Journal of Global Strategic Management | V. 1 | N. 1 ... · PDF fileknowledge of customer...

ABSTRACTThe main object of this study is to investigate theimpact of core competence of a firm on organization-al success. Core competence is a firm-specific organi-zational signature that leads to market dominance. Itis a signature because represents a firm-specific wayof doing business, and emerges from organizationalknowledge, expertise, experience, skills, systems, tech-nology, capabilities and resources along with valuechain that all differentiate firm from their competitors.Those assets are cornerstones for organizationaloperations that firm do better than rivals. They alsohelp firm to efficiently produce winning products toincrease market share. Core competence achieves thistarget by leveraging resources and capabilities. Itimproves the quality of in-house operations withrational resource allocation and usage of distinctiveknowledge, expertise, and skills. Therefore, firm beatscompetition, and dismisses organizational weakness-es, and external threats, and takes advantage of mar-ket opportunities. A large number of firms do searchfor an effective way of managing core competence torespond rapid changes in their environments. Stayingin the business depends more on exploiting core com-petencies in order to reach future priorities and visionof the firm. Thus, a firm's strategies should be basedon core competencies to make company successful inthe market and to obtain customer value, differentia-tion, and penetration in to new markets

INTRODUCTIONA mission of strategic management is to provide afirm with competitive advantage by internal resourceallocation and capabilities, i.e., is to ensure an organi-zation on competing for future success. The strategicmanagement field is focusing on the role of competen-cies and resources that accumulate within a firm(Dierickx, Cool, 1989; Barney, 1991; Quelin, Arregle,2000; Quelin, 2000: 477) because the core competen-cy of a company not only becomes the distinct corpo-rate signature but also provides the company with itscompetitive advantage (Harvey, Buckley, 1997: 37).Because it is a pool of experience, knowledge, andsystems that create and accumulate new strategic

assets that constitute a firm's competitive advantage(Duysteers, Hagedoorn, 2000; 76). A firm acquirescompetitive strength by developing new competenciesthrough organizational transformation with acquisi-tion and integration of knowledge (Carayannis,Alexander, 2002: 626). Such transformation can beobserved in HortResearch Company, a New Zealandscientific reserach institute. The core competencestrategy process was the major driver of the transfor-mation of HortResearch into a commercially respon-sive and successful science business (Clark, Scott,2000: 495). To put another way, Lei et al. (1996), pro-posed that core competence(s) based on double looplearning produce organizational specialization that isdifficult to imitate since competencies have specialqualities can provide a sustainable competitive advan-tage in this way (Gallon, Stillman, 1995: 20).

Core competence is related to resource allocation,capabilities, knowledge, skills, and expertise alongwith value chain. It needs three elements: skills,resources and processes (Torkkeli, Tuominen, 2002:282), and it is communication, involvement, and adeep commitment to working organizational bound-aries (Franklin, 1997: 373). Knowledge resources,innovative creativity and expertise are success factorsthat create the critical potential of an organizationwhich is termed core competencies (Godbout, 2000:77). Therefore, a firm's core competence(s) is definedas a set of problem-defining and problem-solvinginsights that fosters the development of strategicgrowth alternatives (Lei et al., 1996: 549). In addition,core competencies are the integrated bundles of skillsand technologies which are competitively unique andre-deployable (Clark, 2000: 117).

Core competencies are the collective learning in theorganization, especially how to coordinate diverseproduction skills and integrate multiple streams oftechnologies (Torkkeli, Tuominen, 2002: 273), and arethe result of a social learning process in the organiza-tion (Godbout, 2000: 78). For example, technologicalcompetences are manufacturing plant and equipment,manufacturing know-how, engineering know-how andquality assurance tools, and customer competences are

CORE COMPETENCE:A COMPETITIVE BASE FOR ORGANIZATIONAL

SUCCESSGürhan UYSAL

Hacettepe University, Turkey

Journal of Global Strategic Management | V. 1 | N. 1 | 2007-June | isma.info | 5-16 | DOI: 10.20460/JGSM.2007118710

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knowledge of customer needs and processes, distribu-tion and sales channel, communication channel andcompany/brand reputation (Danneels, 2002:1103).These knowledge, know-how, and expertise lead todecisions about new product development (Quelin,2000: 477). New product development is crucialbecause it describes the extent to which Core compe-tencies are the things that some companies know how todo business uniquely well; for example, some manufac-turing corporations have consistently applied core com-petency and have gained considerable strategic valuefrom the coherency of this approach (Gallon, Stillman,1995: 21). Constantly focused on the role of competen-cies and resources, firms' strategic management teamsare becoming increasingly interested in discovering aneffective way of managing the competencies since, inhigh-tech sectors, these competencies have a directimpact on the firm's future competitive positioning(Quelin, 2000: 476). ZAP, a high-tech firm, has compe-tence in metal-forming technology, and makes bicycleframe through metal forming, and builds relationshipwith bicycle manufacturers (Danneels, 2002: 1099).The strategic differences that a firm can maintain withothers have been defined upon the extent and levels ofresources usage (Banerjee, 2003: 251). When embed-ded into the social fabric of the firm, competences canprovide sources of competitive advantage because theydepend on the unique interrelationships between peo-ple, routines and technologies that are highly inimitable(Lei et al., 1996: 552).

