Core Competencies as a Source of Competitive Advantage - Essay Example

Strategic Management Executive summary Having a competitive advantage is very important for a business to emerge on top in the market. Competitive advantage helps the firm remain at par or ahead of its competitors in the market. There are various sources of competitive advantage for a business. These sources are either tangible or intangible. One of the intangible sources of competitive advantage is core competences of a business. Core competences are very important for the success of a business especially in a changing environment. The distinctiveness of the core competence enhances the competitive advantage of a business. Core competences form the roots from where the different business units create new products. These means that the business can not be driven out of the market even when the business environment changes. The business is able to use its core competence to design new products for the market. It’s also very important for the business to maintain its competitive advantage. There are various ways that firms uses to enhance and maintain its competitive advantages even when they are temporally. The different methods include maintaining the costs down, focusing on the given market or customers, differentiation, seeking relevant information , improving employee skills, using new approaches and monitoring competitors. Core competences as a source of competitive advantage Core competences refer to a set of production skills and techniques that are used to produce different products. Core competences confer a sustainable competitive advantage to a business by enabling to produces different goods and services for the market. Core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer. Such competences empower an organization to access a wide variety of markets (Hafeez, Zhang & Malak 2002, p. 28). The firm should estimate the future challenges and opportunities of the business in order to stay on top of the game in varying situations. This ensures that the core competences give sustainable competitive advantages. The core competences of a firm start from the convergence of different technologies and different production skills of the firm. A firm’s core competence has three distinct characteristics. First it has the ability to access a wide variety of markets. Second it has the ability to contribute to the production of product and lastly it can not be imitated by the competitors (Ljungquist 2007, p. 393). Creating core competencies in a business is important because it has more advantages than other competitive advantages that arise from, products price and performance which are short term. Core competencies once achieved are long term and can be adopted in all situations (Danneels 2002, p. 1095). The business environment is changing frequently due to improvement in technology. Core competences help the business because they can be adopted in different situations. Core competences arise from the roots of the products. These help the firm enjoy the competitive advantages that are sustainable over a long period of time. Core competences help the firm to take advantage of their infinite number of uses using a given technology. A business with core competences can not be driven out of the market because it can use them to produces many products for the market in a changing environment (Eden & Ackermann 2001, p. 12). This confers a sustainable competitive advantage to the firm over its competitors. The core competences of a firm are used in the development of core products for the firm. These core products are not sold directly to the consumer but are used in the production of a range of other consumer products. The different business units within an organization use the core products in the development of several different products for the consumers (Kroll, Wright & Heiens 1995, p. 375). Core product technology is very important in conferring competitive advantage to the firm as its able to access different markets with products produced. This is sustainable over time. A firm that does not have core competencies has its business units operating like different business put together. This is because it’s the core competences that bond the different business units together. The competences form the base from where the different business units lunch different products into the market. The business units combine different core competences to come up with different end user products for the consumers. This is a competitive advantage because a business can identify different opportunities as the market changes to introduce a different product into the market. The bonded business is more sustainable over the long run. For a firm to remain competitive in a changing market it needs to have core competencies. Core competences may be difficult to achieve but once achieved confer competitive advantage to the organization. The core competences of an organization are difficult to imitate (Srivastava 2004, p. 43). For example, it’s difficult to imitate Apples IT core competences in production of computers these is a competitive edge over other firms. This advantage can be sustained over a long time In the changing business environment business are always under pressure to sustain their competitive advantage in the market to increase the shareholders value. There are various ways to maintain the competitive advantage even when it’s temporally. The firm requires being imaginative and innovative for it create and maintain that competitive advantage. Competitive advantage is required for the business to expand and grow and expand. One way a firm can maintain it competitiveness is by the managers reading business journals and news to expose them to relevant and timely information about the area they are operating (Kim, Nam & Stimpert 2004, p. 19). This is very important for all areas of the business from marketing, accounting or business principles. The more the managers learn about the business the more exposed they become and the more competitive they