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Summer/May 2012 MB0052-1. What is meant by core competency? Explain with an example.

Core Competency

In 1990, C.K. Prahalad and Gary Hamel introduced the concept of core competencies in the field of management. They stated that a core competency is an area of specialized expertise which is the outcome of harmonizing complex streams of technology and work activity. Core competency is a firm’s ability to do something well and satisfy the following three conditions:

a) The competitors find it difficult to initiate.

b) It provides customer benefits, and

c) It can be leveraged widely to many products and markets.

A core competency of a firm can be a reliable process, proximity with customers and suppliers, work culture, product development and technical know-how.

Also known as modern business theory, the theory suggests that any activity which is not a core competence of a firm should be outsourced.

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