Core competence: LeveragingResources and CapabilitiesCore competency thinking is a powerful and widely pro-moted approach to focus and mobilize an organization'sresources; hence, a core competency is defined as anarea of specialized expertise that is the result of harmo-nizing complex streams of technology and work activi-ty (Gallon, Stillman, 1995: 20). Resources are stocks ofavailable factors that are owned or controlled by the firm(Carmeli, Tishler, 2004: 300). Each firm possesses a dif-ferent profile of tangible and intangible resources andcapabilities; hence, differences in profiles among firmsaccount for variations in the firms' competitive positionand their performance (Carmeli, Tishler, 2004: 300). Byleveraging its resources, a firm increases its strength,and uses them to overcome weaknesses and threats andtake advantage of opportunities (Higgins, 1996: 31).Leveraging resources also helps the firm to achieveunreachable goals. The differences among firms in theiraccumulated resource endowments such as skills,propensity of learning, specialized assets could becomeimportant factors to reach organizational success (Lei etal., 1996: 551) because differences and dynamism are

key determinants of competitive advantage (Carayannis,Alexander, 2002: 625). Resource-based competenciesmean competitive edge. Core competencies are corpora-tion's fundemental strengths, i.e., things that companiesdo very well (Torkkeli, Tuominen, 2002: 275), and dif-ferentiates a firm from its milieu (Banerjee, 2003: 261).

Core competencies should be built upon organization-al capabilities, and resources. Gaining superiority in acompetitive market depends on a firm's ability to iden-tify, develop, deploy, and preserve particular resourcesthat distinguish it from its rivals (Carmeli, Tishler,2004: 300). Resources are input based, capabilities arefunctional or process based, and competencies arecross-functional and based on process integration(Carmeli, Tishler, 2004: 300). Capabilities-based com-petition means the consistency of firm's product qual-ity, the insight into evolving customer needs, the abil-ity to exploit emerging markets, enter new businesses,or generate new ideas and incorporate them in innova-tions (Stalk et al., 1992: 57). Capabilities refer to thecorporation's ability to exploit its resources (Torkkeli,Tuominen, 2002: 274). Each corporation has variousresources, but companies differ in how they leveragethem (Torkkeli, Tuominen, 2002: 274). Capabilitiesmake the difference in using resources. Hence, a com-pany determines what skills or capabilities will makethem unique in the future (Hamel, Prahalad, 1994:127). For example, the secret of Wal-Mart's successagainst its rival, Kmart, which is once an marketleader in retailing industry, is a relentless focus on sat-isfying customer needs, gaining the full benefits ofcross-docking, and finally, its human resource system(Stalk et al., 1992: 59). Those are the capabilities ofWal-Mart so as to increase market share.

Wal-Mart's main objective is to improve internalactivities and develop organizational process to buildcapabilities in order to beat rivals. Such firms as GE,Xerox, Motorola, Ikea, and Kodak achieved thesegoals, and have become well known for their processinnovations as well as their product innovations; forexample, GE created the work-out (a participative,employee focused, problem-solving retreat) andprocess mapping (its version of reengineering), bothof which have led to significant cost reductions with-in the corporation (Higgins, 1996: 28). So, top execu-tives are judged on their ability to identify, cultivate,and exploit the core competencies that make growthpossible (Prahalad, Hamel, 1990: 79).

The answer to question why competence is a key toorganizational success lies on their ability in differen-tiating a firm from their competitors. To be differentand more powerful, company's capabilities and com-


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petencies should be stronger than those of other com-panies in the industry (Torkkeli, Tuominen, 2002:275). Capabilities refer to a firm's capacity to deployresources, usually in combination, using organization-al process to affect a desired end (Carmeli, Tishler,2004: 300). Capabilities are considered core if theydifferentiate a company strategically (Banerjee, 2003:|251). Thus, resources and capabilities that have highvalue (i.e., contribute to improving the firm's perform-ance) and rareness (i.e., are possesses by fewer of thefirms than the number necessary to create perfectcompetition dynamics) have the potential to createcompetitive advantage (Carmeli, Tishler, 2004: 300).

A number of recent contributions highlight the impor-tance of technological competences, technical skills,learning, and knowledge developed within companiesfor understanding performance differentials(Duysteers, Hagedoorn, 2000: 77). ULTRASONICfirm has customer competence of relations with indus-trial customers of nondestructive testing ultrasoundinstruments, good reputation and brand name, and hastechnological competence of ultrasound diagnosticsignal generation and display; therefore, those compe-tencies differentiate the firm from their competitors inproducing flaw detector with color monitor, and indeveloping medical ultrasound diagnostic devices(Danneels, 2002: 1099). Companies develop a uniqueset of skills for market positioning, combinations ofresources, technologies, and personnel that providecompetitive differentiation (Harvey, Buckley, 1997:36). Defining what expertise it possesses enables afirm to more efficiently utilize its resources(McNerney, 1995: 3). Therefore, top managementmust have a sense of where new opportunities lie,must be able to anticipate changing customer needs,must have invested in building new competencies(Hamel, Prahalad, 1994: 124).

An increasing number of companies now priorities theeffective management of competencies through direc-tories, databases, project groups, horizontal structures(Quelin, 2000: 477) since dynamic core competencescan be used to reduce uncertainty and to make imita-tion from other firms difficult (Lei et al, 1996: 549).CHEMAN's dynamic competence is INERT technolo-gy, which allows for coating of metal with glass-fusedsilica technology, and the firm exploits its competenceby adding enormous variety of fused silica columnsfor detection of variety of compounds, and developsability to coat aluminum with INERT (Danneels,2002: 1099).

