Loading the player...

What is 'Core Competencies'

Core competencies are the resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace. They are what the company does best and consist of the combined activities, operations, and resources that distinguish the company from competitors.

BREAKING DOWN 'Core Competencies'

A new business must first identify and then focus on its core competencies to establish a footprint while gaining a solid reputation and increasing brand recognition. Leveraging core competencies usually provides the best chance for a company's continued growth and survival.

Origins of Core Competency

Core competency is a relatively new management theory, originating in a Harvard Business Review article titled “The Core Competence of the Corporation.” In the article, the authors, C.K. Prahalad and Gary Hamel, review three conditions a business activity should fulfill to be a core competency. First, the activity must provide superior value/benefits to the consumer. Secondly, a core competency should not be easily replicated or imitated by competitors.  Lastly, it should be rare; it should be something not found in a competitor.

Development of Core Competencies

Resources, such as human resources, physical assets, patents, brand equity, and capital, can be or can contribute to a company's core competencies.  An organization's capabilities can also be or contribute to core competencies, and they consist of how a firm uses its resources to be competitive and operate efficiently.  Once an organization identifies its core competencies, internal investment should be directed toward maintaining these areas and ensuring they remain unique within the industry sector. Sometimes, when particular functional areas or activities are outside of the core competencies of the business, outsourcing is considered.  Outsourcing is essentially a transfer of business to a company whose core competencies include the transferred activities and functions.

Core Competency Areas

A business is not limited to just one core competency, and competencies vary based on the industry in which the institution operates. For example, a government agency involved in unemployment case management may include core competencies in the areas of information technology management, budget, and finance. Hospitals and clinics may focus on patient care and medical knowledge, while childhood education agencies may prioritize growth and development, health, and nutrition.

Core Competency and Retail Business

While customer service can apply as a core competency in both the goods are services industries, certain activities are more exclusive to certain sectors, such as the sale of goods. For example, with over $480 billion in sales in 2015, Wal-Mart exhibits the core competencies of buying power, superior logistics, and supply chain management to keep prices low while maintaining a high availability of products within its stores.

  1. Core Competency

    Core competency is a narrowly defined field or task at which ...
  2. Core Holding

    Core holdings are a central investment of a long-term portfolio ...
  3. Core Liquidity Provider

    A core liquidity provider is an underwriter or a market maker ...
  4. Core Deposits

    Core deposits are the deposits that form a stable source of funds ...
  5. Headline Inflation

    Headline inflation is the raw inflation figure reported through ...
  6. Outsourcing

    Outsourcing is a practice used by different companies to reduce ...
Related Articles
  1. Insights

    iShares Family of ETFs to See Lower Fees (BLK)

    BlackRock slashes fees on its range of iShares Core ETFs as a way to lure more investors.
  2. Insights

    Inflation Data and the Fed: What to Expect

    Deutsche Bank does not expect the rise in inflation to persist for long, due to disappointing GDP growth.
  3. Investing

    The 5 Cheapest iShares ETFs to Date in 2016 (ITOT, IVV)

    Learn about BlackRock's iShares family of exchange-traded funds and discover which of the company's ETFs carry the lowest expense ratios.
  4. Investing

    IVV: iShares S&P 500 ETF

    Find out more about the iShares Core S&P 500 Exchange Traded Fund, the characteristics of this ETF and the suitability of the iShares Core S&P 500 ETF.
  5. Investing

    Take a Long-Term View When Evaluating Risk and Investments

    Staying well within your risk portfolio will allow you to avoid short-term reactions to the market.
  6. Insights

    Competitive Advantage Counts

    What's the best indicator of a company's future success? Its ability to succeed when others fail.
  7. Investing

    3 Small-Cap Core Mutual Funds (NAESX,FSLCX)

    NSGRX,NAESX,FSLCX: Explore three small-cap core mutual funds and the reasons why they are are suitable as long-term holdings through bull and bear markets.
  8. Investing

    Charles Schwab: Plain-Vanilla ETFs in Demand

    Charles Schwab says that plain-vanilla ETFs are in demand thanks to the fiduciary rule, robo-advisors and low-cost investing.
  1. Who are Facebook's (FB) main competitors?

    Explore the different social media networking sites and internet companies that are competing directly with Facebook, such ... Read Answer >>
  2. How do I determine my company's competitive advantage?

    Find out how to determine if your company has a competitive advantage and, if so, learn how to figure out how to make it ... Read Answer >>
  3. What role does the government play in capitalism?

    Take a deeper look at the role of government in a capitalist economic system and about competing ideas about the proper amount ... Read Answer >>
  4. What are examples of key operating activities in a company?

    Discover the things that make up a company's operating activities, including examples of some the key operating activities ... Read Answer >>
  5. What's the difference between outsourcing and insourcing?

    Discover some of the major differences when deciding between outsourcing and insourcing for an organization. Learn how work ... Read Answer >>
Hot Definitions
  1. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  2. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  5. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
  6. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.
Trading Center