Definition of Core Competencies

If you were completing a dating profile, in what ways would you differentiate yourself from all of your competitors? Would your profile claim that you are the most polite, smartest, funniest or most gorgeous? In the business world, it is also important to stand out from the competition. Most companies focus on core competencies, which are activities or processes that the firm does better than anyone else. In this lesson, we will examine Pear Products, a leading technology company, to explain core competencies and provide examples of how the company leverages these competencies in operations and supply chains so they can be used for competitive advantage.

Core Competencies in Operations

Pear Products has become the leader in the technology industry by focusing on their core competencies in operations. Core competencies are also known as distinctive competencies, which can range from a company offering excellent service, higher quality, faster service or lower cost than their competition. In Pear Products’ instance, the company has leveraged their superior product development as their core competency. They are the first to market with the latest innovative products such as tablets, multi-use laptops, smart watches and even personal robots.

Pear Products has succeeded because they have harnessed their core competency to create a sustainable competitive advantage, which is a long-run competitive advantage that cannot be easily copied or improved by the competition. None of their competitors have highly skilled employees who can create a process of innovative product delivery to the marketplace. One interesting note to core competencies is that because product and technology advantages are short-lived, they are not considered core competencies. For instance, Pear Products’ new virtual reality goggles would not be considered a core competency, but the new product development process that invented the goggles would be considered one. The company’s highly-regarded development process is the main way that Pear Products can create a competitive advantage.

Core Competencies in Supply Chain Management

Pear Products also uses their supply chain management system, or an integrative approach to manage supply and distribution networks, as another core competency. The company’s product development process advantage allows Pear to design, build, market and sell innovative products within a six month time frame. In addition, Pear’s supply chain system allows the company to further promote their product development by aligning their competencies with their partners. Supply chains often develop competitive advantages around their core competencies, which in this case is Pear’s product development process. Pear Products’ supply chain creates numerous competitive advantages, such as:

• Leveraging technology by adopting new methods by supply chain members
• The ability to provide higher quality products in a shorter amount of time
• The ability to meet customer demand delivery requirements and avoid inventory issues

Unfortunately, not all companies are leveraging their core competencies to maintain their operational and competitive advantages.

Core Rigidities

Core competencies must constantly change for Pear Products. In order to continue to remain an industry leader, the company has to focus on the customer and find the best way to go to market with their products. If Pear Products does not align their operations with customer needs it can cause severe business issues, which are called core rigidities.

This exact problem developed with one of Pear Products’ top competitors. Mellow Computers was a prominent manufacturer and retailer of computers. Mellow’s core competency was to offer low cost delivery and production of computers through the mail. Many customers initially liked the idea of calling a 1-800 number to customize and order a computer. Unfortunately, Mellow did not focus on the customer and did not realize changing consumer needs and tastes. For example, it became less important to customers to want low cost delivery and more important to see, touch and play with computers before purchasing.

Lesson Summary

In the business world, it is important to stand out from the competition. Most companies focus on core competencies, which are activities or processes that the firm does better than anyone else. Core competencies are also known as distinctive competencies, which can range from a company offering excellent service, higher quality, faster service or lower cost than their competition. Companies have to leverage their core competencies to create sustainable competitive advantages, which are long-term competitive advantages that cannot be easily copied or improved by the competition. The supply chain management system, or an integrative approach to manage supply and distribution networks, can act as and promote a core competency. If a company does not align their operations with customer needs it can cause severe business issues, which are called core rigidities.

Learning Outcomes

Once you are finished with this lesson, you should be able to:

• Explain what core competencies are
• Describe how core competencies can create sustainable competitive advantages
• Discuss the advantages of a supply chain management system
• Recall what core rigidities are and how they affect business