A core competence is a long-term ability of a company to gain advantages in the market of its performance exploitation. Core competencies are based on special resources, technologies and skills that other companies do not have or do not have in this form or combination. The importance of core competencies has led to the teaching that a company should recognize its core competencies, concentrate on them and cultivate them.
According to PRAHALAD and HAMEL, there are three criteria for identifying core competencies:
- Core competencies enable access to the markets for the sale of services or the purchase of factors.
- Core competencies make an important contribution to the benefits that customers perceive in products and services.
- The core competencies are difficult to imitate by competitors.
In addition, there are the desirable properties that the core competencies can be recognized, defined and transferred. Not all of these points are always given.
KROGER and HOMP have therefore differentiated levels of competence and they have presented their scheme in a competence bulb. Two essential peels of the onion emphasize the property of durability and the transferability of the core competence. Core competence is therefore the permanent and transferable cause of a company's competitive advantage. In addition, KROGER and HOMP differentiate between basic competence and meta-competence.
Basic competence means the ability to efficiently and effectively master business processes. Metacompetence means that the development processes are mastered, which allow a further development of the existing business to the changing environment and the development of new business.
Various instruments serve to identify core competencies. For example, PRAHALAD and HAMEL have proposed a core competence tree.
The trunk and the thick branches are the core products. A core product is the link between core competencies and end products, the realization (s) of one or more core competencies. Thinner branches are the business units of the respective company and the leaves and fruits of the metaphorical tree represent the end products. The base, the roots that nourish the tree and make it stable are the core competencies.
The concept of aligning the company with core competencies requires concentration on competitive advantages and thus enables an increase in the company's value.