standardization as one of its core competency. It
services nearly nine million pounds of French fries per day. Apple Inc. focuses on its unique
style; the style of the product is there core competency. As stated by Kulju et al. (2016), they
focus on product unique product designing and their interfaces provide them a competitive edge
over their competitors. These areas distinguish themselves for their competitors and ensure
stability and leadership position in the market. The service sector business might focus on
excellence in certain specializations. However, it has been argued by Ljungquist (2013), that core
competencies must not be equated with particular skill or discrete technology. Skills are
considered as the pre requisite for being an industry player; however this is not necessarily a core
competency of the business organization. According to Mårtensson and Westerberg (2016), the

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core competence is not a physical asset. For example, distribution channel or patents might not
necessarily be considered as core competency, however, the ability of the business organization
to effectively manage the assets might be considered as their core competency. As mentioned by
Özbağ (2013), the core competencies can help the business organization to strengthen its
business organization. Prahalad and Hamel implemented the examples of ‘slow growing and
now-forgotten mega corporations’ which failed to recognize their strengths. Comparing them
with the top performers of 1980s such as Canon, Honda, and NEC, who had better understanding
of their strengths and this, enabled them to gain success and position themselves in the market
(Rothaermel 2017). The above mentioned companies mainly focused on their strengths and
building core competencies. They work continually to build and reinforce them. The used their
strengths and made their products more advanced as compared to the competitors. They focused
on their strengths and the areas in which they excelled, this enabled them to gain a leadership
position in 1980s as stated by Ten Cate (2013). According to Kim, Lee and Cho (2016), with the
evolution of time, core competencies have become one of the most critical resources in today’s
business organization and business management. As per the opinion of Ljungquist (2013), it
strategically positions itself to deliver sustainable value. In today’s business environment, core
competence has become a critical issue due to the increase in the level of competition. The
concept can be traced back to the works by Prahalad and Hamel (1990), who considered core
competency as the ability to learn collectively and coordinate the skills and talents to deliver
better value to the target customers. Various researchers have studies the issues of modeling core
competencies in several different lines. As mentioned by Mårtensson and Westerberg (2016),
management of competencies is a strategic issue for the business organization. Additionally, it
was claimed by Özbağ (2013), that over fifty years of paradigms of firms, the research and

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development activities have shifted. It has been identified by Kulju et al. (2016), that there are
four major eras with varied characteristics. In the era of 1960s, the business organizations tried to
make technology driven moves without considering the consumers or the markets. In the era of
1970s, the business organizations mainly focused on market dynamics, where only few projects
were concentrated (Kulju et al. 2016). In the era of 1980s, there were iterations between the
research and development and the market. This was mainly focused during that era. In the era of
1990s, the organizations mainly focused on customers and competition with the
competitors(Kulju et al. 2016). According to Kabue and Kilika (2016), in today’s business
scenario, companies also focus on contemporary management life, competence based
management styles, and knowledge based competence. These areas have become the main norms
of the people. It has been assumed that the strategic resources include strategic relationship with
the customers, competitors, and suppliers. As suggested by Gökkay and Özbağ (2015), the
business organizations must analyze the resources of the organization and determine their
competencies and core competencies. This has become vital in today’s business environment.
Ways in which core competency fits with the other concepts of strategic management
As mentioned earlier, core competencies are vital for success and sustainability of the
business organization. It enables the business organization to attain a competitive edge in the
highly competitive business environment. According to Hsu et al. (2014), the core competencies
are vital in strategic development. It facilitates strategy development. The CSR initiatives of the
business organization can be consistent with the core competencies of the business organization
as stated by Kabue and Kilika (2016). The generic strategies of the business organization such as
the cost leadership strategies, differentiation strategy and cost focus also comprehends its

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competitive advantage. According to Gökkay and Özbağ (2015), the generic strategies of the
business organization are also considered as the ways of gaining competitive advantage. It helps
in developing the competitive edge which enables it to compete with the prevailing competitors
in the market. The business organizations might increase the profits by reducing costs or
increasing its market share. According to Kabue and Kilika (2016), the differentiation strategy of
the business organization also helps it to gain competitive advantage and it can be a core
competency of the firm. The core competency of the business organization can also comprehend
the blue ocean strategy. It is also a simultaneous pursuit of differentiation. As mentioned by
Kashirin et al. (2016), the low cost strategy creates demand for the products and services offered
by the business organization and open a new market space. The industry structure and the market
boundaries can be reconstructed by the actions taken by the organizations in the market.
Therefore, the concept of blue ocean strategy fits in with the core competence concept. They can
contribute towards reducing costs and increasing differentiation (Ljungquist 2013). The core
competency of the business organization can be a competitive advantage to the business
organization. As mentioned by Zangiski et al. (2013), setting up core competency involves
proper analysis of the internal and external business environment. It involves environment
scanning and hence it fits in with the concepts of environmental scanning. It also supports
strategy making and implementing competitive strategy and functional strategy. Therefore, it can
be said that the concepts of core competency fits in with the other concepts of strategic
management
Relevance of core competencies in today’s business challenges