are. The information gained is very important in decision making. This will ensure the business is always at a competitive advantage over its competitors. The managers will be able to enhance and maintain these advantages even if it’s for the short run. The business also needs to monitor all competitors in order to remain competitive. A business should monitor what their competitors are offering (Ramaswami & Namakumari 1996, p. 541). The business should be able to monitor how the competitor operates in the market. What the competitors are charging for their products and services etc. if the competitors are not monitored the business might be left behind as the others grow. Mentoring competition helps the business know what’s happening in the market. The competitors have new ideas which the business can emulate. This gives the business more competitive in the market The business managers should also attend seminars and workshops. This seminars offer all the information on what’s happening in the industry. The managers will learn from the presenters as well as the other managers who face similar challenges as themselves. The experiences gained improve the managerial experience. The business is able to remain competitive from this information. The manager should also plan for time to try new approaches in the business. This will help the business improve on its core competencies. The time should be set each month to consider new methods of doing things. The business should note the customer’s suggestions and complaints and look for ways to meet them. This helps the business maintain a competitive advantage over its competitors. The other thing the business should do is optimizing the skills of the employees (Christensen 2010, p. 20). The managers should consider improving their skills in doing business. This will help in improving on the production efficiency. The manager can also purchase new equipment that can help in managing the work better way. For example a business in accounting can purchase accounting software. This will help the business too remain competitive in the market. A business can also consider teaching or mentoring another business. This will help get new clients. By teaching or mentoring new business the business is able to view at things from a different point of view (Hamel & Prahalad 1994, p341). This enables the business to learn new concepts in doing business. Teaching raises new questions and the management is able to stress the topic even more therefore improving their knowledge. This helps the business maintain its competitive advantage. Another way of maintaining competitive advantage is through differentiating the product or service the firm is selling. The firm creates something new about its products or services. This will make the product unique again (Spanos & Prastacos 2004, p. 31). The new thing can either be real or in the mind of the customer. The customer should see the product is conferring more advantage to him than the competitor’s product. The additional futures may and more cost on the product and the customers must be willing to pay for these for the differentiation to succeed. The differentiation increases the competitive advantage by increasing brand loyalty. This helps the firm maintain its competitive advantage. The firm also needs to lower its cost production. The firm will become the lowest cost producer in the industry (Deephouse 1999, p. 147). The firm should improve efficiency and tighten control over cost. The expenses should be maintained at the minimum. The firm will have a competitive advantage by having its cost of production and distribution low. The strategy makes sure that the firm has the lowest prices in the market. This is a competitive advantage that can maintain the relevance of the business in the market The firm can also maintain and enhance its competitive advantage by combining various competitive advantages (Fiol 2001, p. 691). The firm can combine both cost cutting measure and differentiation strategy in maintaining its competitive advantage. Using a combination of strategies is important because it helps compete more effectively against firm using a single strategy like cost cutting or differentiation. Combining the various competitive advantages together helps in enhancing the temporally competitive advantage the firm enjoys. Another way of maintaining competitive advantage for a business is using focus. The firm focuses on a certain product, Geographical area, or customers (Peteraf & Bergen 2003, p. 1027). Using focus strategy helps the firm to serve one area more efficiently. The firms which use this strategy also use differentiation strategy to differentiate themselves from the other competitors. This type of strategy is very effective where customers have a given preference in the market or specialized needs. The focus helps the firm in maintaining and enhancing its competitive advantage over the other firms in the industry. The above methods will ensure that the firm is able to maintain and enhance its temporally competitive advantage. The secret to having a competitive advantage is implementing the above business process in the appropriate way. This way the firm will be able to confer the benefits cheaply compared to its competitors. List of References Christensen, Kurt, H 2010, "Defining customer value as the driver of competitive advantage", Strategy & Leadership, Vol. 38, no. 5, pp.20 – 25. Danneels, E 2002 "The dynamics of product innovation and firm competences," Strategic Management Journal, Vol. 23, no. 12, pp. 1095-121. Deephouse, D 1999, "To Be Different, or To Be the Same? It's a Question (and Theory) of Strategic Balance," Strategic Management Journal, Vol. 20, no. 2, pp. 147–66. Eden, C & Ackermann, F 2000, "Mapping distinctive competencies: a systemic approach," Journal of the Operational Research Society, Vol. 51, no.1, pp. 12-21. Fiol, CM 2001, “Revisiting an identity-based view of sustainable competitive advantage,” Journal of Management, Vol. 27, no. 6, pp. 691-699. 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