competencies emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities. As the capacity to take action, core competencies are the “crown jewels of a company,” the activities the company performs especially well compared with competitors and through which the firm adds unique value to its goods or services over a long period.
Remember, resources and capabilities serve as the foundation upon which firms formulate and implement value-creating strategies so that the firm can achieve strategic competitiveness and earn above-average returns. However, if a firm has a deficiency in some of its resources, it may not be able to achieve strategic competitiveness. For example, insufficient financial resources may prevent a firm from implementing the processes or integrating the activities required to add superior value by limiting its ability to hire workers with the necessary skills or to invest in the capital assets (facilities and equipment) that are needed.
Thus, firms not only are challenged to scan the external environment to identify opportunities that can be exploited, but also to have an in-depth understanding of their resources and capabilities. This enables the firm to develop strategies to exploit external opportunities while it also avoids competing in areas where the firm's resources and capabilities are inadequate.
Chapter 3: The Internal Environment
Not all of a firm’s resources and capabilities are strategic assets —that is, assets that have competitive value and the potential to serve as a source of competitive advantage. Some resources and capabilities may result in incompetence, because they represent competitive areas in which the firm is weak compared to competitors. Thus, some resources or capabilities may stifle or prevent the development of a core competence.
When the firm's resources and capabilities result in a core competence, the firm will be able to produce goods or services with features and characteristics that are valued by customers. This implies that firms can implement value-creating strategies only when its capabilities and resources can be combined to form core competencies.
The question is asked: "How many core competencies are required for a competitive advantage?" McKinsey & Company recommends that firms identify 3 or 4 competencies around which to frame their strategic actions.
In support of the “McKinsey Rule”, it is interesting to note that McDonald’s has four main competencies (in real estate, restaurant operations, marketing, and its global infrastructure). Also, with the actual manufacturing of automobiles and trucks expected to become a declining part of its operations, Ford Motor Company is framing its twenty-first century competitive success around competencies in the areas of design, branding, sales, and service operations.
- Summer '14