THE CORE COMPETENCIES OF THE CORPORATION

THE CORE

In order to understand the core competence of the corporation is that we have to know first what a corporation is. A corporation is the most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern.

Now that we have the idea that a corporation is a business organization then I guess it is safe to say that a corporation is either selling products or services. These products or services would differ in to what kind of customers or market that the corporation is eyeing to benefit since a company's competitiveness derives from its core competencies and core products. Core competence is the collective learning in the organization, especially the capacity to coordinate diverse production skills and integrate streams of technologies. First companies must identify core competencies, which provide potential access to a wide variety of markets, make a contribution to the customer benefits of the product, and are difficult for competitors to imitate. Next companies must reorganize to learn from alliances and focus on internal development

Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required undertaking them. So the goal is for management to focus attention on competencies that really affect competitive advantage.

In 1990 with their article titled "The Core Competence of the Corporation", Prahalad and Hamel illustrated that core competencies lead to the development of core products which further can be used to build many products for end users. Core competencies are developed through the process of continuous improvements over the period of time. To succeed in an emerging global market it is more important and required to build core competencies rather than vertical integration. NEC utilized its portfolio of core competencies to dominate the semiconductor, telecommunications and consumer electronics market. It is important to identify core competencies because it is difficult to retain those competencies in a price war and cost cutting environment. The author used the example of how to integrate core competences using strategic architecture in view of changing market requirements and evolving technologies.

Management must realize that stakeholders to core competences are an asset which can be utilized to integrate and build the competencies. Competence building is an outcome of strategic architecture which must be enforced by top management in order to exploit its full capacity (http://en.wikipedia.org/wiki/Core_competency).

So in other words, the core competencies of the a corporation is based on its ability to let the different systems of the company to work together in harmony to achieve a common goal. These systems may include the following:

1. The owners of the company,

2. The whole staff of the company,

3. The production sector,

4. The technology used in producing products or services,

5. The market,

6. And the consumer.

According to Pralahad and Hammel,  core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of  end-user products. For example, motors are a core product that can be used in a wide array of end products. The business units of the corporation each tap into the relatively few core products to develop to a larger number of end user products based on the core product technology (http://www.quickmba.com/strategy/core-competencies/).

According to Pralahad and Hamel, core competencies arise from the integration of multiple technologies and the coordination of divers productive skills. Some examples include Philip’s expertise in optical media and Sony’s ability to miniaturize electronics.

There are three tests useful for identifying a core competence. A core competence should:

1. provide access to a wide variety of markets, and

2. contribute significantly to the end-product benefits, and

3. be difficult for competitors to imitate.

In my organization, one of our core competencies are the special skills and abilities of our students and well-educated instructors.  We are known as good in computer hardware.  Evidences od excellence can be seen in co-curricular competitions, assessment and trade test examinations and the expanding networks and linkages for on the Job Trainings, Ladderized Education Program Implementation, Consortia and the like.  This improvements and innovations have brought PCT to greater heights resulting to increase in its population this school year.

Core competencies tend to be rooted in the ability to integrate and coordinate various groups in the organization. While a company may be able to hire a team of brilliant scientists in a particular technology, in doing so it does not automatically gain a core competence in that technology. It is the effective coordination among all the groups involved in bringing a product to the market that results in a core competence.

It is not necessarily an expensive undertaking to develop core competencies. The missing pieces of a core competency often can be acquired at a low cost through alliances and licensing agreements. In many cases an organizational design that facilitates sharing of competencies can result in much more effective utilization of those competencies for little or no additional cost.