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Applying the value chain approach to core competencies for competitive advantage includes the following steps:
1. Validate core competencies in current businesses : Core competencies should tie together the portfolio of end products and help a firm excel in dominating its industry. For example, Corning Glass’s core competence is its ability to melt specialty glass. Pyrex, television bulbs, headlamps and optical wave guides are just a few of the products of this successful producer. Procter & Gamble’s R&D expertise and marketing/distribution skills provide a significant competitive advantage in a wide range of mass consumer products (e.g., Ivory, Tide, Folgers, Crisco, Pampers).
1. Validate core competencies in current businesses : Core competencies should tie together the portfolio of end products and help a firm excel in dominating its industry. For example, Corning Glass’s core competence is its ability to melt specialty glass. Pyrex, television bulbs, headlamps and optical wave guides are just a few of the products of this successful producer. Procter & Gamble’s R&D expertise and marketing/distribution skills provide a significant competitive advantage in a wide range of mass consumer products (e.g., Ivory, Tide, Folgers, Crisco, Pampers).
Core competencies need to be continually validated. In the early 1970s, Timex held half of the global market for watches with its core competence in low-cost management of precision manufacturing. By the mid-1970, the watch industry moved to digital technology, making Timex’s core competence irrelevant.
2. Export or leverage competencies to the value chains of other existing businesses : The same set of core competencies can be exploited in multiple businesses by exporting core competencies to the value chains of other existing businesses.
3. Use core competencies to reconfigure the value chains of existing businesses : While firms may manage their existing value chains better than their competitors, sophisticated firms work harder on using their core competencies to reconfigure the value chain to improve payoffs. Otherwise, competitors may exploit opportunities.
4. Use core competencies to create new value chains : With strong core competencies in its existing businesses, an organisation can seek new customers by developing new value chains.
