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The Core Competence model of Hamel and Prahalad is a corporate strategy model. This model starts the strategy process by thinking about the organization’s core strengths. It dismisses the portfolio perspective as a practical approach to corporate strategy. Competencies are the capabilities which are critical to a business achieving competitive advantage.

The starting point to analyze the core competencies is to recognize that the competition between businesses is very immense. It is as much a chase for competence mastery as it is for market power and position in market. The senior management cannot focus on all activities of business. The goal for management is to focus attention on competencies that really affect competitive advantage. The outside-in approach places the competition, the customer and the market at the starting point of the strategy process. The Core Competence model does the opposite; it states that in the long run, competitiveness derives from an ability to build a Core Competence at lower cost and more effectively than other competitors. A Core Competence can be any combination of inherent, integrated, specific and applied knowledge, attitudes and skills.

There are three tests for identifying a Core Competence

• It must provide potential access to large range of markets.
• It should make a significant contribution to the profits of the product as supposed by the customer.
• A CC should be difficult for competitors to make.

Core Competencies tend to be fixed in the ability to coordinate and integrate various groups in the organization. While a company may be able to hire a group of intelligent scientists in a technology but by doing so it does not automatically gain a Core Competence in that particular technology. It is the effective coordination among all the groups involved in bringing a product to market that result in a Core Competence.

Written by: Matt

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Tagged as business strategy, competencies, competitive advantage, core competence, Hamel, management, Prahalad + Categorized as Business, Economy articles, Ladership & Management