Peter Drucker declares that every organization needsone core competency: innovation that is the core com-

petence because it makes competitive advantage byany other strategy possible (Higgins, 1996: 27). This iswhy; a firm focuses on innovation and internal effi-ciency to be competitive. For instance, most U.S.-based firms can either choose to acquire innovationand make it their core competence, or they can stag-nate and watch market share and profits decline(Higgins, 1996: 32). Moreover, internal efficiencydepends on skills, expertise, knowledge, values, andstructure to efficiently utilize organizational resourcesso that firm effectively competes in the market.Resources help a firm to create value in the organiza-tion, and to mitigate the pressures that industry struc-ture puts on firm profitability (Douglas, Ryman, 2003:334). The value is the necessary part of improvementof key technological competencies to extend the cur-rent product base: Value sharing and the technologicalco-operation between Saint-Gobain and Scholtes inthe market of high-temperature glass used in cookingplates is one such example (Quelin, 2000: 480). HortResearch Company identifies a series of core valuesthat include client focus, environmental ethics, honestand open communication, commitment to scientificexcellence, teamwork, and tolerance and respect fordiversity (Clark, Scott, 2000: 501).

Core competences can become instituonalized overtime and thus become part of the firm's knowledge-cre-ating system (Lei et al., 1996: 552): Technologicalknowledge, know-how, expertise and technical capa-bilities support firm's current products. Hence, a com-pany should identify which technologies fit the marketand customer needs as well as the organization's corecompetencies and current strategic plans (Torkkeli,Tuominen, 2002: 271). An example is Canal +, theFrench pay television company, which has alwaysinvested in the technological competencies used in thedesign of television decoders to remain independentand to control other firms' access to its market (Quelin,2000: 480). In addition, competences leverage learningand skills to build growth alternatives, and reduceuncertainty (Lei et al., 1996: 564). In a sense, toachieve competitive edge, core competencies shouldprovide potential access to a wide variety of markets,make a significant contribution to the perceived cus-tomer benefits of the end products, and should be dif-ficult for competitors to imitate (Prahalad, Hamel,1990: 84). They should also be (1) unique to the corpo-ration, (2) essential to the development of core prod-ucts and eventually to end products, and (3) marketableand commercially valuable (Torkkeli, Tuominen, 2002:275). Hence, successfully developing core competen-cies depend on organizational learning, knowledgeacquisition, experimentation and dynamic organiza-tional routines because those factors lead to accumula-


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tion of universal and tacit knowledge, continuousimprovement and firm-specific skills and capabilities(Lei et al., 1996: 555). Tacitness reflects the extent thata competency is intuitive, non-verbalized and yet unar-ticulated and tacit knowledge is inherently moreambiguous than articulated knowledge (King,Zeithaml, 2001: 77). Tacit knowledge protects a com-petency from being imitated by competitors.Organizational learning activities include the processesof knowledge-based organizational transformation,and so, the result of improved organizational learningis enhanced strategic flexibility (Carayannis,Alexander, 2002: 626). Moreover, cooperation with theother firms can help an organization to accomplish thisgoal. Alcatel made cooperation with Sharp in the termi-nals market to acquire new competencies. Alcatel hasknowledge and expertise in the radio technology and intelecommunication networks and Sharp has superiorityin LCD screens, memory storage and communications(Quelin, 2000: 480). Through cooperation, technicalcompetencies in Sharp enable Alcatel to gain accessinto new technological and values that do not possesspreviously, and vice versa. The right technology can bean essential part of resources needed in the core com-petence concept (Torkkeli, Tuominen, 2002: 282)because a technology-driven firm creates, renews, andupgrades its latent and enacted capabilities based on itsstock of explicit and tacit resources by technologicallearning (Carayannis, Alexander, 2002: 626).

Building core competencies will enhance using firm'sinternal resources effectively and taking advantage ofcapabilities in developing successful products, pene-trate emerging markets, and satisfying customerdemands. In a sense, the real sources of advantage areto be found in management's ability to consolidatecorporate wide technologies and production skills intocompetencies that empower individual businesses toadapt quickly to changing opportunities (Prahalad,Hamel, 1990: 81). Therefore, to dominate and shapethe dynamic market, managers should think of neededskills, technologies, and capabilities that organizationmust possess. Wright et al. (1998) identified 3 possi-ble core competencies of petrochemical refineries: (1)skilled workforce, (2) efficient production, and (3)new business development. Infrastructure capabilities,for example, concern the internal operations of thecompany, and technological capabilities provide directsupport to the product or service portfolio (Gallon,Stillman, 1995: 22).

David Whitwan, CEO of Whirlpool, believes that theonly way to gain lasting competitive advantage is toleverage your capabilities around the world becausecompetitive advantage means having the best tech-

nologies and processes for designing, manufacturing,selling, and servicing your products at the lowest pos-sible costs (Higgins, 1996: 31), and (Torkkeli,Tuominen, 2002: 271). Duysters and Hagedorn (2000)say that technological core capabilities generate per-formance differentials. In addition, technologicalcompetencies contribute to firm' competitive strengthby determining the renewal of product lines (Quelin,2000: 476) because technologies can help a companyto build competencies around its strategic resources.In order to reach those targets above, companiesimplement, build, and manage core competence appli-cation explained below.

