Core Competencies

A Core Competency is the major strength of a company

A company delivers unique value to its customers through its Core Competencies

A core competency is a skill or a capability of a company that delivers the highest value for the customer compared to its other activities. The concept is related to value chain, as core competencies are a sub-category of the primary activities, depicting the most crucial processes. In addition, a process is considered a core competency if the activity delivers higher value compared to processes of the same category from its competitors.

A core competency usually features the following three characteristics:

• Challenging to be replicated by competitors because it is a result of an extensive learning period.
• Delivers unique value to the customers.
• Can be applied to the majority of products and markets of the company.

Use the strategic advantages of core competencies to set up a strategy

Core competencies are an opposite approach to Porter’s five forces, which focus on the external environment as a key factor, which drives decisions. The Core Competency concept uses companies’ internal capabilities as drivers for strategic choices.

Knowing the core competencies of a company in a case interview will help you to understand:

• Where to focus in terms of introducing and developing new products, one dimension of the Ansoff Matrix.
• What processes to outsource.
• How to build a competitive edge in terms of cost or quality.
• How to create new markets or enter emerging high growth markets

Apple’s approach (example)

Apple's core competencies:

• Design: Life-style design
• Technology: Product differentiation through innovation
• Marketing:
  • Viral marketing
  • Superior brand with matching price and placement
• Secrecy about new products

Apple's focus on areas where it can deliver the best value has resulted in a set of very loyal customers, and it is unlikely to convince Apple customers to switch to a competitor's product.

Hence, it is crucial for a company to have a core competency and leverage this strength to be successful.