What Is the relationship between core competencies and competitive advantage
|
Core competencies and competitive advantages are closely related to one another as they both help companies achieve greater market share, customer satisfaction, loyalty and greater profits. Core competencies generally lead to competitive advantages, although this may not always be the case. Core competencies and competitive advantages both help a company stand apart from its competition, but are not the same. The article offers a clear explanation on each term and marks their similarities and differences through examples. Show
What is Competitive Advantage? Competitive advantage occurs when a company is able to achieve a competitive edge with regards to is products, services, strategies, skills, etc. than its competitors. There are two types of competitive advantage; cost leadership and differentiation. A competitive advantage is something that will help the company stands out from its competitors. Competitive advantages can be achieved by gaining access to cheaper raw materials, through intellectual property, first mover position, convenience in location, etc. An example of a competitive advantage would be the edge that Google has above other search engines. Google is the best at optimizing searches and has pushed technology beyond what competitor’s thought was possible. A competitive advantage will aid a firm to differentiate its goods and services from competitive offerings. Having a competitive advantage can also contribute towards improving customer loyalty which can go a long way in times of financial difficulty. Building a strong brand name through creative advertising can aid in marketing a company’s competitive advantage. What is a Core Competency? Core competency refers to a specific set of skills and expertise that a company may have over its competitors. In order for a core competency to exist, 3 criteria must be met; those are market access, benefits consumers, unique and difficult to imitate. One of the most essential aspects of a core competency is that they help gain access to a range of markets and consumers. Core competencies also bring benefits to consumers in terms of lower cost and better quality products, and cannot be easily copied or imitated. Core competencies include things like, technological knowhow, skilled individuals, supply systems and processes, customer relationship management skills, etc. For example, Tesco has emerged as one of the largest retailers in the world because of their core competencies in effectively managing supplies through their innovative supply systems, customer focused selling strategies, personalized customer interface for online shopping, an efficient delivery mechanism, etc. Competitive Advantage vs Core Competency Even though these terms may sound quite similar to one another, competitive advantage and core competency are quite distinct. A core competency is a specific skill set or expertise that can lead to a competitive advantage. For example, a core competency in innovative supply systems can lead to increased efficiencies and lower costs; the lower cost being the competitive advantage. Volvo’s core competency lies in their ability to research and develop automobiles that offer the high protection and safety standards. The company’s competitive advantage lies in providing a differentiated product valued for its high safety standards that surpass its competitors. Summary: Difference Between Competitive Advantage and Core Competency • Core competencies and competitive advantages are closely related to one another as they both help companies achieve greater market share, customer satisfaction, loyalty, and greater profits. • Competitive advantage occurs when a company is able to achieve a competitive edge with regards to is products, services, strategies, skills, etc. than its competitors. • A core competency is a specific skill set or expertise that can lead to a competitive advantage. • In order for a core competency to exist, 3 criteria must be met; these are market access, benefits consumers, unique and difficult to imitate. Competitive advantage and core competency are inter-connected concepts that both focus on helping companies gain better footing in the market and increase their profits. It refers to a specific set of skills or knowledge that are unique to a company and which are not easy for rivals to reproduce. Table of Contents 1
When a company has achieved an edge over its rivals due to some factor that allows it to work more efficiently, produce products of superior quality, and drive up profits, it is said to have gained a competitive advantage. This can be done by placing focus on the pricing structure, quality control, branding, etc. Having a core competency usually, but not always, leads to the creation of a continuous competitive advantage for the company. Competitive Advantage vs Core CompetenceThe difference between Competitive Advantage and Core Competence is that competitive advantage refers to a strong point of a firm to perform better than its rivals. Core competence refers to particular knowledge, skills, or technology that the competitors cannot follow. Competitive advantage is useful for competitive strength against the competitors, whereas core competence is excellence in various businesses and products. Comparison TableParameter of ComparisonCompetitive AdvantageCore CompetenceDefinitionConditions that place a company in a favourable position with regard to its rivalsSpecific set of skills