What factors in a business most affect its core competencies?

A:

A business's core competencies are the capabilities that give it an advantage over its competitors. Businesses can maximize efficiency by focusing on their core competencies and outsourcing or automating as much of everything else as possible. For example, consider a carpet cleaning business, which only hires and trains employees to clean carpets. The company outsources its marketing efforts to a marketing company, outsources billing and accounting to an accounting company, outsources its customer service to a call center and so forth. Before a business can determine what to focus on and what to outsource, it must identify its core competencies.

The first factor that determines a business's core competencies is what that business can offer that creates value for customers. Revisiting the carpet cleaning example, suppose a particular company uses technology that can remove stains that other companies left behind or that the solutions it uses to clean the carpet dry twice as fast as those used by its competitors. The core competencies include its ability to lift tough stains and to dry carpet quickly. The company, as a result, should focus on these competencies and constantly fine-tune and improve them.

The second factor is what the business can do to broaden its market and reach more customers. For a family business that has operated within a community for a century and is known by everyone in town, the relationships it has established over the years help it attract and retain customers. This company is better off focusing on maintaining relationships within its community and forging new ones than on outreach efforts, such as cold calling or trying to identify new marketing channels. Another example is a business that is run by veterans that primarily operates in a military town. Relating to and establishing relationships with military personnel is a natural core competency that can help such a business grow its customer base.

Finally, a business's core competencies should be unique. That means they should not be easily replicated by competitors. For example, a criminal defense attorney who has spent 10 years working as a prosecutor has a unique core competency of being able to provide insight to his or her clients about the strategies that might be employed by the opposing legal team. Likewise, an attorney who specializes in DUI defense and has worked as a police officer in traffic enforcement before he or she attended law school can offer clients a level of understanding that his or her competitors cannot in terms of knowing the loopholes that can be exploited in a DUI case. This unique type of knowledge possessed by these two attorneys serves as a valuable core competency that they can use when positioning themselves as a better alternative to their competitors.

Read more here:
What factors in a business most affect its core competencies?