Marketing strategy and core competencies
One of the very common analytical approaches in strategic planning is SWOT analysis. The first letter stands for “strengths" and the first letter stands for “opportunities". These two letters, or parts of the SWOT analysis, are designed to work together.
In other words, we identify the corporate strengths and then try to match them to opportunities in the marketplace. Keep in mind that the SWOT analysis is individualized for the firm/brand, not a generic industry view – which means that the opportunities listed in the SWOT analysis are only relevant to our firm/brand.
Understanding core competencies
Core competencies are special skills and capabilities of the firm that provides some competitive advantage in the marketplace. We are primarily interested in those skills and capabilities that allow the firm/brand to deliver superior customer value.
You should note that core competencies are skill sets that reside in the people and processes within the organization. They are ways that the organization operates, rather than the physical resources that the firm. You should use the words “expertise", “abilities", “skills", “know-how", and so on.
Probably the best way to understand a core competency is to review the article on core competency examples.
Apple and core competencies
To demonstrate the value of core competencies versus physical assets/resources let’s consider Apple’s skill sets – what are they really good at doing?
Apple has superior innovation expertise – they are very good at enhancing existing technology and improving its capability and making it easy and enjoyable to use. They are also quite good at growing markets and attracting large numbers of consumers to new technology.
This skill set means that they will have ongoing success in the marketplace because they are able to KEEP delivering exciting and interesting new products and generating large scale demand.
Compare this position to Nokia – that not that long ago was a leading mobile phone provider. They had the resource advantage of a larger market share, a larger selection of mobile phone products, and a strong established brand in the mobile phone market. But along comes
Apple who leverages this skill set for innovation into the mobile phone market – the results have been spectacular, with Apple becoming a dominant player in the market and extremely profitable.
McDonald’s and core competencies
Let’s look at another example of core competencies – this time using McDonald’s – so what are they really good at doing?
McDonald’s skill sets are in their system/process of preparing and delivering food in a very fast and consistent manner. Much of their success has been due to its ability in this area. In the fast food sector, consumers expect the food to be “fast" but also to be delivered with a consistent quality and with good value.
McDonald’s expertise in the speed of the process, along with their efficiency of costs, along with their customer service skills – all add up to a competitive advantage in the marketplace.
Difficult to duplicate
Core competencies are attractive to firms because they allow the firm to have a relatively unique advantage in the marketplace – again think of the Apple example above – that skill set of innovation is very difficult (or very expensive) for competitors to duplicate, if not impossible?
Here is a link to a Harvard Business Review article that is worthwhile reading on this topic.
You will note that it is suggested that there are three evaluation factors that firms should use to identify the strength of the core competencies in the business. These include:
- Ability to leverage into different markets
- Extent of customer value added
- Degree of uniqueness/difficult to copy
We can consider these three questions as “tests" of the degree of value of the core competencies.
The first point of ability to leverage has been demonstrated by Apple who has been able to take the innovation expertise into multiple technology markets – such as, mobile phones, tablets, watches, computers, and even retailing.
It is also clear that Apple’s expertise in innovation provide significant customer value – as their customers are most appreciative of features and designs of the Apple products. And as highlighted previously above, the ability for competitors to duplicate Apple’s expertise is highly unlikely.