Managing Core CompetenciesActivities, skills and disciplines, which are termed pri-mary capabilities, are the building blocks of core com-petencies (Gallon, Stillman, 1995: 21). The aptitudes,the skills and motivation of the employees are neces-sary conditions for developing a core competencebecause knowledge is carried through human resourcesto achieve the company's objectives (Godbout, 2000:78). In a sense, those core competencies must be acapability which the organization can sustain over time(Torkkeli, Tuominen, 2002: 274). In the general hospi-tal industry, the ability to develop capabilities, whichare superior to its competitors, is critical for success(Douglas, Ryman, 2003: 335).Accordingly, a corecapability is a knowledge-set that distinguishes a firmfrom its competitors because the knowledge-set has acontent embodied in employee knowledge and skills,technical systems, managerial systems and values andnorms (Banerjee, 2003: 253). The management oftechnological capabilities is important because it pro-duces increasing economic returns as they focus morenarrowly on knowledge assets and processes that arenon-substitutable, rare, and valuable (Carayannis,Alexander, 2002: 626). 3M company, for example,builds their core competence on capabilities in surfacecoating formulations and continuous coating processesand on know how in technical skills (Gallon, Stillman,1995: 21). COMP firm in a computer business hasskills in peripheral integration and network integration,and produces hardware for portable video editor builton existing technological competence (Danneels,2002: 1099). These capabilities provide direct supportto the product or service portfolio, can provide thebasis for significant product superiority, and also givethe firm broad strategic value (Gallon, Stillman, 1995:21). Success in product development and strategicvalue comes from firm's core competencies that areessential to the development of core products and endproducts, and that are essential to the implementationof the strategic vision of the corporation (Torkkeli,Tuominen, 2002: 274).


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Core competence development efforts are based oncapabilities, resources, organizational learning, R&Dworks, technology, and work teams. In addition, thecontent and form of the core competencies are createdthrough the linkages between the organization's goals,structure and culture (Godbout, 2000: 78). If compe-tencies reside in organizational culture and values,they will be unique and causally ambiguous, and cannot to be imitated by rivals because they may be moreuncertain and less mobile to the rivals (King,Zeithaml, 2001: 77). The core competency approachin HortResearch Company fitted well with the cultureof this company (Clark, Scott, 2000: 506). The opera-tional learning, i.e., learning from experience, con-tributes to the management of core organizationalcapabilities, resource allocation, and competitive strat-egy (Carayannis, Alexander, 2002: 629).

A core competence is acquired through acts of learn-ing on the success and failures of recombination ofknowledge resources (Banerjee, 2003: 252). The hier-archy of developing competence is resources, capabil-ities, competency and finally core competencies(Torkkeli, Tuominen, 2002: 274). A firm firstly deter-mines candidate abilities, knowledge and skills whichare valid and applicable in practice. The firm some-times also creates horizontal workgroups to foster thesharing of experiences and to facilitate the develop-ment of new ideas (Quelin, 2000: 476). These abili-ties, skills etc. should be analyzed before consideredas core competences, and pass some qualification cri-teria (Gallon, Stillman, 1995: 24): Does it harmonizestreams of critical technological capabilities? Does ittranslate into customer-perceived value? Is it difficultto imitate? Are there substantial barriers to competi-tors? Is it extendable to new markets, i.e., does it pro-vide market mobility? Moreover, dynamic core com-petences are developed by the integration of systemicorganizational learning of knowledge and continuousimprovement based on experimentation and the devel-opment of firm-specific skills (Lei et al., 1996: 549).Motorola cares about these criteria above, and is theleader in the development of semiconductor solutionsfor wireless communications systems (Gallon,Stillman, 1995: 24). They recognize the potentialcompetencies in order to develop and exploit, and toleverage their competitive strength in the market. Thismeans appealing to and utilizing potential in theorganization as the success factor for an organization'ssustainability (Godbout, 2000: 77). R&D activitiescan help a firm to find the potential competencies. Itrenews the firm's portfolio of competencies by identi-fying the new technologies that are likely to becomecrucial over time (Quelin, 2000: 481). Therefore,

firms and managers ought to show high commitmentto core competence program to resolve business chal-lenges (Gallon, Stillman, 1995: 25).

Managers can also set up relationships among univer-sities, competitors, suppliers and clients. Throughthese linkage strategies, and by establishing durablerelationships with external research partners, firms areable to stay abreast of current developments, increasetheir proximity to competence, and gain access to theresources, knowledge and know-how that they do notpossess (Quelin, 2000: 477). These strategic alliancesallow a firm to combine resources across organization-al boundaries in pursuit of competitive advantage(Douglas, Ryman, 2003: 333). Strategic technologyalliances cannot be considered as effective short-termvehicles for the acquisition of core competencies, butinstead should be used to complement endogenouscapabilities in the long run (Duysters, Hagedoorn,2000: 84). Because of the increasing complexity oftechnologies, rapid technological changes, and theincreasing costs of R&D, firms are no longer able tomonitor all the technological developments that areimportant for their core markets; therefore, strategictechnology alliances enable companies to monitorseveral technological developments, and simultane-ously, let them concentrate on a few, most promising,projects internally (Duysters, Hagedoorn, 2000: 84)

Organizations put core competencies into practice toenhance competitiveness in existing product cate-gories, or to focus R&D and technology investments(Gallon, Stillman, 1995: 20). R&D is important incore competency practice. Quelin (2000) believes, itdevelops new key technologies, and implementsstrategies that lead to an improvement and acquisitionof fundemental techonologies. The ability to achieveeconomies of scope for many crucial products isfounded on a common technological knowledge base(Duysters, Hagedoorn, 2000: 84). In the internationalcomputer industry, technological knowledge increasesthe performance of corporate. Thus, technology selec-tion is important to companies. The aim of technologyselection is to obtain new know-how, components, andsystems which will help the company to make morecompetitive products and more effective processes(Torkkeli, Tuominen, 2002: 271).

