Concept of Core Competence
A core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. The capability to use the competencies exceedingly well turns them into core competencies. On the basis of resource and behavior an org develops certain strength and weakness which when combined lead to synergistic effects such effects manifest themselves in terms of organizational competencies Competency may be categorized as a core and non-core depending on the nature of capabilities.
Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required undertaking them. So, the goal is for management to focus attention on competencies that really affect competitive advantage. The diversified corporation is a large tree the trunks and major limbs are core product; the smaller branches are business units the leaves flowers and fruits are end products. The root system that provides nourishment, substance and stability is the core competence.
Core competency is a specific factor that a business sees as being central to the way it, or its employees, works. It fulfils three key criteria:
- It is not easy for competitors to imitate.
- It can be re-used widely for many products and markets.
- It must contribute to the end consumer's experienced benefits.
Core competencies are flexible and developing with time. They do not remain rigid and fixed. The organization can make maximum utilization of the given resources and relate them to new opportunities thrown by the environment. Resources and capabilities are the building blocks upon which an organization create and execute value-adding strategy so that an organization can earn reasonable returns and achieve strategic competitiveness Examples to exemplify concept of core competence are –
- Canon's core competence lies in optics, imaging and microprocessor or control
- Philips in optical media
- Honda in engine & power trains.
The Core competencies of these corporations have enabled them to operate in diverse market offering different products for instance canon has enter into and even dominated, diverse markets such as copiers, laser printers, camera and image scanners.
Organizational Capability
Organizational capability factor are the strategic strengths and weakness existing in different functional areas within the organization which are crucial importance to strategy formulation and implementation.
- Focuses on internal processes and systems for meeting customer needs
- Creates organization-specific competencies that provide competitive advantage since they are unique
- Ensures that employee skills and efforts are directed toward achieving organizational goals and strategies.
It enhances uniqueness because it is difficult to imitate
- Imitation requires changing the way people think, act, and interact.
- Social engineering of complex social processes such as culture, teamwork, leadership is neither well-understood nor easily replicated.
Organizational Capability enhances perceived customer value in three ways
- Responsiveness: the ability of the business to understand and meet customer needs more quickly than competitors
- Relationships: the ability of a business to develop enduring relationship between customer and employee
- Service quality: the ability of business to design, develop and deliver service that meets or exceeds customer expectations.
Four critical elements of capable organizations
- Shared mindset - Common understanding and goals of ends (strategies) and means (processes, work systems, activities) Congruence between customer and employee expectations
- Management practices - Policies, programs, operating procedures, and traditions that guide work. Transform individual behavior to create customer satisfaction and consistency in how customer is treated. Complement and integrate with one another to create common expectations, behaviours, and goals
- Capacity for change through understanding and managing organizational systems - Ability to reduce cycle time of all activities Four Principles:
- Symbioses
- Reflexiveness
- Alignment
- Self-renewal
- Leadership at all levels in the organization - Owns passionately a vision which is promoted both within and outside the organization Translates external conditions into vision for organization and how employee must act to attain vision. Empowers individuals at all levels within the organization to act within his or her domain.
Different types of capability factors of an organization
- Financial capability – Its factors relate to the availability usage and management of funds. Organization capacity and ability to implement its strategies.
- Important influencing factors –
- Factors related source of funds capital structure, financing pattern borrowing, capital & credit availability, reserves & surplus e.tc
- Factors related to usages of fund capital investment, fixed assets, current assets loan & advance e.tc
- Marketing capability – Its factors relate to the pricing, promotion and distribution of products and services and all the allied aspects that have a bearing on an organization. It is measured and compared through the process of organizational appraising.
- Important influencing factors –
- Products related factor - variety, differentiation, packaging e.tc
- Price related factors – pricing objective, policies change, and protection e.tc
- Promotion related factors – sales promotion, advertising, public relation and so on.
- Places related factors – distribution, transportation, marketing channels e.tc
- Integrative & systemic factors – Marketing mix, company image, marketing system and so on.
- Operation capability - It factors relates to the production of products or services the use of material resource and all allied aspects that have bearing on an org.
- Important influencing factors –
- Factor related to production system – location, layout, production design, and work system e.tc
- Factors related to the operation & control system – production planning, material supply, inventory cost & quality control so on.
- Factors related to the R&D system – product development, patent right, level of technology used e.tc
- Personnel capability – It factors relate to the existence and use of human resource and skill and all allied aspects that have a bearing on an org capacity.
- Important influencing factors
- Factors related to personnel system – manpower planning, selection, development compensation.e.tc
- Factors related organizational & employees characteristics – quality of mangers staff and workers, development opportunities.
- Factors related to individual relations – union – management relationship, collective bargaining, safety, welfare. e.tc
- Information capability – It factors relates to the design and management of the flow of information from outside into and within an org for the purpose of decision making.
- Important influencing factors –
- Factors related to acquisition & retention of information sources, quality, quantity and timelines of information
- Factors related to the processing & synthesis of information database management, computer system, software e.tc
- Factors related to retrieval & usage of information availability & appropriateness of information formats e.tc
- Integrated, systematic & supportive factions, IT infrastructure, up gradation facilities so on.
- General management capability -It relates to the integration, coordination and the direction of the functional capabilities towards common goals.
- Important influencing factors-
- Factors related to general management
- Factors related to general manager
- Factors related to external relationship
- Factors related to organizational climate.
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