Sustainable Competitive Advantage with Core Competence : A Review

Kak, Anjana

Abstract

The potential of an organization's sustainable competitive advantage depends on the rareness and imitability of its resources and capabilities. The less imitable a competitive advantage is, the more cost disadvantage is faced by the competitor in imitating these competencies. Thus, core competence is an important source of sustained competitive advantage for corporate success and greater is its economic return. The literature has been reviewed for the sources of core competence, role of core competence for competitive advantage, and formulation of strategy with core competence and flexibility in a more focussed manner. The organizational learning, strategic flexibility, effective technology management, and people provide the important sources of core competence.

Keywords : core competence, organizational learning, strategic flexibility, sustainable competitive advantage, technology management.

Introduction

The idea that complex internal capabilities are critical to an organization's success is not new. Phillip Selznick in his book 'Leadership in Administration' (1957), acknowledged that factors internal to an organization, e.g. its personnel and its past experiences, are important to its success in implementing a formulated strategy. he defined the art of good management as the ability to make a practical assessment of an organization's suitability to its strategy. Selznick called the strange characteristics of an organization its 'distinctive competence'. In the year 1960, Learned, Christensen, Andrews and Guth, academicians of the Harvard Business School, suggested that the goals of corporate strategy have to match an organization's distinctive competencies with available opportunities and thereby gain competitive advantage. The thinking on competencies and corporate strategy remained dormant during the 1970s and early 1980s, the reason being that the consultants and the academicians paid more attention to other approaches of strategy. Porter (1980) developed five-force framework of competitiveness, which helped managers to understand external opportunities and competitive threats, and enable them to formulate a strategy, based on these analyses. It is simultaneously important to know if the organization has the requisite skills to implement the chosen strategy or can it acquire those skills at a reasonable cost. Hayes (1985) stressed the thinking on an organization's internal competencies wherein he advised managers to build capabilities first and then encourage the development of plans for exploiting them. Itami and Roehl in their influential book, 'Mobilizing Invisible Assets' (1987), also pointed out the importance of building on organization's strengths, or what they called its invisible assets. This thinking gathered momentum with the emergence of the resource-based concept during the late 1980s. Successful corporate strategy depends on accumulating competencies and exploiting them by matching these competencies to the market opportunities, thereby achieving a sustainable competitive advantage. The identification of core competence of an organization is to be based on a corporation's complete history rather than selected parts of it.

The effective technology management, organizational processes and flexibility direct the attention to organizational capabilities, instead of focusing on specific technologies to build and refine core competencies. The less imitable the core competencies are, the more they become the factors for corporate success and greater is their economic return. This paper reviews the literature on the role of core competence for competitive advantage, sources of competitive advantage, and role of strategy with core competence and flexibility in a more focused manner.

Role of Core Competence for Competitive Advantage

Hamel and Prahalad (1994) define core competence as a bundle of skills and technologies that enable a company to provide a particular benefit to customers. Core competencies are not product specific; they contribute to the competitiveness of a range of products or services. They are the roots of competitiveness and individual products and services are the fruit. A core competence is a tapestry woven from the threads of distinct skills and technologies. A skill must meet three tests to be considered as a core competence, i.e., customer value, competitor differentiation, and extendibility.

Competitive advantage is at the heart of firm's performance. It is concerned with the interplay between the types of competitive advantage, i.e., cost, and differentiation, and the scope of the firm's activities. The value chain plays an important role in order to diagnose and enhance the competitive advantage. A sustainable competitive advantage creates some barriers that make imitation difficult. Without a sustainable competitive advantage, above average performance is usually a sign of harvesting (Porter, 1985).