To meet today's R&D challenges; many of the compa-nies have been attempting to devise new methods formanaging technological competence (Quelin, 2000:476): They compile skills in the organization, manag-ing the breadth of the competence base, or monitoringthe competencies that accumulate at the business unitlevel. For instance, examples of textile competencies


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are a firm's expertise in managing international divi-sion or in developing innovative manufacturingprocesses (King, Zeithaml, 2001: 77). Therefore, todevelop a new strategy based on core competence,managers need to understand the purpose and poten-tial of core competencies, and the details of the majorcomponents involved (Clark, Scott, 2000: 504).

Building competence requires a large amount andvariety of employee participation, and demands rigor-ous analytical activity (Gallon, Stillman, 1995: 25),and organizational learning (Lei et al., 1996: 553). Inaddition, core competencies should be developedaround strategic business factors because thisapproach leads to a common understanding of wherethe key performance gaps were in the business (Clark,Scott, 2000: 507). Core competence-based competi-tive advantage can be sustainable over time, if thecompany exploits cumulative learning about the tech-nology effectively (Torkkeli, Tuominen, 2002: 282).Recent conceptual work suggested the importance oforganizational learning for core competence develop-ment (Lei et al., 1996: 553). Organizational learningtranslates knowledge into core competences. This isbecause core capabilities are a function of the firm'sability to organize itself into a knowledge-creatingsystem (Lei et al., 1996: 552). In addition, knowledgecreation have often involved the formation of certaintypes of internal horizontal structures such as projectmanagement, virtual R&D workgroups and the estab-lishment of a co-operative working relationship withthe surrounding environment including universities,laboratories, competitors, clients and suppliers(Quelin, 2000: 476).

With knowledge of the organization's existing andpotential technical competencies, a firm focuses onevaluating the strategic value of current competencies,and forming an initial view on which potential techni-cal competencies might be strategic (Gallon, Stillman,1995: 29): A firm also decides where, when, and howto expand the scope of the core competencies. Themajor problem in managing competencies and R&Dactivities is uncertainty. This phenomenon affects firmsthroughout their activities in mobilizing the basic tech-nological competencies, and internally controlling theinteractions between these competencies, and mobiliz-ing all useful competencies (Quelin, 2000: 476).

How can organizations achieve the core competence?They should follow strategic fit and strategic intentapproach, and fit their competencies into organization-al resources, and internal strengths and weaknesses,and external threats and opportunities. The core com-petence approach requires ongoing commitment to

develop and pursue a long-term strategic intent (Clark,2000: 125). Full utilization of core competencies andtheir development into competitive advantage isessential to the realization of the goals established bystrategic intent (Torkkeli, Tuominen, 2002: 275).Strategic fit model, i.e. SWOT approach, appears to bemore popular in Western firms, and leveragingresources is more popular in Japan (Higgins, 1996:31): This is why Japanese firms are niche players inthe market and give importance to resources, andWestern firms are consciousness more about theirinternal and external environments, and give impor-tance to strategic fit.

State-of-the-art companies adopt core competenceapproach to go beyond traditional way of doing busi-ness. For example, the combination of a specializedtechnology base and more diversified sales suggeststhat the internally generated technological core com-petences can be applied beyond the traditional com-puter industry (Duysters, Hagedoorn, 2000: 84). Aresource or skill-based view focusing on developmentand application of core competences is offered to sup-plement the traditional approaches (Lei et al., 1996:549). On the other hand, Duysters and Hagedoorn(2000) discuss that specialized core knowledge base,the depth of technological competences, technologicalspecialization, and the focus of technological skillsappear to generate performance differentials betweencompanies in a high-tech sector, such as the world-wide computer industry. Another example to that isTELECOM Company. TELECOM's technologicalcompetence includes RF signal transfer and amplifica-tion, and it exploits these competencies by introducingnew editions of amplifiers for cable TV customers(Danneels, 2002: 1099). The firm takes advantage ofanother competency, which are reputation and rela-tions with customers in wire line telecom market,especially cable TV operators (Danneels, 2002: 1099).Hence, a firm needs knowing how to act, knowledgein practice, being able to act with the help of the tools,and special processes such as interactions, informationmanagement and evaluation (Quelin, 2000: 477):Knowing includes all of a company's knowledge, cul-ture, professional experience and way of thinking, andknowing how to do is all of the practices and solutionsthat are meant to solve problems.

Quelin (2000) explains why develop a strategic man-agement of competencies: First one is to enhance thefirm's flexibility. Strategic flexibility means that a firmfaces a greater range of potential options for actionwhich can then be leveraged to achieve a better fit toits competitive environment (Carayannis, Alexander,2002: 626). Secondly, they increase the company's


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added value. A competence generates added valuefrom firm's products, processes and organization.Finally, the most important one, a firm's performanceis determined by its competence. Therefore, it shouldbe explained how core competence achieves organiza-tional success.

Core Competence: The Roadto Organizational SuccessCorporate survival is in the long term dependent on theability to exploit core competencies (Torkkeli,Tuominen, 2002: 282) because technology, learningand skills are specific to the context of their develop-ment and use within the firm, and competencies mayhave little or no market value to other firms (Lei et al.,1996: 551). Core competencies are irreversible invest-ments that determine the future capabilities and strate-gic opportunities (Lei et al., 1996: 551). Technology isalso key to success since the right technology can offervery effective leverage when a company builds its corecompetencies (Torkkeli, Tuominen, 2002: 271). Corecompetence is an entrepreneurial decision-ability torespond to the dynamics of the environment (Banerjee,2003: 252). Firm-specific capabilities, skills and tech-nologies allow a firm to rapidly catch opportunities inthe market, and to constantly watch the changes in thebusiness environment. For example Fujitsu, Honda,Sumitomo and NSK's competence-based missionsallow them to obtain achievements and to see opportu-nities arising in the business (Carr, 1997: 55). Anotherexample is HortReserach Company, a New Zealandscientific research institute: With competition forresearch and development funding increasing,HortResearch experience shows that core competencestrategy process helps senior management to link theportfolio of research projects with changing industryand sector priorities (Clark, Scott, 2000: 496).

