7/27/2019 Competence.doc

1/5

Competence

A competence becomes a core competence when the well-performed activity is

centralto the companys strategy, competitiveness, and profitability

Often, acore competence results from collaboration among different parts of

an organization

Typically,core competencies reside in a companyspeople, not in its physical

assets

A core competence gives a company a potentially valuable competitive and

collaborative advantage

Examples of core competencies

Skills in manufacturing a high quality product

System to fill customer orders accurately and swiftly

Fast development of new products

Better after-sale service capability

CompetenciesCompetencies

Competencies

CoreCompetencies

Distinctive

competencies

7/27/2019 Competence.doc

2/5

Superior know-how in selecting good retail locations

Innovativeness in developing popular product features

Merchandising and product display skills

Expertise in an important technology

Expertise in integrating multiple technologies to create whole families of

new products

The Sustainability of Competitive Advantage

Barriers to imitation

Speed of imitation by competitors in reducing advantage

Imitation by acquiring similar resources

Imitation of capabilities (more difficult)

Limits on competitors

Prior strategic commitments

Absorptive capacity for change

Industry dynamism

The rapid innovation shortens product life cycles

Avoiding failure and sustaining competitive advantage

Focus on the building blocks of competitive advantage.

Institute continuous improvement and learning.

Track best industrial practice and use benchmarking.

Overcome inertia.

7/27/2019 Competence.doc

3/5

Along-term competitive advantage that is not easily duplicable or surpassable by

thecompetitors.

Developing Sustainable Competitive Advantages

1. Customer Loyalty: Customers must be committed to buying merchandise and

services from a particular retailer. This can be accomplished through retail branding,positioning, and loyalty programs. A loyalty program is like a "Target card." Now, when

the customer uses the card as a credit card, Target can track all of their transactions and

store it in their data warehouse, which keeps track of the customers needs and wants

outside of Target. This will entice Target to offer products that they do not have in stock.

Target tracks all sales done on their cards. So, Target can track customers who use their

card at other retailers and compete by providing that merchandise as well.

2. Location: Location is a critical factor in a consumer's selection of a store.

Starbucks coffee (shown here Figure 1) is an example. They will conquer one area of a

city at a time and then expand in the region. They open stores close to one another to let

the storefront promote the company; they do little media advertising due to their locationstrategy.

3. Distribution and Information Systems: Walmart has killed this part of the retailing

strategy. Retailers try to have the most effective and efficient way to get their products at

a cheap price and sell them for a reasonable price. Distributing is extremely expensive

and timely.

4. Unique Merchandise: Private label brands are products developed and marketed

by a retailer and available only from the retailer. For example, if you want Craftsman

tools, you must go to Sears to purchase them.

5. Vendor Relations: Developing strong relations with vendors may gain exclusive

rights to sell merchandise to a specific region and receive popular merchandise in shortsupply.

6. Customer Service: This takes time to establish but once it's established, it will be

hard for a competitor to a develop a comparable reputation.

7. Multiple Source Advantage: Having an advantage over multiple sources is

important. For example, McDonald's is known for fast, clean, and hot food. They have

cheap meals, nice facilities, and good customer service with a strong reputation for

always providing fast, hot food.

Example of Companies with Sustained Competitive Advantage1. Strong research and Innovation

The technology industry is one of the leading industries with respect to strong

research and innovation. And when it comes to setting the pace using

innovation as leverage;Apple and Sony are the two companies that have held

their leadership position using innovation as a competitive advantage.

http://www.businessdictionary.com/definition/long-term.htmlhttp://www.businessdictionary.com/definition/long-term.htmlhttp://www.businessdictionary.com/definition/competitive-advantage.htmlhttp://www.businessdictionary.com/definition/competitive-advantage.htmlhttp://www.businessdictionary.com/definition/competitor.htmlhttp://www.businessdictionary.com/definition/competitor.htmlhttps://www.boundless.com/marketing/definition/customer-service/http://www.businessdictionary.com/definition/long-term.htmlhttp://www.businessdictionary.com/definition/competitive-advantage.htmlhttp://www.businessdictionary.com/definition/competitor.htmlhttps://www.boundless.com/marketing/definition/customer-service/

7/27/2019 Competence.doc

4/5

2. Brand Popularity

Being recognized all over the world as a respected brand is a sustained

competitive advantage that companies such as Virgin, Apple and

Coca cola have used as leverage to hold the market sway for years. Virgin is a

company that has used its brand name as leverage to break into

new markets in completely new territories.

3. Corporate reputation

Corporate reputation is a form of sustained competitive advantage that

companies such as Price Waterhouse and Berkshire Hathaway have leveraged to

become world class entities.

4. Strategic assets

Holding strategic assets such as patents is a strong source of sustained

competitive advantage and General Electric has stood the test of time

because of the several patents held. Mind you that possession of these strategic

assets has madeGeneral Electric one of the most powerful

companies in the world.

5. High volume production

Dangote Group of companies became one of the leading conglomerates in Africa

because of its ability to produce goods on high volume and ensure a uniform price

throughout Nigeria.

6. Access to working CapitalGenerally, public liability companies (quoted companies) have a sustained

competitive advantage over private companies because of their infinite

capacity to raise capital from the public. Take a look at how Oracle acquired

57 companies in a space of five years and Reliance Industries investing a

billion dollars in a single swoop to open a chain of retail stores.

7. Barriers to Entry

Barriers to entry due to government restrictions and regulations have been the

source ofsustained competitive advantage for companies such as Telmex

and Chevron.

8. Superior Product or customer support

IKEA has become a market leader in the furniture industry because of its ability to

provide superior product at an affordable rate; backed by a strong customer support

system.

7/27/2019 Competence.doc

5/5

9. Exclusive re-sel ling or distribution rights

The Coscharis Group has become one of the leading automobile retailers in Nigeria

and West Africa at large because of its possession of exclusive distributorship of

BMW brand throughout West Africa.

10. Ownership of capital equipment

Ownership of capital equipment can be a source of sustained competitive

advantageand Julius Berger has proved it by becoming a leading company in the

construction industry.

11. Flexibility

The ability to change swiftly is a strength and source of sustained

competitive advantage that Microsoft leveraged upon to become the

largest software company in the world.

12. Speed and Time

Speed and time was once an overlooked source of sustained

competitive advantage until FedEx and Domino Pizza used it as leverage to

become industrial pacesetters.

13. Low pricing

Wal-Mart as at the time of this writing is the most capitalized company in the world.

Thanks to its low pricing strategy that became its strong source of

competitive advantage.

13. Superior database management and data processingcapabilities

GTBank, AT&T, Google, Facebook have become market leaders in their various

niches because of the superior database management and data processing

capabilities they possess.

As a final note, these are the sources of sustained competitive

advantage and the corresponding companies that leveraged such

advantage. The message I am trying to pass across through this article is

that you dont have to win at every level; you just have to win atone level. If you cant win with innovation, you can win with speed and

flexibility.