The secret of a sustainable competitive advantage lies in performing every step in the value chain in an appropriate way. A competitive advantage essentially has to be one that not only merely represents better performance than that of its competitors, but also delivers genuine value to the customer, thus ensuring a dominant position in the market. The internal resources and capabilities of an organization play a very important role in building competitive advantage. The organizations that want to build competitive advantages, which cannot be eroded (no matter how much change is there in the environment), must make linkages between the advantage and the capabilities underlying it as impenetrable and as confusing as possible. Also the most important part of the competitive advantage stems from a capability that is impossible to replicate (Sinha, 1998).

To acquire competitive advantage in any market, a firm needs to be able to deliver a given set of customer benefits at lower costs than competitors, or provide customers with a bundle of benefits its rivals cannot match. To realize the potential that core competencies create, a company must also have the imagination to envision markets that do not yet exist and the ability to stake them out ahead of competition. A company will strive to create new competitive space only if it possesses an opportunity-horizon that stretches far beyond the boundaries of its current businesses. This horizon identifies, in broad terms, the market territory the management hopes to stake out over the next decade, a terrain that is unlikely to be captured in anything as precise as a business plan (Hamel and Prahalad 1991; Porter 1980).

The enhancement of core capabilities needs a longer run focus, which includes identifying what they are and how they are applied and synthesized in new products. Strong capabilities lead to strong product families because these are embedded in the people and assets applied to build an organization's new products. The organization, rather than releasing a single new product, can simultaneously introduce many products, each aimed at a specific market niche. The winning organizations retire their own products rather than let competitors do it for them. Initiative provides wide latitude to choose its own growth path in the fast changing environment. The core capabilities will become the basis of future industry and technology initiatives. It refers to an organization's ability to direct resources that build and redefine core competencies, skills, and capabilities in a way that creates competitive advantage. The core capabilities of an organization must not be easily transferable by merely hiring a key employee employed by a competitor. The less imitable the core capabilities are, the more they become the factors for business success, and the greater is their economic return. If an organization's core capabilities are scarce, durable, defensible, or hard to imitate, they can form the basis for competitive advantage and surplus profit. The capabilities based companies outperform the competition along five dimensions: speed, consistency, acuity, agility, and innovativeness. One dimension reshapes the company in terms of its underlying capabilities, the capabilities can be used to define the growth path for the corporation, (Meyer and Utterback 1993; Lei and Slocum 1992; Schoemaker 1992, Stalk, Evans and Shulman 1992).

A company can clearly define organizational boundaries and focus resources for maximum competitive advantage by recognizing its core competencies. Some actions are performed much better than the competitors and are so crucial to end products or services that they can be described as core competencies. When a series of activities are organized into a system that works better than the sum of its parts, this business process can also create competitive advantage, even if component activities by themselves do not. An approach for identifying those competencies that can provide a company with the best chance to achieve long term competitive advantage could be framed in a set of four imperatives of core competencies, viz., avoid laundry lists, achieve senior management consensus on core competencies, leverage core competencies inside the organization, and share core competencies outside the corporation as well. Any company that wishes to capture a disproportionate share of profits from tomorrow's markets must build the competencies that will make a disproportionate contribution to future customer value. The growth and strengthening of core competencies depend to a great extent on the people who are involved in the organization. The skilled and expert individuals in the organization are identified and are given the authority to translate their functional expertise into useful products. The important actors who have to carry out the task of building and nurturing core competencies are the people in the top management (Snyder and Ebeling 1992, Hamel and Prahalad 1990).

