Core Competencies
Section 1
- How did Hamel and Prahalad (1990) define Core Competencies, and what is their
importance to ‘Rethinking the Corporation’? Use theory and examples to help support your answer.
Prahalad and Gary Hamel, who were business researchers, came together and wrote a very influential article on the nature of modern business. They introduced the idea of core competence and named it the most important way to succeed in international commerce. The two researchers defined core competencies as the combined learning in a business environment, especially in coordinating varied production knowledge and assimilate various streams of expertise. Core competency is the consolidation of resources and expertise, which are unique to make an organization stand out in the marketplace. Core competency comprises communication, participation, and a profound obligation to offer services beyond organizational limitations, e.g., refining cross-functional crews in a business set up to cater to restrictions and overcome them. In their research work, Hamel and Prahalad found out that organizational leaders will be identified by their capability to point out, nurture, and exploit the core competencies resulting in growth. Managers will be required to rethink the organizational idea.
The study looked at core competency as a particular factor that a business venture looks at how an organization works with its employees. This view achieves three critical criteria:
- It is difficult for competitors to reproduce.
A core competence has the characteristic of being “competitively unique”: In most organizations, most expertise is taken as a requirement for contribution and does not offer any noteworthy competitor differentiation. To be a core competency, it should be somewhat admirable to other competitors, and they should wish to have the same in their organization.
Example: Why Dell computers possess a robust standing in the personal computer market share?
- Core competence makes a product to be reused broadly applied to many products and markets.
The critical core competencies provide for the development of new products and services. E.g., why has Saga been renowned with the provision of strong leadership in providing commercial services and vacations to the elderly? It is due to a clear distinguishing product intention that only concentrates on a closely-defined customer group.
- It must benefit the end consumer and also improve product or service value to consumers.
Core competencies are the abilities and expertise that are unique to a business venture enabling it to provide an essential customer benefit. It is this benefit that makes consumers prefer one product over another. To point out core competencies in a specific market, asking questions such as “why is the client ready to pay more or less for a particular product or service as compared to another? What is it that the customer is paying for?
Example: What has made Tesco successful in taking market leadership for online grocery shopping? Due to planning and applying effective supply systems connecting present shops to the Tesco website.
A core competency can be exhibited in various forms, comprising technical/subject matter knowledge, a dependable process, or close associations with consumers and dealers. It may also constitute product expansion e.g., employee commitment, improved Human Resource Management (HRM), better market coverage, and constant product improvement.
According to Hamel and Prahalad, very few organizations are likely to achieve global leadership by implementing about five to six fundamental competencies. A core competency is generated from a detailed set of expertise or production methods that result in added value to the consumer enabling an organization to access a wide variety of markets.
In Hamel and Prahalad’s article (Prahalad & Hamel 1990), core products and services for end-users are generated from core competencies. The process of continuous improvement over a long time leads to the development of core competencies instead of a single colossal change. To be successful, therefore, in a competitive global market, the development of Core competencies is vital as compared to vertical integration.
Core competencies enable business in a rethinking corporation by allowing it to point to the business units at a particular end market and admonish them to be the global business leaders. To capture the global market, businesses must go beyond the business limits, invent and enter new markets as well as alter consumer patterns and create products that fit customers’ needs but have not been availed into the market. While this is not an easy task for any business, it calls for managers who will hinge and acquire competencies and manage them well. They must also take responsibility for the overall competitive decline.
Section 2
- Using the case study of the City of Vaasa which remains open to you in Moodle explain the importance of the Resource-Based View and how the various tools employed helped develop a strategy map
the case study of the City of Vaasa which poses a question, “How can we know what we think, until we see, what we do”? can be used to explain the Resource based view (RBV) as an approach to attaining competitive advantage in an organization. The study applies the sense-making practice, whereby thoughts do not direct the action, but actions direct reflection. The study explains that organizations have been using different approaches in developing strategies, which have always started from planning, from content to procedure, and from process to exercise.
When old-fashioned strategy study majored in procedures, resources, structures, and systems, on the other side, strategy-as-practice research emphases mainly on three perceptions of strategy work; practice, practitioners, and praxis (Whittington 2006). Thus the study emphasized the strategy-as-practice.
According to RBV, it is possible to external adventure opportunities using the available internal resources instead of obtaining new expertise for each unique occasion. In the RBV model, resources are the leading players in enabling organizations to attain increased business performance. Organizational resources can be categorized into tangible and intangible.
The RBV is an approach that, as a strategy to achieve a competitive advantage, organizations look inside to establish sources of competitive advantage instead of looking at a competitive environment external to an organization. In this process, an organization is looking at their actions “what they do” to “understand what they do,” which is the City of Vaasa case study.
Resource-based theory as the City of Vaasa case operates ob a process based on inside-out strategy. The strategy utilizes methods by which an organization collects resources (Das & Bing-Sheng 2000)
The Resource based view (RBV) studies and utilizes resources internal to an organization and makes use of resources and abilities in developing an organizational strategy to realize sustainable competitive advantages. Funds took to be the inputs enabling businesses to carry out activities. Resources and capabilities internal to an organization govern strategic choices that an organization makes in competing in the external environment. RBV dictates that not all the support of an organization
is vital.
The Resource-based theory or Resource-based view enables business in evaluating its resources and make a relationship with the business abilities calmly. Thus an organization can determine its profitability and assess the value factor linked with it (Colbert 2004). Using RBV, an organization can realize competitive advantage by utilizing available resources in an exclusive and cherished way as compared to their competitors.
The Resource-based theory creates an environment for an organization to access whether the resources are cherished to the expected level. In this process, the resource availability is also checked in an organization through this approach (Barney et al. 2001). The competitive advantages that are realized through the Resource are assessed so that an organization can recognize unique resources and those lacking in the organization’s competitors. Those resources that can’t be substitutable are also identified as they provide more benefits to a firm. A resource-based view is a vibrant concept helping an organization to work, ratify, and function under its internal and external possessions s to obtain a competitive advantage.
Kaplan and Norton developed the Balanced Scorecard (BSC) method, which is a performance management tool. More features have been added to strengthen the balanced score card by permitting “strategic mapping” to join “activity” with “result”. RBV as an organizational performance model that making use of resources and capabilities which are governed by controlled the organization acting as the sources of competitive advantage. Resources in RBV are classified as tangible or intangible assets used to conceive and implement their strategies.
Therefore, it follows that a competitive advantage can be shaped by intangible assets alone in the BSC approach. Additionally, the strategy map tries to establish a relationship between the cause-and-effect of performance movers and result measures. However, this relationship between performance drivers and results is only but a logical one instead of a causal one. The reason is that the mapping of performance drivers and results cannot entirely clarify the socially and operationally intricate nature of the value creation procedure.
References
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