Core Competence
(Hamel Prahalad)

Knowledge Center

The Core Competence model of Hamel and Prahalad is a corporate strategy model that starts the strategy process by thinking about the core strengths of an organization.

Inside-out Corporate Strategy

The Outside-in approach (such as the Five Forces model from Porter) places the market, the competition, and the customer at the starting point of the strategy process. The Core Competence model does the opposite by stating that in the long run, competitiveness derives from an ability to build a Core Competence, at lower cost and more speedily than competitors. The Core Competence may result in unanticipated products. The real sources of advantage are to be found in management's ability to consolidate corporate-wide technologies and production skills into competencies, through which individual businesses can adapt quickly to changing circumstances. A Core Competence can be any combination of specific, inherent, integrated and applied knowledge, skills and attitudes.

In their article "The Core Competence of the Corporation" (1990), Prahalad and Gary Hamel dismiss the portfolio perspective as a viable approach to corporate strategy. In their view, the primacy of the Strategic Business Unit is now clearly an anachronism. Hamel and Prahalad argue that a corporation should be built around a core of shared competences. Compare: Horizontal Integration.

Business units must use and help to further develop the CC(s). The corporate center should not be just another layer of accounting, but must add value by articulating the strategic architecture that guides the process of competence building.
 

Three tests for identifying a Core Competence

1. Provides potential access to a wide variety of markets.
2. Makes a significant contribution to the benefits of the product as perceived by the customer.
3. A CC should be difficult for competitors to imitate.

Building a Core Competence

A Core Competence is built through a process of continuous improvement and enhancement (compare: Kaizen). It should constitute the focus for corporate strategy. At this level, the goal is to build world leadership in the design and development of a particular class of product functionality. Top management can not be just another layer of accounting, but must add value by articulating the strategic architecture that guides the process of competence building.
 

Once top management (with the help of Strategic Business Units managers) have identified an all-embracing Core Competence, it must ask businesses to identify the projects and the people that are closely connected with it. Corporate auditors should perform an audit of the location, number, and quality of the people related to the CC. CC carriers should be brought together frequently to share ideas.

Core rigidities?

Care must be taken not to let core competencies develop into core rigidities. A Corporate Competence is difficult to learn, but is difficult to unlearn as well. Companies that have spared no effort to achieve a competence, sometimes neglect new market circumstances or demands. They risk to be locked in by choices that were made in the past.

E-Article: C.K. Prahalad, Gary Hamel - The CC of the Corporation

Book: Michael Goold, Andrew Campbell - Corporate-Level Strategy

Book: C.K. Prahalad, Gary Hamel - Competing for the Future

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Best Practices Sign up The top-rated topics about Core Competence. Here you will find the most valuable ideas and practical suggestions. Why Protect Core Competence? Why should a firm ensure its core competence is hard to imitate? The whole market should be made aware about a firm's C (...) 34   0 comments CC as an Organisational Trait(s) Try to define your organisation's Core Competency and you find yourself with the same problem as trying to identify your (...) 26   3 comments Identifying a Core Competence How can a firm identify its CC? (...) 24   5 comments Core Competency versus Corporate Competency? Is there any difference between core competency and corporate competency? If yes, then please explain. (...) 17   3 comments Imitation of Core Competence How can a firm ensure that its core competence(s) are hard to imitate? (...) 16   6 comments The Virtual Company and Core Competences It's interesting to consider a Virtual Business when you are thinking about Core Competences: 1. The Virtual Company fo (...) 15   2 comments Utilizing a Core Competence Once an organization has defined its Core Competence, finding or creating new markets to leverage the CC becomes a cruci (...) 13   3 comments Financial Valuation of a Core Competence How can a firm determine the financial valuation of individual CCs? How can we measure the value of a core competence? (...) 9   3 comments

Expert Tips Sign up Advanced insights about Core Competence. Here you will find professional advices by experts. Developing Core Competencies Strategy In order to develop core competencies, a company should: - Isolate its key abilities and develop and improve them into (...) Uses (Advantages) of Core Competencies Strategy Core competencies are capturing the collective learning in an organization and can be used to: - Design and develop com (...) Customer Centricity: Success Factors for Customer Intimacy Value Disciplines, Customer Strategy, Customer Intimacy, Customer-oriented, CRM Customer / Consumer Centricity (CC) is a frequently used concept used by companies to achieve competitive advantages. It (...) A Corporate Theory: Long-term Handhold and Guidance in Turbulent Times? Inside-out Corporate Strategy, Corporate Visioning According to Professor Todd Zenger, companies should focus less on competitive advantage (this isn't what really interes (...) Qualities of Core Competences What is a Core Competence and What isn't? According to Gallon, Stillman and Coates, core competencies are 'aggregates of capabilities, where synergy is created th (...) The Key Role of the Strategy Competence in Creating Sustainable Competitive Advantage Business Strategy, Corporate Strategy, Competitive Advantage, Strategy Education Most organizational performance theories assume that there are certain “best practices”, or “best ways” that are needed (...) How to Change a Firm's Core Business? A 7-Step Process Chris Zook recommends 7 steps: 1. Define the core. 2. Assess the core's full potential and the durability of its key (...)

Information Sources Sign up Various sources of information regarding Core Competence. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies Core Competencies Javidan (1998) has made a great contribution to answering the question for the relationship / differences between resour (...) A Service-Dominant Logic on the Firm Service-Dominant Logic, Perspectives on Marketing Presentation about a service-dominant logic mindset in marketing, including the following sections: 1. Getting the logi (...) Core Competence Short explanation Short article explains core competencies. (...) Porter's Industrial Organization Versus Barney's Resource Based View Business Strategy, Value Chain Management This presentation compares Porter's competitive advantage thinking with Barney's Resource Based View, focusing on how co (...) Core Competence Diagram Inside-out Strategy Download and edit this 12manage PowerPoint graphic for limited personal, educational and business use. Republishing in (...) Perspective: Biography Prahalad (1941-2010) Developing a Broader Perspective towards the Ideas of Prahalad A short biography on C.K. Prahalad's career and ideas. (...) Core Competencies. What are They, Inventory and Test Discovering Core Competencies In this presentation, the concept of Core Competencies is explained, following the next points: - Importance of core co (...)

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