Building core competence becomes essential to competitive advantage building, because advantages emanating from the product-price-performance-tradeoffs are almost short term. Especially in an era where technologies are altering the existing boundaries of business; advantage can last only through competence enjoyed at the very roots of products. And only through expertise over several technologies and a complete command on their infinite variety of users, a company can occupy a highly advantageous position. An organization's management needs to consolidate corporate-wide technologies and production skills into competencies that empower individual businesses to adopt quickly to changing opportunities. The corporation is like a tree that grows from its roots, core products are nourished by competencies and engender business units, whose fruit are products. Three tests are proposed to identify core competencies in an organization: a core competence provides potential access to a wide variety of markets, it should make a significant contribution to the perceived customer benefits of the end product, and finally a core competence should be difficult for competitors to imitate. The core products provide a tangible link between identified core competencies and the end products. The real competitive advantage lies in integrating operations for the sake of hitting demand quality targets or meeting specialized customer needs. Every organization is a victim of its own success, so there is a need of diversification, which creates a different mix of talents and capabilities. It must learn how to utilize strategic alliances as a mode of learning new technologies and skills from their alliance partners. Also, in order to sustain competitive advantage it should protect itself from being despoiled and assimilate new sources of technologies, skills and core competencies. (Ramaswamy and Namakumari 1996, Bannergy and Krishnamoorty 1995, Hamel and Prahalad 1990, Fisher 1989).

Companies need to learn to manage tomorrow's opportunities as competently as they manage today's businesses. The discovery of new competitive space is helped when a company has a class of technology generalists that can move from one discipline to another. The new market development can be geared up by developing the capability to redeploy the human resources quickly from one business opportunity to another. It is the top management's responsibility to inspire the organization with a view of distinct goals and help them to achieve and reach the set target (Hamel and Prahalad, 1991).

The basis for competitive advantage is the ability to create knowledge and move it from one part of the organization to another. The creation of knowledge is a dynamic and continuous process involving interactions at various organizational levels. Organizations must learn from their environment how to survive and produce competitive condition that shapes the character of success. Time is an important factor, and it eventually renders nearly all advantages obsolete. Learning is the only sustainable source of advantage, so managers must link their core competence to different types of strategies across time. The real competitive advantage lies in integrating operations for the sake of demanding quality targets or meeting specialized customer needs. An organization should provide a differentiating edge to be competitive to serve customers better, which is a newer method by which a company can turn more profitable. Due to fierce global competition, senior management must understand not only the technologies but also the competencies and motives of competitors. Building successful alliances requires identifying the core competencies of both the partners and developing the strong interpersonal skills and values needed to manage them. If an organization's capabilities are scarce, defensible, or hard to imitate, these can form the basis for sustainable competitive advantage and surplus profits. The select key issues on role of core competence for competitive advantage are listed down in Table 1.

Sources of Core Competence

The organizations pick up skills, abilities, and resources that are unique to them, reflecting their particular path through history. These resources and capabilities reflect the unique personalities, experiences, and relationship that exist only in a single organization. Such resources can be the sources of sustained competitive advantage, and those imitating these resources will be at a cost disadvantage building them. An organization's competitive advantage potential depends on the value, rareness, and imitability of its resources and capabilities. However, to fully realize this potential, an organization must also be organized to exploit its resources and capabilities. If strategic assets are imperfectly imitable, imperfectly substitutable and imperfectly tradable assets necessary to underpin an SBU's cost or differentiation advantage in a particular market, then core competencies can be viewed as the pool of experience, knowledge and systems etc. that exist elsewhere in the same corporation which can be deployed to reduce the cost or time required either to create a new strategic asset or expand the stock of existing one. In a dynamic world, only organizations that are able to continually build new strategic assets faster and cheaper than those of their competitors will earn superior returns and create long term competitive advantage. In this process core competencies have a pivotal role to play ( Barney 1995, Markides and Williamson 1994).

Craig and Douglas (1996) suggest how a firm should respond to the challenges of change, complexity, competition and conscience. The use of different tools such as information systems technology, creating new organizational forms providing administrative and organizational flexibility, and effective resource deployment at various stages of the value chain can help a firm to cope with them. The nature of challenges is dynamic and the form it will take in the years to come remains uncertain. The firm's information system and its use of technology helps in initial involvement in international markets and establishes the foundation for subsequent expansion. As the firm starts its operation in the international markets, the organizational structure must evolve to coordinate operations in diverse and far-flung markets. Finally, the way in which the firm deploys its resources is of great importance. Firms that are able to adapt to changing realities of market continuously can sustain and succeed in today's world of competition.

