What Are Core Competencies?

Core competencies are the resources and capabilities that comprise the strategic advantages of a business. A modern management theory argues that a business must define, cultivate, and exploit its core competencies in order to succeed against the competition.

A variation of the principle that has emerged in recent years recommends that job seekers focus on their personal core competencies in order to stand out from the crowd. These positive characteristics may be developed and listed on a resume. Some personal core competencies include analytical abilities, creating thinking, and problem resolution skills.

Key Takeaways

  • Core competencies are the defining characteristics that make a business or an individual stand out from the competition.
  • Identifying and exploiting core competencies is seen as important for a new business making its mark or an established company trying to stay competitive.
  • A company's people, physical assets, patents, brand equity, and capital all can make a contribution to a company's core competencies.

Understanding Core Competencies

A successful business has identified what it can do better than anyone else, and why. Its core competencies are the "why."

Core competency is a relatively new management theory that originated in a 1990 Harvard Business Review article, “The Core Competence of the Corporation.”

Defining Core Competencies

In the article, C.K. Prahalad, and Gary Hamel review three conditions a business activity must meet in order to be a core competency:

  • The activity must provide superior value or benefits to the consumer.
  • It should be difficult for a competitor to replicate or imitate it.
  • It should be rare.

A variety of resources, such as its talent pool, physical assets, patents, and brand equity, make a contribution to a company's core competencies. Once it understands those competencies, the company can properly focus all of those resources. It may even outsource activities that are outside their core competencies in order to devote its resources to what it does best.

Examples of Core Competencies

A business is not limited to just one core competency, and competencies vary based on the industry in which the institution operates.

A core competence must offer a superior benefit, must be rare, and must be hard to replicate or imitate.

Some of the core competencies of established and successful brands tend to be there for all to see:

  • McDonald's has standardization. It serves nine million pounds of French fries every day, and every one of them has precisely the same taste and texture.
  • Apple has style. The beauty of its devices and their interfaces gives them an edge over its many competitors.
  • Walmart has buying power. The sheer size of its buying operation gives it the ability to buy cheap and undersell retail competitors.

Core Competencies by Industry

The core competencies that distinguish a business vary by industry. A hospital or clinic may focus on excellence in particular specializations. A manufacturer may identify superior quality control.