Question

Successful businesses outperform their competitors due to some advantages that make them successful. Businesses also remain profitable due to their core competence. Discuss the concepts ‘competitive advantage’ and ‘core competence’.

Answer 1

Competitive Adavantage:-

There are many factors that can be rightly referred to as competitive advantages. Everything from greater profilts, cheaper production through outsourcing labor, to brand prestige can fall under this definition.

A company will have a compertitive advantage when it finds itself in a position that makes it superior to its rivals in the markets.

Michael Porter, a professor at the Harvard Business School in his famous book 'Competitive Advantage' categorized it into two types:-

• Cost
• Differential

A Cost advantage is achieved when a company is able to work efficiently and bring down production costs.

A Differential advantage kicks in when a company has something to offer that is unique or superior to the goods and services offered by rivals.

Core Competency

In an article in the Harvard Business Review of 1990, the concept of core competence was intriduced by professors Gary Hamel & C.K. Prahalad who difined it as 'a harmonized combination of multiple resources and skill that distinguish a firm in the marketplace'.

In essence, core competence referes to a particular set of skills or strategies that set a company apart from its rivals. According to Hamel and Prahalad, there are three characteristics that can be used to identify a core competence.

Firstly the company must be able to provied potential access to a wide varity o markets.

Secondly, the company should make a significant contribution to the perceived customer benefits of the end product.

And thirdly, it must be difficult for competitor to imitage.

Conclusion

Competitive advantages allow companies to gain a firm hold on a market but they cannot be sustained for long without rivals imitaing those practices.

Core competencies, on the other hand, are unique to a company and can assist them in building a sustained competitve advantage as well.

Moreover, core compentencies also allow companies to expand their presence in a number of markets. Both concepts are essential for business strategy.