Any organization that wishes to hold its present customers and expand its customer base has to innovate more effectively than its competitors. This needs the creation of an innovative climate, i.e., each department and function of the organization must be concerned with innovation of an incremental kind. The company has to set aside human and financial resources also to produce radical innovations for the future. If an organization does not have the will and capability to innovate, it inevitably ends up with obsolete products and services which customers are never interested to buy. The whole company must constantly be in the search of incremental improvements for everything from systems to training, from quality to purchasing. The hardwork of incremental improvement is a continuous process with an annual special effort. Radical innovation calls for different methods and people. To be ahead of the competition The original driving force is the technology and the people rather than the market. Those who define international competitiveness as no more than low cost manufacturing are aiming at wrong target. Executives must look beyond lower costs and product standardization to think in new ways about world competition. Those who fail to identify the strategic intentions of their global competitors cannot anticipate competitive moves and often shoot behind the target. In a world of forward thinking competitors, the historical patterns of competition provide little guidance. Top managers must develop the new analytic approaches and organizational arrangements on which our competitive future rests (Humble and Jones 1989, Hamel and Prahalad 1985).

Oliva, Day, and Macmillan (1988) present a generic model of competitive dynamics that allows for the integration of structural and process components of competitive dynamics found in market place. A simple way to develop an understanding of competitive dynamics is to examine competitive behavior from the point of view of single business entering a new market. The business is alone during the launch phase, but in time the potential competitors counterattack by entering the market, thereby reducing the competitive position of first business. If the business cannot respond by repositioning itself through some new competitive advantage, it may be forced to disengage and exit from the market. It is critical of managers of lagging business to be creative in finding ways to reduce industry inertia. Managers whose businesses are at a competitive disadvantage must over respond if they are to regain that edge. The model implies that an accurate assessment of the competitive situation is a critical factor in changing or enhancing a given business position. An incorrect assessment by a business has two negative sides to it, i.e., under respond results in a deteriorating relative competitive position, over respond results in wasted resources with little gain in advantage. This supports the development of competitor intelligence systems to accurately assess competitive positions as well as the current and likely actions of competitors.

Various sources of core competence, basedon the review of literature, are as under:

Organizational Learning and Strategic Flexibility

A learning organization is an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights. In the absence of learning organizations, three M's need to be addressed, i.e., Meaning, Management, and Measurement. For learning to become a meaningful corporate goal, it must first be understood the new ideas are essential if learning has to take place. Sometimes they are created through flashes of insight or creativity; at other times it may arrive from outside the organization, or are communicated by knowledgeable insiders. These ideas are the trigger for organizational improvements. Learning organizations are skilled at five main activities: systematic problem solving, experimentation with new approaches, learning from their own experience and the best practices of others, and transferring knowledge quickly and efficiently throughout the organization. Learning organizations are not built overnight. Any company that wishes to become a learning organization can begin by taking a few simple steps, i.e., to foster an environment that is conducive to learning, and to open up boundaries to exchange the ideas. The ability to learn faster than your competitors may be the only sustainable competitive advantage. The organizations that have to cope with the rigid procedures and information systems are going to learn more slowly than those with flexible, open communication channels. The best learning takes place in terms that accept that the whole is larger than the sum of parts; thus synergy its has to be there in the learning organizations (Garvin 1993, Geus 1988).

The continuous improvement is a philosophy that states that production, engineering, and marketing excellence require ongoing attention and learning. The corporate worldwide is a set of beliefs about how to compete successfully in a given set of competitive conditions. These beliefs include how the product should be designed, produced and sold. The role of accounting is important here for the purpose of developing systems that reinforce the activities necessary for the success of the company. Managers must identify and marshal excess resources if they are to save costs associated with that capacity; profits would not improve unless these costs are recovered or absorbed elsewhere. Continuous improvement requires a focus on all aspects of manufacturing including cost, quality, and delivery; thus today's accounting is an essential ingredient in the achievement of continuous improvement (Turney and Anderson 1989).

