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Business Essay

2440 words - 10 pages

Table of Contents
Executive Summary 3
Introduction 3
Benefits of Hamel & Prahalad’s concept of Core Competence 4
Disadvantages of core competency 6
The concept of Icarus Paradox and its comparison with core competencies 7
Conclusions 8
References 9

Executive Summary

This report takes an account of Core competencies that were introduced by C. K. Prahalad and Gary Hamel in 1990. Evaluating this business concept, its advantages and disadvantages are examined. The report also examines another concept of Icarus Paradox identifying reasons for failures of highly successful businesses. The disadvantages of core competencies and Icarus Paradox business concept have ...view middle of the document...

The concept of having capabilities to restructure the organization in order to identify particular factors that a business views as a core application is considered as crucial by today's businesses. Two business authors namely C. K. Prahalad and Gary Hamel introduced this concept. They called this concept as a core competency which should embrace 3 important elements: a. the core competency cannot be imitated by the competitors, b. the core competency is reusable across the product line a and various markets where the business operates, and c. the core competency must be utilized in such a manner so that the outcome i.e. product or service offers value to its end users i.e. its customers (Harvard Business Review 1990).

Benefits of Hamel & Prahalad’s concept of Core Competence

One of the most significant advantages of core competency is that it helps organizations to achieve competitive advantage. It is reported by several researchers studies that organizations must endeavour to develop inimitable resources in order to obtain an unbeatable and everlasting competitive advantage (Shaanani et al. 2012, p. 309; Leonard-Barton, 1992, p. 113). Regardless of the source, it can be eventually attributed to owning valuable resources, enabling the firm to perform business initiatives in and effective manner, which inevitably involves lower cost of business operations when compared to its competitors (Galunic and Rodan, 1998, p. 1194). This means that exceptional business performance is reliant upon developing or hiring competitive and distinctive set of resources along with positioning or allocating them in a strategic manner. Further on, organizations must abandon the operations domains and dispense them with activities that do not possess a competitive advantage (Prahalad and Hamel, p. 81; Creswell, 2010, p. 49). A strategic approach is to concentrate the resources that can't obtain competitive strength for the business, so that the business focus is laid upon improving business productivity as well as efficiency.

Relating the concept of core competency to the above ‘resource-based’ viewpoint of doing business, it is evaluated to be central to the study's concept. The resource- based view explains that sustainable competitive advantage of any company is developed through owning some specialized skills, knowledge, resources or competencies that's distinct the firm from the competitors. This means that core competency can be seen as an organized union of particular knowledge, capabilities, skills that facilitates an enterprise to generate value in a marketplace, which is not generated by the competitors in a given period of time. As an example through owning a core competency of ‘customer satisfaction’, the firm can offer flexible, responsive, trendy and viable services.

The other benefit of developing or hiring core competencies is that it helps businesses to increase their financial revenues. Although this advantage closely relates to...

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