or knowledge unique to a companyScopeLimitedFar ReachingDurationShort term measureLong term measureMarketPlaces company over rivals in a particular marketAllows company to gain presence in a number of marketsWhat is a Competitive Advantage?There are many factors that can be rightly referred to as competitive advantages. Everything from greater profits, cheaper production through outsourcing labor, to brand prestige can fall under this definition. A company will have a competitive advantage when it finds itself in a position that makes it superior to its rivals in the market. Michael Porter, a professor at the Harvard Business School in his famous book ‘Competitive Advantage’ categorized it into two types – cost and differential. A cost advantage is achieved when a company is able to work efficiently and bring down production costs. This increases the profits of the company as they can sell the product at the same price as their competitors but spend less on producing it. Greater profit margins can also lead to a reduction in prices thereby building a larger customer base for the company as consumers will prefer cheaper options. Cost advantage can be achieved through techniques like finding favorable manufacturing locations and investment in R&D. Differential advantage kicks in when a company has something to offer that is unique or superior to the goods and services offered by rivals. The product must be such that consumers must be able to recognize its superiority and find it worth paying a premium price for it. Improving the durability of products, providing quality customer service, and enhanced safety levels are a few examples of how a differential advantage can be achieved. Besides this categorization, Porter also defined three generic strategies by which companies can achieve a competitive advantage.
Then a cost or differentiation strategy tailored towards that market can be adopted. Companies are advised to calculate which strategy works best for them by conducting a SWOT as well as a Five Forces Analysis and comparing the results of the two. The drawback of competitive advantage is that the factors to facilitate that advantage can easily be adopted by other companies as well so it is difficult to sustain. What is Core Competency?In an article in the Harvard Business Review of 1990, the concept of core competence was introduced by professors Gary Hamel & C.K. Prahalad who defined it as ‘a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace’. In essence, core competence refers to a particular set of skills or strategies that set a company apart from its rivals. According to Hamel and Prahalad, there are three characteristics that can be used to identify a core competence. Firstly the company must be able to provide potential access to a wide variety of markets. The skills and technologies developed by the company must be such that the company is able to diversify its products according to the needs and changes in the market. Secondly, the company should make a significant contribution to the perceived customer benefits of the end product. At all times, the needs of the customer and the necessity of making the product visibly unique and superior to them should be kept in mind. And thirdly, it must be difficult for competitors to imitate. Uniqueness is a fundamental necessity to achieve core competence because if the company’s product can be reproduced with ease, they will continue to lose customers to their rivals. By isolating the strengths of the company and investing in their development, the company can build the necessary skills to make them unique. Experts even argue that a company should outsource all non-core work in order to focus more thoroughly on core competencies. It is essential to keep working on them in order to leave no space for competition. Companies can create a sustained, continuous competitive advantage by figuring out what their competencies are and using them to create increased value in the eyes of consumers. All strategies must be decided after taking into account these strengths in order to make the work of the company more structured. Main Differences Between Competitive Advantage and Core Competence
References
Search for "Ask Any Difference" on Google. Rate this post! [Total: 0] One request? I’ve put so much effort writing this blog post to provide value to you. It’ll be very helpful for me, if you consider sharing it on social media or with your friends/family. SHARING IS ♥️ Chara Yadav Chara Yadav has extensive knowledge of Banking, Finance and Business related topics. She also writes and edits for various other businesses across many subjects, including small business and marketing. She holds MBA in Finance and has over a decade of experience crafting blog posts, articles, white papers, and more for clients across many industries. What is the difference between core competency and competitive advantage?Competitive advantage is a particular feature or aspect of a company that makes it stand out from the rest of the companies in the market. Core competence, on the other hand, is a combination of skills and strengths possessed by the company that offers it a competitive advantage in the market.
What is the relationship between core competencies and organization values?Core competencies are a specific type of competency. They identify the key values and strengths shared by everyone in the organization, regardless of the job they perform. Values identify the beliefs or ideals shared by everyone in the organization.
|
