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4.0 General View about Core Competence
Core competence will help companies adapt to various markets and it serves as the base for companies to enlarge their business. Besides, core competence can realize those interests that customers value most.
In the short term, a company’s competitiveness comes from the price of existing products or services. In the long term, the competitiveness will shift to the ability to reduce costs as well as meet customer needs more quickly than competitors. (Cynthia & Michael, 1991)
The strategy of developing a company’s core competence aims to make company gain profit, acquire certain market share, establish a good image as well as recognized and well-accepted by publics through its capability of utilizing production factors efficiently. It is a basic competitive power to help companies sustain a stable and high competitive ability over their opponents.
Specifically, the core competence for modern enterprises is a mix of key resources and specialized skills which based on knowledge and innovation. This mix ensures the dynamic balance of competitive advantage for companies in a certain period.
Core competence can come from several aspects. It lies on a company’s human resource and its integration with corporation, a company must have a qualified even excellent specialists. Besides, core skills are indispensable in developing company’s core competence. Reputation also accounts for core competence. Certain companies manage to surpass competitors in research and development. They aim to gain long term profit and devote themselves to new products. Corporation culture is also important to establish a company’s core competence. Among all those aspects that develop a company’s core competence. The most influential and widely used technique is marketing strategy. Some companies utilize the 4Ps theory i.e. product, price, place, promotion (McCarthy, 1960) to provide products and service to meet customers’ specialized needs. Others may seek competitive advantage through the marketing network. They attach great importance and invest a lot of money and time in product selling, market research, market promotion, technical support and market expansion.
Since there are so many aspects that companies should pay attention to, sometimes it is difficult for companies to distinguish core competence from other capabilities. There are several features of core competence. First, the core competence can provide benefit or meet the ultimate need of its customers. Second, core competence must be unique and hard to be imitated. Third, it should also capable of extending, that is to say, core competence can help company to open other market and can promote company’s competence in other products and service.
For P&G, its core competence mainly lies in its market strategy. P&G develops a multi-brand strategy. As a major manufacture of daily products, its business covers nearly all lines concerning our daily life, ranging from cleaning products to food, paper, medicine and so on. Taking advantage of its sufficient capital, P&G realizes a vertical integration. Though the multi-brand strategy costs more and risks more, it is more flexible and allows P&G fill up its space on supermarket shelves. (Ian, 2010) Through this strategy, P&G establish a stable and good image in customers. Apart from using multi-brand strategy，P&G also practice differentiation strategy. P&G always seeks to develop distinctive features for each of its products. It develops different interest mix to meet various needs of its customers.
The competence that distinguished P&G from other competitors also lies in its ability of establishing its brand value. A good brand name can help companies easily recognized and generate customers’ association as well as reduce promotion costs. Each product of P&G well exemplifies the characteristics of the product and the position. P&G also excels in using knowledge-based marketing to enhance its brand value. Exploiting knowledge into the practice of marketing will help companies constructing successful market brands. (Ian, 2004) During the process of marketing, P&G fully utilizes knowledge and ideas.
All those above marketing strategies used by P&G constitute its core competence. They not only help P&G establish a good image and high reputation in the society and among the public, but also develop a large number of loyal customers as well as retain a high customer satisfaction which make the company gain a sustainable advantage in the daily products line. 4.1 Advantages of Core Competence
Core competence mainly applied by those companies which seek long-term development. Once it is established, core competence can bring a lot of benefits to companies.
First of all, core competence surpasses the concrete product and service and liven the competition among companies up to a higher level that is the competition of the overall strength of companies. In this way, it helps companies reduces the number of competitors and all companies need to do is to focus on those strong competitors. The overall strength of companies can reflect the objective need of long-term development for companies and avoid some strategic mistakes caused by short insight. For P&G, it has a long history and seeks to retain its high proportion of market share.
Secondly, core competence can strengthen the competitive status of companies in related markets. Core competence is not just a single competence; it is a mix of several factors. Companies that develop a strong core competence usually have a more insightful idea over the market, thus it is relatively easier for them to diversify their business and manufacture other related products.
Last but not least, core competence is accumulated by rich experience and knowledge through a long period. Therefore, it can hardly be attacked, imitated and surpassed. 4.2 Disadvantages of Core Competence
Just as mentioned in the advantages of core competence, the uniqueness of core competence can make the company has distinctive advantages over others, meanwhile, if the company faces with a very strong competitor who also has its own core competence, it will have more obstacles for the company to tackle with.
Generally speaking, core competence can help big companies a lot in their marketing. However, it is a long way to go for small and new entrants of a line. For small-sized companies and new entrants, they have to invest a large sum of money on constructing core competence and it usually takes several years to make the core competence outstanding.
Moreover, small enterprises and new entrants may come across difficulties in recognizing core competence. There are dozens of factors that involved in a business, but not all those factors should be attached great importance to. The main difference between core competence and capacities lies in the recognition of Penrose or any other prior work. (Anders, 2002) So it is a requirement for companies to evaluate these factors as well as evaluate its own business by using the SWOT Analysis. After that, companies can combine those things together and judge which factors they will focus on. 4.3 Measures to take
Concerning the problem that it is not easy for companies to recognize which aspect they should concentrate on, companies have to do a general overview of factors influencing their business most. Companies can compare their own performance with other companies in this line and find out in what aspects they overshadow competitors. After it recognizes those competences, company can further evaluate on them and to test whether those competences have the characteristics of core competence. Companies can using questions to help them judge. Those questions may include: whether the competitive power is suitable to the development and competitive strategy of the company? Is it in accordance with the goal and long term plan of the company? Is it helpful in improving the efficiency of corporate management as well as reducing costs? Is it typical and helpful to company in carrying out the differentiation strategy? Is it good to the expansion of scope of business?
With the help of those questions, companies can distinguish the core competence from other competence.
After recognizing its core competence, company still needs to take many efforts in building and improving the core competence of a company. Basically, this can be realized through both internal ways as well as external ways. From the perspective of internal ways, companies should cultivate a good and unique corporation culture. Both companies and its staff in every sector should value and concern the cultivation of core competence. It is also of great significance for companies focus on the specialization of a certain field. Innovation is another aspect that should be valued, especially in some technology-based companies. Modern enterprise system also helps in building core competence.
Unlike the internal ways which mainly focus on the company itself and its staff, the external ways shift its focus to the partner and stakeholder. External ways emphasize the efficiency of knowledge ally. Through acquire more knowledge, companies can better adapt to the ever-changing market. Another way is merger and acquisition. Merger and acquisition could have the effect of simply knocking one rival company out of the market. (Brian, 2000) Customer’s views toward the product are the driving force in shaping appropriate product decision. (Art Weinstein, 2004) |