The creation of new organizational knowledge is becoming a managerial priority as it provides the basis for organizational renewal and sustainable competitive advantage. Failure to create knowledge and manage it as a critical organizational asset may call in for the declining performance of many well established companies. The organizational effectiveness is improved by sharing the individual knowledge throughout the organization. The creation of knowledge is a dynamic and continuous process involving interactions at various organizational levels. One of the important sources of competitive advantage is the ability to move the new knowledge from one part of the organization to another. In order to create knowledge, organizations must learn from their environment how to survive and produce competitive conditions that shape the character of the success. Managers need to link their organization's unique resources, i.e., core competencies, to different types of strategies across time. As technology cannot be separated from strategy, so competing on science and technology implies competing on organization of information, machine being not at the center of the competition. The hidden thread of knowledge that coordinates is the only lasting corporate asset. Since learning does not occur overnight and is not possessed by all the organizations, top management must hold the levers and mechanisms of change to determine the rate and direction of learning in an organization. Managers interested in the future of their organizations can learn from the four phases of corporate planning, i.e., basic financial planning, forecast based planning, externally oriented planning, and strategic planning phase. The strategic management, linking the vigor of formal planning to vigorous operational execution, proves to be fruitful. (Inkpen 1996, Williams 1992, Clark 1989, Gluck, Kaufman, and Wallack 1980).

The organizational learning is necessary to retain and improve competitiveness in uncertain technological and market circumstances. To design a learning organization, it is necessary to define it in terms of a system and the processes that help it create, acquire, codify and utilize new knowledge and learning. Thus, the focus of creating a learning organization needs to shift from developing a learning oriented culture to building learning capabilities. The principles and practices of organizational learning are already being introduced as organizations strive to transform the assumption about how to succeed. Competitive progress is fast coming to be seen as a learning process whose cornerstone is the rate at which organizations can change the way they view things and their assumptions about what is the best way to do things. Organizations unable to sustain learning are in a great danger of obsolescence. The rate at which organizations learn increasingly determines their prospects for survival. Organizational learning is about creating a close interchange between what customer needs and the required configurations of organizational capabilities, and using that intimate interchange to fuel continuous transformation for achieving competitive advantage (Chattel 1995, Shukla 1995, and Dodgson 1993).

In the longer run, the only source of competitive advantage is the organization's ability to learn faster than its competition. The organizations have to draw their attention where people expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where people are continually learning how to learn together. There needs to be a discipline that features into a coherent body of theory and practice, making the whole of an organization more effective than the sum of its parts. Team learning is important because it is the teams and not individuals that are the fundamental learning units in modern organizations. Thus, unless teams can learn, the organizations cannot, learn. The discipline of team learning starts with the capacity of members of a team to enter into a genuine thinking together (Senge 1994).

The knowledge base of an effective learning organization allows for the development of competencies and incremental or transformational change. There is assimilation and utilization of knowledge and some kind of learning system to support such 'actionable learning'. An organization's ability to survive and grow is based on advantages that stem from core competencies that represent collective learning. A learning process has identifiable three stages, viz., knowledge acquisition, knowledge sharing, and knowledge utilization. Knowledge acquisition is the development or creation of skills, insights and relationships. Knowledge sharing is the dissemination of what has been learned. Knowledge utilization is the integration of learning so it is broadly available and can be generalized to new situations. True knowledge is more than information: it includes the meaning or interpretation of the information, and a lot of tangibles such as the tacit knowledge of experienced people that is not well articulated but often determines collective organizational competence. It involves many levels of people and all of their functions. It requires creation and control of both external and internal knowledge for both current and future operations. Thus managers designing learning organizations need to adopt holistic systems thinking that makes such systems difficult to imitate, thus providing a competitive advantage (Nevis, DiBella and Gould 1995, Leonard and Burton 1992, Hamel and Prahalad 1990).