Core competencies are therefore currently viewed asthe primary means to enable organizations to respondto their environments (Godbout, 2000: 78).HortResearch Company successfully followed thecore competence based strategy process throughout-developing industry foresight, generating consensusand committing to an ambitious, future strategicintent, identifying core competencies to create thisfuture (Clark, Scott, 2000: 505).

To reach success, core competencies should not beobsolete or irrelevant; conversely, they should be sus-tained and improved (Torkkeli, Tuominen, 2002: 275)to develop a unique and effective product/market pol-icy (Godbout, 2000: 78). For example, Fujitsu sawtheir core competence in terms of complementary

technologies, which could be directed into a numberof market areas such as multi-media, telecommunica-tions, semiconductors, as well as mainframe and per-sonal computers (Carr, 1997: 54). That example showsthat the competitiveness of companies derives from anability to build the core competences that will result innew business development more speedily than others(Möllersten, Sandberg, 2004: 81). The new businessdevelopment competence seems to have a marketingorientation, and seems to emphasize a focus on thecustomer as a source of competitive advantage(Wright et al., 1998: 21). A core competence processfor new business development programmes shouldbegin internally interviewing individuals, and then,after interview, the potential core competencies areevaluated with customers, suppliers, and industryexperts (Clark, 2000: 116).

New product planning should also include the fore-casting the future. Forecasts are used in the develop-ment of new products, in the hiring of new personnel,in the addition of capacity in current positions, in theestablishment of new operations, and in any otherdecision requiring an irreversible investment(Makadok, Walker, 2000: 854). The success or failureof an organization will depend on the accuracy of thedecision-makers vision of the future (Makadok,Walker, 2000: 855). For small and large organizations,being just one step ahead of the competition is not suf-ficient unless you can ascertain that you can be contin-uously ahead (Godbout, 2000: 77).

Building new core competencies helps the firm to pen-etrate into emerging markets by developing new prod-ucts that fit to challenges and demands of these mar-kets. They form products in which intra- and inter-organizational business strategies, innovative process-es, logistics and individual competencies find theirexpression (Godbout, 2000: 78). Therefore, a newproduct can satisfy customer quality with the require-ment specification (Osterlund, 2001: 161). In addition,product innovation contributes to the competitivenessof the firm through its dynamic and reciprocal relationwith the firm's competences (Danneels, 2002: 1095).

Company's major brands will be successfully intro-duced to market as long as they are manufactured effi-ciently. Core competence efficiently produces thefirm's products and makes good business based uponthem (Möllersten, Sandberg, 2004: 84). It is the basefor making competitive products (Osterlund, 2001:160) by anticipating customer needs and leveragingresources to provide unique value to customers (Clark,2000: 116). Textile executives say, their competenciesunderstand the needs of end users of their products, and


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flexible manufacturing through quick changeovers(King, Zeithaml, 2001: 82). Moreover, new productsare created by linking competences relating to tech-nologies and customers (Danneels, 2002: 1095).Without knowledge and know-how, organizationsbecome dependent on suppliers and external technolo-gy and fail to control the key resources of their sustain-ability (Godbout, 2000: 78). The only way to earnabove-normal economic returns is to forecast the futurevalue of resources to the firm more accurately thancompetitors (Makadok, Walker, 2000: 855). Core com-petence development should include customer needs tosupport them in their business operations. For example,in Sweden, an executive manager of a pulp produceremphasized the importance of giving support to thecustomer so that the customer's paper machines workproperly (Möllersten, Sandberg, 2004: 86). This sup-port will attract new customers toward the company,and hold existing buyers.

Attracting new consumers requires new competenciesand organizational renewal to meet the customerdemands and to survive in a business environment. Anexecutive manager emphasizes to know customerneeds to build a completely new competence in mar-keting and sales (Möllersten, Sandberg, 2004: 87).New competencies are the knowledge for productinnovation that has been recognized as a primarymeans of corporate renewal that involves the buildingand expansion of organizational competencies overtime (Danneels, 2002: 1095). Therefore, new productsin the market will face high success. In other words,new products with a closer fit to firm competencestended to be more successful because competenciesinvolve employee knowledge and skills, technical sys-tems, administrative systems, values and norms(Danneels, 2002: 1096) and because competenciesconsist of the synergy of intellectual assets such asmotivation, employee effort, technological and profes-sional expertise, and methods of collaboration andmanagement processes (Godbout, 2000: 78). A corpo-rate focus on core competencies builds synergybetween units and provides the rationale for resourceallocation and investment (Clark, 2000: 121).

Core competence is a key to competitive edge becauseit represents a combination of business specializationand economic utilization of human skills, and hence, iscritical success factors of excellent organizations andtrend-setting companies (Godbout, 2000: 77). Becausea distinctive competence is a differentiated set of skills,complementary assets, and organizational routineswhich allow a firm to coordinate a set of activities thatprovides the basis for competitive advantage in a partic-ular market or markets (Williamson, 1999: 1094). In the

general hospital industry, the acquisition and deploy-ment of a set of valuable and distinctive competencieswill enable a hospital to establish a favorable reputationin the market, thereby, attracting customers (Douglas,Ryman, 2003: 336): That is, the more distinctive hospi-tal's competencies are in a market, the greater the com-petitive advantage. A firm's core competencies andcapabilities profile the current product/market situationand then assess capabilities in terms of future marketopportunities (Clark, 2000: 116). For example, formoney market mutual funds, the particular competenceis the ability to forecast changes in short-term interestrates that has an impact on the economic surplus gener-ated by the fund and its growth (Makadok, Walker,2000: 853). Moreover, it uses tangible materials such asequipment, machinery, mail list and intangible materi-als such as manufacturing know-how, understanding ofcustomer needs (Danneels, 2002: 1102).

