How Does the Development of Core Competencies Provide Both Advantages and Disadvantages for an Organisation?

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“How does the development of core competencies provide both advantages and disadvantages for an organisation? What steps can managers take to prevent core competencies becoming core rigidities?”

In today’s world competition among firms becomes globalized and more intense. In order to become superiorly competitive, companies should enhance its competencies in a way that will allow them to achieve dominant position in a market. One way of accomplishing it is by development of core competencies. Competencies are considered core if they are skillfully performed and are principal to company’s strategy and its competiveness (Thompson et al, 2013). They are result of ‘collective learning’ activities (Prohalad and Hamel, 1990), a combination of unique skills, assets and routines (Teese, Pisano and Shuen, 1990), and knowledge sets, which altogether strategically differentiate company (Leonard-Barton, 1992) and by being valuable, rare, inimitable, and non-substitutable by nature they provide basis for sustainable competitive advantage (Hafeez, Zhang and Malak, 2002).
To begin with, the development of core competencies provides numerous advantages for an organization. Prahalad and Hamel (1990) in their research ‘Core Competence of the Corporation’ argue that these benefits can be seen as the following: development of new core and diversified products and consequently potential ability to enter new markets. Scholars have also emphasized the importance of the effective competence building as it might provide insights for vertical integration decisions assist in building beneficial alliances and prevent companies from being too dependent on suppliers. This is achieved by outsourcing resources that contribute to the creation of core products. There has been an interesting debate on the LinkedIn discussion whether outsourcing in general can be or cannot be beneficial to the…...

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