There was a time when the prime business of business was to make a product and profit, but now the scenario has changed which leads to conclude that the business of business is learning. The process involved in planning and execution of significant changes in organizations can provide rich insights on how management can modify their ways of managing organizations and develop capabilities to introduce major changes successfully. The organization grows in its capability as managers' design and implement appropriate interventions to facilitate learning. The significant source of organizational learning could be through mobilization of organizational members, technical collaborations, or joint ventures. The better utilization of strategic alliances acts as a vehicle for learning new technologies and skills from their alliance partners while simultaneously protecting themselves from being deskilled. In order to sustain competitive advantage, companies need to assimilate sources of manufacturing technologies, tacit skills and core competencies that will become basis of future industry and technology initiatives. Alliances provide a mechanism for effective learning of new technologies, core skills and capabilities from a partner. Successful alliances share some common elements that permit them to leverage their skills across multiple centers of competence (Ramnarayan and Bhatnagar 1993, Lei and Slocum 1992).

Nonanka and Takeuchi (1995) illustrate the process of knowledge creation within a Japanese company. The organization's ability is important to identify the type of knowledge required by the changing external environment, and to improve the enabling conditions continuously. Organizations cannot become competent tomorrow with today's knowledge, as different and new knowledge will be required to meet the needs of the customers in competitive environmental changes. It is the ability to create new knowledge continuously that becomes the source of competitiveness. In order to make knowledge creation dynamic knowledge created at one level needs to be amplified across different levels of the organization. Only by cross leveling the true benefit of organizational knowledge creation can be obtained. It is a never-ending process that requires a continuous innovation. The implementation of successful organizational knowledge creation process can be done by: i. Leveraging the tacit knowledge base of an individual and making use of socialization to transfer it throughout the organization; ii. Amplifying the knowledge creation across different levels of organization; iii. Enhancing the enabling conditions; and iv. Continuing to create new knowledge constantly.

'The climate of openness' is a facilitating factor that expedites learning in the organization. There is a need of permeable boundaries around information flow so that people can make their own observations. The opportunity to meet with the other groups and see higher levels of management promotes learning. All the people in an organization have a primary responsibility for learning from customers, competitors, suppliers and other companies. Managers need to ensure that information is shared within the organization and in particular between groups, functions, and geographical locations. They need not always program their strategies formally; sometimes the strategies must be left flexible, as a broad vision to adopt to the changing environment. Thus flexibility plays an important role in the organizational learning. It is a multi-dimensional concept demanding agility and versatility, creativity and innovation, sustainable advantage and capabilities that may evolve overtime. The attributes of flexibility are closely related to the issues of continuum, dynamic interplay, and freedom of choice. The three basic components that define the dynamic interplay of reality in flexible systems management paradigm are Situation, Actor, and Process; the three are the parts of an inseparable whole. They interact flexibly on multiple planes in ambiguous reality and ultimately melt together into one at the enlightened stage (Sushil 1997, Chattel 1995, Nevis, DiBella and Gould 1995, Minzberg 1994).

To understand the nature of learning capabilities, it is necessary to look at how organizations normally solve problems and take decisions. Managers must be creative in designing and operating strategic management systems and flexible enough to tailor their use of such systems to the organizational circumstances that confront them. The notion of flexibility is highly relevant in strategic management, as it is important for surviving in the present day economic environment of globalization and liberalization. Flexibility in strategic management offers ability to add capacity and capability in the original system in a modular approach. In any organization the problems range from unstructured to well structured situations. There are multiple ways of reaching the same end, and the suitability of the way will depend on the nature and attributes of the problem situation at hand. Flexibility advocates an approach out of the existing ones so as to match the requirements of the problem situation. It thus integrates all system approaches and techniques into a family in which everyone, either individually or collectively, contributes meaningfully. The process of selection and integration of techniques is to be adopted flexibly in the practical situations (Mittal 1995, Sushil 1994, Certo and Peter 1991).