Much recent research has shifted from focusing ontangible assets as a source of competitive advantage toinclude intangible assets such as competence andexperience (Pehrsson, 2004: 272). This utilization ofresources means improvement in organizational learn-ing, i.e., learning by doing. Learning new competencemakes a firm competitive in the future (Osterlund,2001: 159) because the combination of firm-specificassets or resources enables a firm to accomplish agiven task (Danneels, 2002: 1102). By doing this, corecompetencies give a company power to control thefuture shape of markets and industries, and to deter-mine the destiny of organizations (Clark, 2000: 115).For instance, TELECOM's core competency is RFamplifiers, and its wireless products are closelyaligned with its technological competences that givesthe firm the ability to design and manufacture a phys-ical product with certain features that customer wants(Danneels, 2002: 1103). A company can perform highgrowth rate by leveraging core competence.Therefore, firm strategies should be based on corecompetencies which are unique, knowledge-based,organization-wide capabilities (Clark, Scott, 2000:496). Hence, managers must think of how the compe-tence might be applied in new product areas(Danneels, 2002: 1108). For example, firms such asEastman Kodak, IBM and Motorola apply their corecompetencies to develop new successful productsbecause their competencies give them this ability.Eastman Kodak's core competence might be consid-ered imaging; IBM's might be considered integrateddata processing and service, and Motorola's unteth-ered communication (Williamson, 1999:1093).

Strategy making focuses on the firm's heterogeneousresources, capabilities and competencies as those pro-


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vide a more stable basis for competitive positioning ina turbulent environment (Clark, 2000: 116). Becausecompetencies produce high-quality products that addvalue to consumers. According to Douglas and Rymanstudy (2003), the value of a hospital's strategic compe-tencies is positively related to hospital financial per-formance. Pehrsson (2004) also found the same resultthat high strategy competence is generally associatedwith high performance of the entrant business. Theway in which competencies are mustered will be a pri-mary factor in determining the degree of differencebetween average and superior performance (Godbout,2000: 83). Because it provides a new way of thinkingabout future priorities and positioning, which are thefactors critical for successful core competence strate-gy implementation (Clarl, Scott, 2000: 507). In thecontemporary management literature, there is prevail-ing belief that organizations which learn to work sys-tematically with their core competencies achieve con-siderable strategic power (Godbout, 2000: 78). It alsodevelops an organization's capability in buildingshared vision, personal mastery, and system thinkingthat is to understand wholes, and to learn how theactions shape the strategy (Osterlund, 2001: 165). Thisrequires organizational changes. The most successfulchanges and turnarounds in the Western industrialworld are cases where organizations have concentrat-ed on the core competencies of the organization andthe quality of competencies of their employees(Godbout, 2000: 76). At the organizational level, corecompetence based strategy making will translate intochanges- new products, new processes, new skills andnew people (Clark, 2000: 123). For instance,HortResearch Company culminates the transformationof their organization from a bureaucratic Governmentdepartment to a commercially successful science busi-ness by the process of developing a new strategy basedon core competencies (Clark, Scott, 2000: 496).

The core competence approach to strategy making isonly one of many contributions within emergingresource based view of the firm, and arrived at a timewhen executives in large corporates were aware thatmany of the traditional approaches were inadequate,and it offered a compelling rationale for corporatestrategy decisions, resource allocation and competi-tion (Clark, 2000: 115). Moreover, a core competencehelps an organization achieve its chosen competitiveadvantage by providing customer value, competitordifferentiation, and extendibility to markets (Franklin,1997: 373). Therefore, the acquisition and develop-ment of the right core competences to create future isclearly a strategic issue (Franklin, 1997: 374) becauseshaping future deals with positioning the firm in theindustry (Douglas, Ryman, 2003: 333). Therefore,

forecast the future is a specific competence that a firmshould have (Makadok, Walker, 2000: 854).HortResearch Institute is successful in implementationof core competence strategy making by managing thethree core elements of their business: Anticipatingfuture needs, managing integrated research teams, anddelivering innovative and effective solutions (Clark,Scott, 2000: 501). Makadok and Walker's study (2000)shows that superior forecasting ability generates aneconomic surplus, and that the stronger a firm's fore-casting competence, the larger the firm will subse-quently grow. Two key components of firm successare firm core competencies and industry structure;thus, a firm must develop competencies that allow it tosuccessfully position itself within its industry(Douglas, Ryman, 2003: 333).

Any company that aims to obtain competitive edgeshould build causal ambiguity to save their core com-petencies. Executives emphasize that if a competitorcould copy their information systems, which is theircore competence, they would lose much of their com-petitive advantage (King, Zeithaml, 2001: 82). Causalambiguity, which is ambiguity about the link betweenfirm resources and sustained competitive advantage,protects resources from competitive imitationalthough socially complex resources such as a goodreputation and trust are time-consuming and expen-sive to imitate (King, Zeithaml, 2001: 76). Causalambiguity among competitors protects the firmbecause competitors cannot imitate valuable compe-tencies if they do not understand the relationshipbetween these resources and competitive advantage(King, Zeithaml, 2001: 76).

