Learn what Core Competence is and what are the advantages of defining the core competencies of your business – WAU
Core competences are attributes that distinguish one company from any other, allowing to make it clearer to the company itself and its consumers what the business’s differentials are. It is the ideal strategy to improve brand awareness and retain more customers.
In today’s market, just presenting a company’s products and services is no longer enough. It is necessary to show what is the biggest differential that it has and what it can offer its customers the best. Core competence is ideal for this.
With the volume of information and the need to attract the attention of the public, showing how the company differs from its competitors and how it can help the persona to solve his problem are the keys to winning and retaining customers, increasing sales and brand perception.
The concept of core competence can be applied to companies of any size, time and market niche, despite having started to be used in large companies, to define management and business growth strategies.
Learn more about core competence and how it can be applied to your company, knowing the following points:
Interested? Keep reading!
What are core competencies
Core competencies, in short, are the attributes that distinguish one company from any other. It’s what she does best!
Originally, the definition was a little more specific, as it was a concept created exclusively for large companies. But in a short time, they realized that it could also be applied in smaller companies, changing some details.
To better explain how this happened, let us tell you a brief history of how the concept of core competence came about.
The term first appeared in the May issue of the Harvard Business Review in 1990, in an article called “The Core Competence of the Corporation”, whose authors are C.K. Prahalad and Gary Hamel.
According to the article, “the most powerful way to stand out in the global dispute between companies was invisible to most companies”. Core competencies were based on 3 points:
- be a benefit to the consumer;
- not be easy to imitate by other companies;
- it should be adaptable to any product and market.
Small and medium-sized companies, which had regional or maximum national reach, did not find in core competence the solution to differentiate themselves and conquer the Market Share they desired, as the concept was very global, aimed at multinationals.
Over time, with the changes designed to be able to adapt to these smaller companies, some concepts have been changed, but continue to focus on the main thing: finding a competitive advantage that makes a difference.
Currently, core competencies can be conceptualized as skills or attributes that have been developed by a company and that give it a competitive advantage over its competitors, in addition to assisting long-term growth.
What are the advantages of having core competencies defined
Core competence, for being a skill in which the company manages to deliver the greatest value to its customers, is as if it were the flagship of the company, that is, for what it is most remembered as a brand.
Have core competencies defined then brings a series of advantages for those who work hard. The first is to know where to focus to create and develop new products and how they will be created and launched.
In addition, it is possible to know where to focus on the production of products and services that are already produced, knowing where to invest to improve processes and where to outsource to ensure quality without losing focus on the special skills that the company has.
Another advantage is to direct the strategy regarding the issue between cost and quality, to build the company’s competitive advantage.
And specifically for large or multinational companies, understanding what the core competencies are has the advantage of knowing how to enter markets that are advantageous for the business, such as new markets or places with a high chance of rapid growth.
Knowing how to enter a market is more important than the speed with which you enterbecause a fast-rising strategy in one location, if poorly planned, can be a failure for the company.
Meet 5 companies that have consolidated core competencies
To exemplify the benefits that core competencies can bring to a company, we will show some successful cases.
Apple has its core competencies very well defined and is able to position itself in the market very clearly. Look!
Apple knows how to bring innovations to the market, revolutionizing what people consume and how they consume, creating unique products that are different from all other competitors.
The brand knows how to win over its customers, making them not only loyal consumers, but defenders of Apple and its products. There is also the frenzy caused by each new product launch, which we can see by the queues that are formed when products arrive at stores.
The loyalty to the brand is the result of an intense work in the company’s marketing sector, which is totally focused on the customer, with the objective of creating products that meet the needs of consumers in an innovative and intuitive way. In addition, the products interact with each other, reinforcing the power of the brand.
Walmart has its core competencies recognized wherever it operates around the world, which are as follows.
Massive purchasing power
Walmart wants to offer low prices every day, all the time. In order to obtain attractive prices, the solution is to use its purchasing power (which is gigantic, by the way) to negotiate attractive values for the company with suppliers, also promoting the reduction of the costs of acquiring the stock when possible.
Supply chain management
Supply chain management is also one of the competitive advantages of Walmart, which has networks of distribution centers and is constantly improving its operations processes such as purchasing, distribution and integration of these centers, to guarantee inventory in stores extremely efficiently and with low cost.
The North American shopping club, which has not yet arrived in London, has stores spread across 9 countries in North America, Europe and Asia. See your competitive advantages!
Costco is able to serve the customer in a way that its competitors cannot, with free shipping, fast delivery and an almost insane exchange and return policy.
Because it is large, almost similarly to Walmart, Costco is able to negotiate good prices and pass them on to its consumers, making it even become a supplier of products for small businesses, when wholesale sales are made.
Employee appreciation policy
The brand is internationally known for dealing with its employees, offering not only decent wages and compatible with the market, but also providing some extra benefits.
In other words, the search to obtain low prices on its products does not involve reducing the salaries of its employees. This investment brings good results through the company’s people management sector, as the turnover is very low.
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Netflix started its business by selling DVD’s over the internet. Despite appearing to have changed completely, core competence has remained intact and has even played an important role in the transformation.
Whether selling DVD’s by email or being a streaming platform, the company is focused on delivering visual content to its customers ’homes with the greatest convenience that can exist. Can you see how core competence interfered with the product change?
The giant 3M also makes decisions about the management of its business based on the company’s core competence.
3M manages to connect different product lines in a way that no other company can, by totally innovative means. The result of this is the association between cutting-edge technology and the manufacture of production, regardless of the market and the type of product. In other words, they are all worked in the same innovative and integrated way.
How to define a company’s core competencies
Core competencies can be more than one, as we saw in the examples in the previous topic. Because it is a competitive advantage, small businesses may well think that the core competence of their business may be the owner or the team.
And this is not true, because core competencies must first of all be a competitive strategy, a competence specific, which may even be the company’s intellectual capital, but never a person in itself.
Other possibilities are equipment and processes, but, in most cases, it is some specific skill in which the company has a superior performance.
To define what the core competencies are, it is first necessary to take into account their characteristics, which are the fact that they need to be centered on customers, that is, on the benefits offered to those who buy products or services from the company.
Besides that, it needs to be something that your competitors need a lot of time or effort to achieve, while the company in question already does it relatively naturally.
You need to do a sincere analysis of what your company delivers. We saw in the example of Netflix that a good analysis can lead the company to the path of success, regardless of how it started.
Many companies believe that they have a certain core competence and then realize that it is something entirely different. This can happen if the market is very focused on competitors, forgetting the consumer.
Benchmarking to know what direct competitors have a hard time doing and how your business is doing is part of what is needed to raise your company’s core competencies, but it shouldn’t be the only way.
Check what your customers praise the most in your company and brainstorming possible competitive advantages are other ways of doing a survey to identify your company’s real core competence. Using only one of the techniques can lead to errors.
What is the relationship between core competencies and organizational culture
The defined core competencies are not a guarantee of success for your business, as it is essential to maintain and improve them, through processes and training. They are not static, needing to be worked on constantly and must be inserted in the organizational culture of the company, so that they can then be experienced in practice by employees.
To better understand how these two concepts can work together, we have separated this article that better explains the organizational culture of companies.