Core Competencies vs Competitive Advantage
Core competencies and competitive advantages are closely related to one another as they both help companies achieve greater market share, customer satisfaction, loyalty and greater profits. Core competencies generally lead to competitive advantages, although this may not always be the case. Core competencies and competitive advantages both help a company stand apart from its competition, but are not the same. The article offers a clear explanation on each term and marks their similarities and differences through examples.
What is Competitive Advantage?
Competitive advantage occurs when a company is able to achieve a competitive edge with regards to is products, services, strategies, skills, etc. than its competitors. There are two types of competitive advantage; cost leadership and differentiation. A competitive advantage is something that will help the company stands out from its competitors.
Competitive advantages can be achieved by gaining access to cheaper raw materials, through intellectual property, first mover position, convenience in location, etc. An example of a competitive advantage would be the edge that Google has above other search engines. Google is the best at optimizing searches and has pushed technology beyond what competitor’s thought was possible. A competitive advantage will aid a firm to differentiate its goods and services from competitive offerings. Having a competitive advantage can also contribute towards improving customer loyalty which can go a long way in times of financial difficulty. Building a strong brand name through creative advertising can aid in marketing a company’s competitive advantage.
What is a Core Competency?
Core competency refers to a specific set of skills and expertise that a company may have over its competitors. In order for a core competency to exist, 3 criteria must be met; those are market access, benefits consumers, unique and difficult to imitate. One of the most essential aspects of a core competency is that they help gain access to a range of markets and consumers. Core competencies also bring benefits to consumers in terms of lower cost and better quality products, and cannot be easily copied or imitated. Core competencies include things like, technological knowhow, skilled individuals, supply systems and processes, customer relationship management skills, etc. For example, Tesco has emerged as one of the largest retailers in the world because of their core competencies in effectively managing supplies through their innovative supply systems, customer focused selling strategies, personalized customer interface for online shopping, an efficient delivery mechanism, etc.
Competitive Advantage vs Core Competency
Even though these terms may sound quite similar to one another, competitive advantage and core competency are quite distinct. A core competency is a specific skill set or expertise that can lead to a competitive advantage. For example, a core competency in innovative supply systems can lead to increased efficiencies and lower costs; the lower cost being the competitive advantage. Volvo’s core competency lies in their ability to research and develop automobiles that offer the high protection and safety standards. The company’s competitive advantage lies in providing a differentiated product valued for its high safety standards that surpass its competitors.
Summary:
Difference Between Competitive Advantage and Core Competency
• Core competencies and competitive advantages are closely related to one another as they both help companies achieve greater market share, customer satisfaction, loyalty, and greater profits.
• Competitive advantage occurs when a company is able to achieve a competitive edge with regards to is products, services, strategies, skills, etc. than its competitors.
• A core competency is a specific skill set or expertise that can lead to a competitive advantage.
• In order for a core competency to exist, 3 criteria must be met; these are market access, benefits consumers, unique and difficult to imitate.