Discussions and ConclusionThis study is about investigating the impact of corecompetence of a firm on organizational success. Thestudy aims to clear two important questions: What arewe really good at? What distinguishes us in the mar-ketplace, adds value to our products and services, andgives us a competitive advantage? (McNerney, 1995:3). The reason to focus on those questions is becausethe translation for "core competency" is market domi-nance (McManus, 1995: 17). It is a market dominancesince a core competency is simply something a com-pany does better than any of its competitor(Vadhanasiripong, 2000: 7).

Core competence is a firm-specific organizational sig-nature that introduces winning products to market thatprovides a firm with competitive advantage. The cor-porate signature emerges from organizational knowl-edge, expertise, experience, systems, technology,skills, capabilities, and resources. Those are the fac-


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tors that differentiate the firm in the market, and thatare difficult to imitate by rivals, and finally, that devel-op new assets and specializations within the organiza-tion in order to catch market opportunities.

A firm obtains organizational success with the help ofcore competence that contains distinct qualities above,and that provides a company with rational resourceusage to produce successful products. New productdevelopment and new market penetration based oncore competence strategy enable the firm to have newgrowth alternatives. Because core competenceinvolves technologies and social learning unique tothe firm. For example, competencies such as technicalknow-how, quality improvement instruments, knowl-edge about consumer requirements, and firm reputa-tion make the firm build winning strategies. That is tosay, leveraging resources enhances company's com-petitive superiority. Moreover, core competenceimproves the quality of in-house operations by inte-grating technology, skills, experience, and know-how.

Distinctive core competencies differentiate the firmfrom their competitors in how to use and leverage theirresources to beat the competition. They also provide amanagement for dismissing organizational weakness-es and external threats. Each corporation has variousresources, but companies differ in how they leveragethem (Torkkeli, Tuominen, 2002: 274). Capabilities,which are a set of process in the organization, alsomake difference in organizational operations and man-ufacturing to increase product quality. Duysters andHagedoorn (2000) believe that technical core capabil-ities generate performance differentials. Therefore,capabilities should have importance in developingcore competence strategy because both capabilitiesand core competencies manufacture high-qualityproducts, watch customer wants, and develop newproducts to put into markets. The importance comesfrom the ideas that capabilities refer to the corpora-tion's ability to exploit organizational resources(Torkkeli, Tuominen, 2002: 274). This is why upper-level managers is evaluated by managing and exploit-ing core competence of their organization.

To increase organizational efficiency depends mainlyon executing core competence strategy. Because acompetence uses specialization, knowledge, skills,and experiences to effectively run resources. Theseresources build organizational value on end productsconsumed by customers. Thus, plenty of firms searcheffective ways for managing competencies to take themost advantageous, and to decrease uncertainty. In asense, the real sources of competitive advantage arethe management's ability to consolidate corporate

wide technologies and production skills into compe-tencies that empower the firm to adapt quickly tochanging opportunities (Prahalad, Hamel, 1990: 81).

Firms develop core competence to support their currentproducts, and so, to increase their competitiveness.This is why, in addition to capabilities, activities; tech-nology etc., effective management of developing com-petencies should include the experiences, skills andaptitudes of human resources that use knowledgeresources to achieve organizational goals. Becausehuman resources of firm uses knowledge resources toreach organizational goals. Therefore, employeesought to join to efforts of developing core competence.These efforts are keys to competitive success becausecompetencies increase the organizational flexibility toeffectively respond to the business environment.

Core competence encourages entrepreneurial activi-ties in the organization to respond rapid changes in theenvironment. That will result in firm survival in thelong run. To stay in the business depends more onexploiting competencies because it identifies thefuture priorities, capabilities, and opportunities. Thesuccess or failure of an organization will depend onthe accuracy of the decision-makers vision of thefuture (Makadok, Walker, 2000: 855). In addition,core competence improves synergy among organiza-tional departments by collaborating resources, experi-ences, knowledge and skills. It is critical success fac-tors of excellent organizations and trend-setting com-panies, and represents a combination of business spe-cialization and economic utilization of human skills(Godbout, 2000: 77).

Competencies show a firm its present situation in themarket, and help a firm to monitor and acquire need-ed capabilities to catch market opportunities. Thecombination of firm-specific assets, resources, andcapabilities enable a management to accomplish thistask (Dannels, 2002: 1102).

Core competence has an ability to give a companypower to control the future shape of markets andindustries, and to determine the destiny of organiza-tions (Clark, 2000: 115). Core competence providesthis power to firm with new product development.New products, which are built on competencies, aresuccessfully introduced into the marketplace becausecompetencies involve specific and distinctive organi-zational knowledge, skills, and values. Therefore, indevelopment of competence-based new product, topmanagement should call attention to customerdemands to satisfy them in their business operations.This will lead to attracting new buyers for the compa-


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ny. An executive manager emphasizes to know cus-tomer needs to build a completely new competencies(Möllersten, Sandberg, 2004: 87), and new products.

In conclusion, core competence determines the degreeof difference between average and superior perform-ance (Godbout, 2000: 83). It helps a management toshape firm's market position by forecasting future.Superior forecasting ability generates an economicsurplus, and the stronger a firm's forecasting compe-tence, the larger the firm will subsequently grow(Makadok, Walker, 2000: 855). Core competencemeans value for consumer, differentiation of a firm,and entrance to new markets; therefore, organization-al strategies should be based and built on core compe-tencies to be winner and successful in business life.The most successful changes and turnaround in theWestern industrial world are cases where organiza-tions have concentrated on the core competences ofthe organizations and the quality of competences oftheir employees (Godbout, 2000: 76).

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