Core and Distinctive Competencies: Competitive Advantage

Core and Distinctive Competencies

• Resources: An organization’s assets, and thus the basic building blocks of the organization. They can be tangible or intangible.
• Capabilities: Refer to a corporation’s ability to exploit its resources. They consist of business processes and routines that manage the interaction among resources to turn inputs into outputs.
• Core Competency: A collection of competencies that cross divisional boundaries, is widespread throughout the corporation, and is something the corporation does exceedingly well.
• Distinctive Competency: Core competencies that are superior to those of the competition.

Using Resources to Gain Competitive Advantage

1. Identify and classify resources in terms of strengths and weaknesses.
2. Combine the firm’s strengths into specific capabilities and core competencies.
3. Appraise profit potential—Are there any distinctive competencies?
4. Select the strategy that best exploits the firm’s capabilities and competencies relative to external opportunities.
5. Identify resource gaps and invest in upgrading weaknesses.

Access to a Distinctive Competency

• Asset Endowment
  • Acquired from someone else.
  • Shared with another business.
  • Built and accumulated within the company.
• Clusters: Geographic concentrations of interconnected companies and industries.
• Access to:
  • Employees
  • Suppliers
  • Specialized information
  • Complementary products

Determining the Sustainability of an Advantage

• Durability: The rate at which a firm’s underlying resources, capabilities, or core competencies depreciate or become obsolete.
• Imitability: The rate at which a firm’s underlying resources, capabilities, or core competencies can be duplicated by others.
• Transparency: The speed at which other firms understand the relationship of resources and capabilities supporting a successful strategy.
• Transferability: The ability of competitors to gather the resources and capabilities necessary to support a competitive challenge.
• Replicability: The ability of competitors to use duplicated resources and capabilities to imitate the other firm’s success.