## Core Competence
### Definition
A core competence is a unique strength of an organisation that may not be shared by others. It is a combination of skills and techniques — not merely one isolated skill or a single technique — that is critical to achieving competitive advantage.
> Coined by C.K. Prahalad and Gary Hamel.
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### Three Tests for a Core Competence
According to Prahalad and Hamel, a capability qualifies as a core competence only if it meets all three criteria:
| Test | What it means |
|---|---|
| Competitor Differentiation | The competence is unique and hard for rivals to imitate. It gives the firm an edge in delivering better products/services without fear of copying. |
| Customer Value | It must deliver a fundamental benefit to the end customer — a real reason why the customer chooses this firm. If customers would buy from the company anyway without this capability, it is not truly core. |
| Application to Other Markets | It must be applicable across the whole organisation — not confined to one product or one business unit. It opens up multiple potential markets. |
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### Key Characteristics
- A core competence is an organisation's complex combination of technological and managerial know-how, wisdom, and experience.
- It must differentiate the business from any other similar business.
- It is organisationally embedded, making it hard for outsiders to observe or replicate.
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### Building Core Competencies (Small Business Example)
Even a small local business can build core competencies through:
- Personalised relationships with customers
- Speedy, cost-free home delivery networks
- Extended working hours
- Easy credit for regular customers
The key is that the competence must be valuable, rare, costly to imitate, and non-substitutable.