How will you develop core competency and capability in managing your manufacturing enterprise?

What is Core Competency?

Core competency is a unique skill or technology that creates distinct customer value. For instance, core competency of Federal express (Fed Ex) is logistics management. The organizational unique capabilities are mainly personified in the collective knowledge of people as well as the organizational system that influences the way the employees interact.

As an organization grows, develops and adjusts to the new environment, so do its core competencies also adjust and change. Thus, 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.

Resources are inputs to a firm in the production process. These can be human, financial, technological, physical or organizational. The more unique, valuable and firm specialized the resources are, the more possibly the firm will have core competency. Resources should be used to build on the strengths and remove the firm’s weaknesses. Capabilities refer to organizational skills at integrating it’s team of resources so that they can be used more efficiently and effectively.

Organizational capabilities are generally a result of organizational system, processes and control mechanisms. These are intangible in nature. It might be that a firm has unique and valuable resources, but if it lacks the capability to utilize those resources productively and effectively, then the firm cannot create core competency.

The organizational strategies may develop new resources and capabilities or it might make the existing resources and capabilities stronger, hence building the core competencies of the organization.

Core competencies help an organization to distinguish its products from it’s rivals as well as to reduce its costs than its competitors and thereby attain a competitive advantage. It helps in creating customer value. Also, core competencies help in creating and developing new goods and services.

Core competencies decide the future of the organization. These decide the features and structure of global competitive organization. Core competencies give way to innovations. Using core competencies, new technologies can be developed. They ensure delivery of quality products and services to the clients.

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There are many avenues for companies to pursue to gain an edge against other businesses in their industry. In order to stand out, companies look to promote unique aspects of their business that make them better than the competition and more attractive to consumers. These differentiating characteristics of a company are referred to as core competencies. Core competencies are proficiencies or resources that give businesses a competitive advantage. If companies are able to develop their core competencies, they have a greater shot at beating out the competition and reaping the benefits.

Criteria for Determining Core Competencies

There are three main criteria that organizations can follow to determine the strategic strengths that will give them a competitive advantage. First, a core competency must bring with it the potential for accessing a wide variety of markets. This ensures that the product or service has an initial value with the added potential for even greater value. The second trait requires that the core competency adds to the customer benefit of the end product or service, which means that it is essential to the company’s final output and is not substitutable. The third criterion requires that the competency be difficult and costly to imitate. If a company’s core competency is unique and rare enough that competitors are unable to reproduce it, competing businesses will be unable to match their success.

Most successful companies have strong core competencies that they exploit to maximize business and profits. For instance, Amazon’s goal of being the “most customer-centric company on earth” embodies the core competency that gives them competitive advantage over numerous other retailers. Companies should be aware that just because their core competency has brought them success once, they may not always have the advantage when markets and consumers change. They must be able to change and adapt by developing new, updated core competencies that can help them retain their edge.

Competitive Advantage Strategies

Companies can achieve a competitive advantage a number of ways. Three common and effective strategies which companies have used to find success are cost leadership, differentiation, and market segmentation. Cost leadership refers to bringing consumers goods at a lower price. Companies can achieve cost leadership by improving efficiency in their operations. If they can lower overhead costs in manufacturing, labor, resources, and every other aspect that goes into the production of their goods or services, they can give consumers the greatest value, which can lead to increased sales and customer loyalty.

Differentiation refers to providing better or unique products. Companies can do this by making the highest-quality products, delivering services faster than competitors or reaching more customers quickly and conveniently. Companies achieve differentiation by using creativity and innovation to fill a need or solve a problem that no other company has been able to solve. Since these companies are able to make a higher-quality product, they are able to charge more, which increases their profit margins.

Market segmentation, which is also referred to as focus, is another strategy for achieving competitive advantage. It requires that companies understand the specific needs of their target market better than their competitors. This often involves focusing on a particular niche market that larger corporations overlook. This strategy can be combined with the cost leadership or differentiation strategies. For example, some companies differentiate themselves by providing a unique, personalized service to a select group who they know will be willing to pay more for the ease of the one-on-one service.

How Core Competencies Benefit Companies

Developing core competencies enables organizations to gain a competitive advantage with the express benefit of increasing sales and profits. Companies achieve this through innovation in developing products and services. While seeking ways to fill niche target markets, deliver services quickly and efficiently, and increase product quality, companies are bringing consumers better products and better values. This is something that customers recognize and payback with loyalty. Another benefit of developing core competencies is that it helps organizations establish the essence of their brand. If a company’s core competency lies in its outstanding customer service, then that is also an excellent attribute that can be used for marketing its brand.

Whether launching a new business idea or rebranding a product to fit the current market, developing core competencies can lead to a competitive advantage. Companies need to exploit the special strengths that make their product or service stand out among others in the industry. Understanding these concepts will set resourceful and strategic companies apart from the rest.

How Ohio University Can Help

At Ohio University, we understand how important an MBA can be to advancing your career. We also know that your MBA should be affordable, engaging, and academically-rigorous. That’s why we have designed an online MBA that is comprehensive and challenging, yet flexible to fit your lifestyle. When you earn your MBA online from Ohio University you are making a conscious decision to improve your professional value and position yourself for current and future business opportunities.

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Sources

Economist.com, Core competence
The Balance.com, What Is Competitive Advantage?
Strategic CFO, Core Competencies Definition

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