The core competency perspective as defined in management theory is an assembly of varied skills and resources that are useful in distinguishing a specific firm. In essence, it is a business’s core competency that assists it cut its own niche in a competitive marketplace. The baseline idea in the concept is firmly grounded on the need for value delivery to the clients, aiding a company become profitable by establishing and utilizing a competitive advantage within its marketplace, as well as the need to guarantee the steady growth of the organization even in the face of competition.
The two main strategies that may arise out of the concept include the blue ocean strategy that is part of Porters 1980 generic strategies and the low cost strategy as defined by the core competencies presented by Prahald and Gary Hamel in 1990. The distinguishing feature of the blue ocean strategy is based on the idea of a business making a product or offering a service that is so unique such that only that business can make it. Ideally, the concept of the blue ocean strategy aims not at out-competing the rival firms but to create new and relatively unexploited marketspace or venturing into new business. By so doing, the firm cuts costs and enjoys relative monopoly based on the uniqueness of the goods or services offered (Kim and Mauborgne, 2015).
A case in point that exemplifies the usage of the blue ocean strategy is the business venture taken on by the founders of Uber and Airbnb. Both businesses are heavily reliant on the internet to reach out to their clients, Uber in the transportation business and Airbnb in the hospitality industry. While both industries might seem rather congested to the not so keen investor, the unique nature of both Uber and Airbnb have seen them flourish and upset the existing balance of business in their respective fields. The two are unique in that they solely rely on internet platforms to generate business and reach out to clients from where they earn a commission. This move, a break from the traditional cab and hotelier services, has seen the number of individuals prefer their form of business and shy away from tradition. Arguably, it is the unique form of business that has spurred the success of the two firms.
On the other hand, the low cost strategy involves competitively pricing ones products or services lower than that offered by competing firms. In some instances, and if not properly executed, this strategy might achieve a counter measure in that should the other competing firms also decide to lower their prices for the same commodity, the firm in question would have to slash its prices even more. Eventually, if the prices offered are too low, the profits realized might be too marginal and not enough to sustain the production process. As a consequence, the firm might eventually be forced to close down. Nevertheless, while this process seems attractive to many firms, there is need to use more affordable means of production in a bid to make the strategy profitable. In essence, under this strategy, the production cost is lowered in all areas from the acquisition of material to the production of the finished good. A common usage of this technique could be witnessed in the competitive field of telecommunications. In a bid to lure clients and subscribers. A mobile network provider might opt to reduce its call rates lower than that of its competitors. With adequate marketing, the outcome will be an increased subscriber base. Nonetheless, this will require an augmentation of the existing support infrastructure to cope with the increased demand. With low financial might stemming from marginal profits, this form of expansion might prove untenable in the long run (Ryan, 2009).
- Kim C., and Mauborgne R. (2015). Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard: Harvard Business Review.
- Ryan A. (2009). Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals. New York: John Wiley & Sons.