So, I'm putting one as a redirect to the other. I've chosen Core competency as the one to keep because:
- it's a lot older
- to me it reads better
The term core competence/competencies was originally introduced by C. K. Prahalad and Gary Hamel, who suggested that "core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies". From their point of view the core competencies are the foundation from which competitive advantage can be created. In other words, core competencies can be seen as the things that companies do very well. To take an example from the automotive industry, it has been claimed that Volvo’s core competence is safety.
According to Prahalad and Hamel a core competence has three characteristics:
- it provides potential access to a wide variety of markets,
- it increases perceived customer benefits and
- it is hard for competitors to imitate.
Ever since Prahalad and Hamel introduced the term in the 1990’s many researchers have tried to highlight and further illuminate the meaning of core competence. According to Leonard-Barton, D. “Capabilities are considered core if they differentiate a company strategically”. On the other hand Galunic and Rodan (1998) argue that “a core competence differentiates not only between firms but also inside a firm it differentiates amongst several competencies. In other words, a core competency guides a firm recombining its competencies in response to demands from the environment” . However, there are some much more complex explanations and definitions of core competence. This is how Banarjee P. explains it:
Resources are very often divided into two types:
- tangible resources: finance, manpower, IT equipment etc.
- intangible resources: knowledge, reputation, goodwill etc.
Generation of a resource happens very often as a result of viewing an already existing resource from a new perspective, called resource recombination. In other words, you discover that this resource can be used in other settings and contexts than it previously has been used for. When the resource becomes multifunctional, then the efficiency of the firm increases as well. Recombining two or more resources in order to “generate” a new one is defined as simple competence. The main reason why firms generate new resources is to adapt to constantly changing market environment. Competence on recombination has been referred to as an architectural resource, which is of the second order. Finally, the third order is what is called a core competence. “A core competence then is about logical rules helping recombine the second-order architectural knowledge on simple competencies. A core competence is acquired through acts of learning on the success and failures of recombinations of second-order competencies”.
Most researchers agree that core competencies are the fundamental strengths of a firm, and can provide sustainable competitive advantage.
- Prahalad, C.K. and Hamel, G. (1990) The core competence of the corporation, Harvard Business Review. pp. 79–91.
- Galunic, D.C. and Rodan, S. (1998). Resource recombinations in the firm: knowledge structures and the potential for Schumpeterian innovation. Strategic Management Journal 19. p. 1193-1201.