Core competency exists in companies which have a factor central and unique to their business. Core competency is a factor which gives you competitive advantage over others. Examples of core competency are home delivery in case of Domino’s, or Innovation in case of Apple and Google. Your core competency is always defined when compared with others. Let us understand core competency with an easy example.
We are taking an example of product marketing of Honda to understand core competency. Honda is known for its engines. That’s the core competency of Honda. Thus, when it plans a car, the car design and the marketing mix are all secondary. The first thing that it decides on is the engine. Honda knows, that given the right engine and the right power, any car can sell because the customer knows that the engine quality is superior to everyone else. Thus, Honda has always focused on its core competency and has always spent its R & D on improving its engines.
In service marketing, Taj hotels is known for the luxury. The service and the food comes secondary. People know the Taj group of hotels for the luxury that each of their hotel provides. The luxury of the hotel is its core competency. Thus, in Mumbai, the Taj hotel is facing the gateway of India and has fantastic interiors. In Goa, the Taj hotel is directly connected to a private beach. These are exemplary forms of luxury being provided to Taj customers. When planning on a new Taj hotel, the manager has to think on the location and the interiors and has to ensure that he plans on his core competency well.
Thus, a core competency may be technical, service driven or any factor which makes the company unique in the eyes of the customer. For any corporate, core competency is developed over a period of time. Apple has its innovation, Titan has its watch designs, Walmart has its costing. The core competency for all these companies have been developed over time.
Advantages of developing a core competency are threefold.
Difficult to imitate – You cannot take away the word innovation from Apple easily. This is because apple has continuously brought forward innovative products like Ipod, Iphone, Mcbook and others. Thus, the core competency of Apple is difficult to imitate. In general, take the core competency of any good company, and you will find that it is very difficult to imitate the core competency because the competency has been developed over a long period of time.
Wide usage – As explained in the above example, the engines of Honda have a wide usage. They are used in cars, motorboats, planes and wherever they are compatible. Thus, a core competency is widely applicable in various markets. It is not exclusive to some segments only. It is a quality which is applicable to any market that the company enters.
Benefits and Value – The luxury of Taj gives delights to its customers and creates value for the brand. At the same time, there are benefits. The benefit is that wherever you go, you can rely on the Taj brand. And thus, anywhere Taj establishes its hotels, customers are sure to flock in. Thus, when you have a strong core competency, customers recognize the benefits and values of the core competency.
The major thing here is that core competency gives your brand a push and at the same time creates a barrier for the competition which is required for your brand. Each of the above brands has a competency which they are recognised for. To develop such a competency requires time and effort. Hence developing a core competency is an excellent tactic for competitive advantage.
Threats to core competency is when a company comes along who either nullifies your core competency or takes away market share by having a better core competency. For example – Although apple is known for innovation, and has a wide spread fan following for its mobile smart phone, the market share is taken away by Samsung, who is known for its android platform. Thus, even though Apple’s core competency is stronger in terms of value, the market share is being taken away by a separate technology. This technology, android, is the core competency of Samsung smartphones. Thus, the competitive advantage benefit of core competency is limited and does not ensure an absolute position in the market.