What are Core Competencies?

Definition: Core Competencies are a set of unique abilities that serve as the founding competitive advantages of any organization. They are particular skills that a company develops over time and they function as the cornerstone of its culture and competitiveness.

What Does Core Competencies Mean?

The term was brought up by the renowned academics C. K. Prahalad and Gary Hamel to identify the essential elements that constitute a business’ ability to enter new markets and develop new products or services. According to the authors, there are three fundamental factors that identify a core competency: first, they provide access to new markets and opportunities; number two, they increase the benefits perceived by the consumer of the end product and finally, they are hard to be imitated by the competition.

These competencies are not considered static, since they are the result of collective efforts and knowledge gain. They must be dynamic in order to respond properly to market shifts. By investing in core competencies, companies can take advantage of whatever they do best, avoiding at all cost to pour resources into activities that fall out of these capabilities, since they will generate a less-than-satisfactory result.


A big drug store called PharmaSolutions LLC is currently opening its services to the public. They are located in a mid-size town in the state of Dallas and the founders are very sure its business model will change the way the town does its pharmaceutical shopping. Before they opened the business they hired a consultant to get some advice about how to think strategically to set themselves apart from their local competition.

After discussing the matter, the consultant came up with three core competencies that the business possess and must advertise and exploit in order to attract new customers and opportunities. The competencies where the following: one-stop-shop, health care solutions instead of just products and personalized attention. The founders agreed that these were elements that were hard to be replicated by local competitors, since most of them were small shops and these ingredients were also perceived as valuable by customers.

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