The organizational learning and strategic flexibility provide a congenial environment for the development of core competence. Learning does not occur overnight, it requires an endless effort. Thus, senior management needs to pay due attention to determine rate and direction of learning in an organization. The significant source of organizational learning could be through mobilization of organizational members, technical collaborations or joint ventures. The greater attention and more flexibility to people may be the keys to successful leadership. In the longer run, an organization's ability to survive and grow depends on the sustainable competitive advantages, which have their roots in the organizational core competencies that represent the collective learning and flexibility. The select key issues on organizational learning and strategic flexibility as a source core competence are listed down in table 2.

Management of Technology

Technology is an important parameter for corporate growth and performance. The process of successful technology acquisition requires special skills, knowledge, and experience. It is a managerial responsibility and should be done with tact, patience, will and efficiency, in the interest of better organizational performance. Technology addresses the application of science and engineering knowledge to the solution of problems. However, technology management has a broader charter of integrating technology throughout the organization as a source of competitive advantage. A sustainable competitive advantage comes from the organizational learning, i.e., how constantly an organization can improve its technology acquisition and deployment capabilities. The transaction of technical knowledge into useful things or processes involves knowledge that is non-technical. Such knowledge is used to deliver products and services, e.g., managing people and facilities, assuring that products or services are consistent with customer desires, etc. The successful management of technology requires the capacity to orchestrate and integrate functional and specialist groups for the implementation of innovations, continuous testing of appropriateness of existing markets and skills for the exploitation of technological opportunities. Failure to improve the internal systems and processes leaves an opportunity for competitors to move ahead with technology based strategies and create a foundation of competitive advantage. A strategy that stresses technology is not necessarily the best, but if a company decides to exploit technology as a competitive weapon, it had better to do more than merely investing in R&D. The successful pursuit of the technology based opportunities for competitive advantage are not the result of a single set of decisions or a single product being introduced at a single moment of time, but of numerous product releases and many decisions. There is a requirement for continuous learning in order to exhibit the strategic consistency. The technology management provides a means to use new technology to create competitive advantage (Kumar 1994, Werther, Berman, and Vasconcellos 1994, Aldridge 1990, Pavitt 1990, Morone 1989, Frohman 1982).

Technology is important for competition if it significantly affects an organization's competitive advantage. The basic tool for understanding the role of technology in competitive advantage is the value chain. An organization, as a collection of activities is a collection of technologies. Technology is embodied in every activity in an organization and technology change can affect competition through its impact on virtually any activity. An organization that can discover a better technology for performing an activity than its competitors thus gains competitive advantage. The twenty first century will be pervasively technological. All nations will share the conviction that technology is the critical factor for economic growth, national security, and social stability. No single country will depend solely on world arena. As the generation, dissemination and the application of technology is to be accepted as predominantly global, all nations will adjust toward a more open world of technology exchange, alliances and research. It is important to note that today's successful organizations are not necessarily those that create new technologies but those that rapidly absorb them. Thus it requires an organizational capacity to identify promising new technologies worldwide and absorb them into new products and processes quickly and effectively. Organizations need to be constantly oriented towards improving their critical competencies or capabilities to absorb new technologies and improve and combine existing technologies (Rastogi 1995, Branscomb 1992, Ramo 1989, Porter 1985).

In a typical organization's technological portfolio there exist three broad classes of technologies, viz., the base technologies, the key technologies, and the pacing technologies. Base technologies are necessary, but not sufficient to achieve competitive advantage. These technologies are widely known and readily available. Key technologies provide competitive advantage and permit the producer to have differentiating features or functions in the product. Pacing technologies could become tomorrow's key technologies. It differentiates the leaders from the followers, as every organization cannot afford to invest in pacing technologies. Managing technologies effectively means setting and communicating strategic priorities, managing projects to get timely results and effectively using linkages inside and outside the organization. A good fit between a parent and its business can create value while a bad fit can destroy it. Parents often create value as they have people with unique capabilities. The organizations that are on a quest for patenting advantage can achieve the competitive advantage for corporate level strategy (Campbell, Goold and Alexander 1995, Ericson, Magee, Roussel and Sad 1990).

