Resources, Capabilities and Core
Competencies
Resources
What is a resource?
An entity uses resources to provide products or services to its customers.
A resource is any asset, process, skill or item of knowledge that is controlled by
the entity.
hese resources can be created within the organization. They form the internal
resources. Such generated resources are organization-specific. Otherwise they
could be obtained externally from the suppliers available in the resource markets.
They form the external resources. The externally obtained resources are
organization-addressable. In addition resources can be categorised as specific or
non-specific. Those resources which can only be used for extremely specialized
intentions and are significant to the organization in adding value to goods and
services are called specific resources.
Types of resources
Resources can be grouped into categories:
(a) Human resources. These are the leaders, managers and other employees
of an entity, and their skills.
(b) Physical resources. These are the tangible assets of an entity, and include
property, plant and equipment, and also access to sources of raw materials.
(c) Financial resources. These are the financial assets of the entity, and the
ability to acquire additional finance if this is required.
(d) Intellectual capital. This includes resources such as patents, trademarks,
brand names and copyrights. It also includes the acquired knowledge and ‘know-
how’ of the entity.
Capabilities
Capabilities
A company’s capabilities are the activities and functions it performs to utilize its
resources in an integrative fashion. Capabilities are practiced and honed over
time. As they become stronger, the company enhances its expertise in a
particular functional or operational area. This expertise allows the company to
differentiate itself from competitors.
Furthermore, capabilities are operational activities that the company has
mastered. They are inimitable or difficult for competitors to figure out and
replicate. When capabilities meet the criteria outlined below, they contribute to
the company’s competitive advantage and profit potential, and are considered
core competencies.
Important capabilities to have:
● Learning
Learning and development as a continuous process at individual, team and
organisational levels
● Change
Leading and managing change, in response to external or unplanned events as
well as proactively to transform or develop the organisation
● Innovation
Ability to continuously re-invent the organisation and channel innovation in pursuit
of sustainable value creation
● Collaboration
Important capabilities to have:
● Collaboration
Working collaboratively and partnering effectively both inside and outside the
organisational boundary
● Agility
Capacity to efficiently adapt and evolve in response to external opportunities and
threats without needing to initiate disruptive change
● Engagement
An organisation’s ability to engage authentically, emotionally and ethically with its
people, customers and other stakeholders
Competencies
Core competencies
The core competencies definition is a resource or capability that gives a firm
competitive advantage.
Core competencies are the business functions or operational activities that
a company does best. A company’s core competencies are what differentiate it
from the other competitors in its industry.
They are also the resources and capabilities that allow the company to
achieve profitability. A firm should devise its strategy so as to exploit the
resources and capabilities that comprise its core competencies.
Importance
When developed, nurtured and applied appropriately throughout a firm, core
competencies serve as the basis for a firm’s competitive advantages, its
strategic competitiveness (strategic competitiveness is achieved when a firm
successfully formulates and implements a value – creating strategy – the
benefits of which other firms are unable to duplicate or find them too costly to
imitate) and its ability to earn above average returns
Core competencies serve as a source of competitive advantage for a firm over
its rivals.
They emerge over time through an organizational process of accumulating and
learning how to deploy organizational resources and capabilities.
Importance
Core competencies are the collective learning of the organization, especially how
to co-ordinate the diverse production skill and integrate multiple stream of
technologies. A company, if it has identified its core competencies, will be
capable of creating more value.
Core competences must coalesce around individuals working in the organization.
These people should recognize their effort in building and strengthening these
core competencies.
Importance
Unlike physical assets, which do deteriorate over time, competences are
enhanced as applied and share across the organization. The competences act as
the glue which bind businesses together as well as pave the way for new
business development. In other words core competences of a business are also
guiding parameters for new markets and diversification.
Importance
Core competencies are also an indicator that resources are being used in the
right places in the right amount. An organization should focus on outsourcing all
non-core activities which will streamline the operations to encourage learning
environment congruent to their competencies.
Criteria of core competencies
1. Valuable
2. Rare
3. Costly to imitate
4. Non-substitutable
How to identify core competencies?
We can identify them using three simple tests:
● Does the trait provide a major competitive differentiation? Does it provide a
unique value proposition to the organization?
● Does the trait cover a lot of business or is useful only for a single business
unit? Is it useful only for current business or for new ones too?
● Is it hard for competitors to imitate?
● Is it rare?