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The core competencies are significant for the business organizations in today’s highly
competitive business environment. It must coordinate with the diverse production skills and
amalgamate various technologies. The business organizations must create more value and
enhance its output. They must identify their efforts and underpin their core competencies. As
stated by Kim, Lee and Cho (2016), the future business scenario is unpredictable; therefore it is
essential for the business organization to adapt them to different situation. It is vital for the
business organization to start developing critical competencies, prepare them for the future
business, and overcome the leadership challenges (Kulju et al. 2016). The external business
environment is highly competitive. As explained by David and David (2019), new firms enter the
market with new improvements and innovations; it reduces the profitability of the firm.
Therefore, it is crucial for the business organizations to identify its core competencies and focus
on those aspects. The uniqueness of the products or services, and its specialized resources will
have more competencies. As mentioned by Hsu et al. (2014), the core competencies of the
business organization help to differentiate its products and services from its rival companies.
Further, as mentioned by Bird (2019), the core competencies and reduced pricing strategies of
the business organization can help the business organization to gain competitive advantage. It
helps the business organization to create new portfolio of products or enter a new markets
without facing risks. The core competencies of the business organization provide long term
competitive advantage. Further as stated by Zangiski et al. (2013), it bridges the gap between
opportunity and performance of the business organization, thereby ensuring leadership position
in the market. Without core competencies of the business organization, it might not be able to
sustain in the highly competitive business environment. Therefore it holds significant importance
for the business organizations especially in today’s business environment. As mentioned earlier,

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the future business environment is highly uncertain. As stated by Mårtensson and Westerberg
(2016), the customer trends, market trends are changing. Therefore, without strategies and core
competencies, it is unlikely that the business organization will sustain in the market. It is
essential to overcome the challenges in operating business. There are improvements and
advancement in technologies in the business environment, the competitors might take advantage
of the developments and advancements and offer better products and services. As suggested by
Ljungquist (2013), it is vital for the business organization to analyze the areas of strengths and
integrate them into the technological developments. Moreover, in today’s business environment,
maintaining reputation in the industry and market has become a challenge due to the increase in
the level of competition (Rothaermel 2017). The customers can vice their dissatisfaction public
in no time. Therefore, it is a challenge for the organizations to continuously monitor and
maintain reputation in the market. This challenge can be overcome with the help of core
competencies. According to Özbağ (2013), the leading organizations such as Apple Inc and
Walmart, have maintained their reputation in the global market by focusing on its core
competencies. The managers and the leaders of the business organization must have a clear
understanding of the core competencies and implement ways to leverage them in the corporation.
It provides relevant information to the managers required to indentify the opportunities and take
necessary resources to take advantages of the opportunities (Ten Cate 2013). The business
organization can outperform the rivals and the competitors by identifying a core competency and
difference that can be preserved. They are able to differentiate their products with the
competitor’s products.

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Conclusion
Therefore, from the above research and analysis, it can be concluded that core
competency is combination of different skills or resources which is unique to the business
organization and it helps the company to differentiate it from the competitor’s products and
services. In today’s business environment, core competency is crucial. It leads to the
development of core products and services. It is important for the business organization
operating in a highly competitive business environment. It helps to increase the values of the
customers and the stakeholders of the business organization. The concept of core competency
relies on the ability of the business organization to identify its strengths and areas in which the
company excels. It is important for the business organization to manage and enhance its
competencies considering the changes occurring in the business environment. The leading
business organizations have successfully differentiated its products from the competitor’s profits
and ensured leadership position and stability in the market. They mainly focus on excellence.
The concept of core competence fits in with the other concepts of strategic management
including generic strategies, blue ocean strategies, and CSR concepts. It has been described in
details in the report. The concept mainly focuses on differentiating the products and services
from the competitor’s products and services. The concept of core competence is relevant in
today’s business environment and challenges. It has been identified that the present business
scenario is unpredictable. It is essential for the business organization to adapt to the changes. In
the changing business scenario, it is vital for the business organization to understand the
concepts of core competence and gain competitive advantage. Further, it also bridges the gap
between the opportunities and the performance of the business organization. In today’s changing

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business scenario, core competencies have become crucial for the success and sustainability of
the business organization.
PART B
Introduction
Core Competency is a concept which helps companies to overcome difficulties and
challenges and achieve competitive advantages in the market. The concept was proposed by
Gary Hamel and C.K. Prahalad as a management theory. Core Competencies can be defined as a
combination which is arrived at by making utilization of skills and resources. These skills and
resources help a company become distinguishable in a market place from its rivals and
companies posing competition in the market place. The capabilities are to be identified and
utilized to achieve strategic advantage for the business (Barney 2017). According to the modern
theories of management, it is very important to make usage of the competencies to be successful
and ahead of the competitive forces. Core competencies of individuals can help in the process of
accomplishing resolutions for the problems.
Core competencies help a business become exemplary among the competing forces and stand out
from the existing companies which pose challenges in the form of competition (Ljungquist
2007). It is a healthy sign of an existing company to establish its identity in the market by
making use of its skills and capabilities and continue to remain competitive in the market.
Woolworths faced some issues which were dealt with by making use of the core competencies of
the company. The fundamental objectives were accomplished by improving strategies.
Woolworths have analyzed to assess its capabilities and resources in order to develop a
functional system for future and work on their areas of weaknesses.
Company Overview