Technology transfer in itself will not lead to increased economic growth but the ability to maintain and fully utilize the appropriate technology may lead to long term economic growth. A successful transfer can occur only if the recipient is sufficiently capable of maintaining an introduced production system. Factors such as socio-political and cultural value systems affect technology transfer. Technology transfer is not without its consequences; this may result in additional financial strain on the receiving country. Before a new technology is adopted, the scope and limitations of the existing technology have to be studied. It may suggest the need for improvement and the need to develop more capabilities before the right type of technology can be transferred. The factors that are important for the transfer of technology are needs and objectives; capabilities; education, training, research, and development. Adaptation of technology should not end the process of technology transfer. There is a need to develop a control system for evaluating the success or failure of the new technology continuously or periodically. The transfer of technology can take place also from university to industry. Again, this is not one single operation but contains a great variety of methods that can be applied depending on the local circumstances. The close co-operation between university and industry is a key requisite in technology transfer. The research results are transferred in general to society and in particular to industry. Thus R&D from universities can contribute to the economic and social progress of the country (Madu 1989, Kroonenberg 1989).

Zahra, Nash, and Bickfold (1994) examine the conditions under which the technological pioneering can be the source of a competitive advantage. A competitive advantage exists when a company can distinguish itself from rivals, thereby succeeding in making a profit. Technological pioneering is the creation and commercialization of new technology. It enables a company to create and maintain a technological gap, allowing it to produce at lower cost than its rivals, offer innovative products, and change product designs, or features. The pioneer's success in creating an advantage from its technology depends on its progress in building capabilities, overcoming inertia, and creating an organization that enhances technological development and commercialization.

The successful pursuit of technology based opportunities is not a result of a single set of decisions but is a process of continuous learning in order to exhibit the strategic consistency. Managing technologies effectively requires the capacity to integrate functional and specialists groups for the implementation of innovations and continuous testing of skills for the exploitation of technological opportunities. Technology is an important parameter for corporate growth and is embodied in each activity of an organization. The organizations need to develop competencies to identify promising new technologies and transfer and absorption of right type of technologies. The effective management of technology provides a means to create competitive advantage for corporate success and growth. The select key issues on management of technology as a source of core competence are listed down in table 3.

The People

The successful organizations of the future will be the those which understand the link between their business results and the people. The people are the most important assets and are the source of competitive advantage. Competence at the level of people is an underlying characteristic of a person which enables him or her to deliver superior performance in the given job, role or situation. Those characteristics are present in superior performers but not average ones. Organizations can improve their overall productivity by shifting people from average to superior performance through development and by promoting right people. The less control, greater flexibility, and more attention to people in the organization and to the environment outside the organization may be the keys to successful leadership. The strategies for successful leadership in the changing times impinge on leaders to take responsibility for their own development and the development of their people and the organization. They need to learn more about people so as to know how they work in groups and organizations, talk with people about their careers and promote career development activities, hire broadly educated people with diverse interests, and keep a low profile. In the 21st century, humans will be to computers what pets are today to humans. In addition, humans will continue to hold a huge competitive advantage over computers by the fact that they are superb problem solvers, they can learn, and they can be creative. These talents must be cultivated as far as possible as they will become the critical skills of 2Ist century (Boulter, Dalziel and Hill 1996, Makridakis 1989, Bisesi 1983).

The creation of meaningful future of an organization depends on its human dimension. Tomorrow's organization is the one that uses technology to amplify human capabilities, both in products and services it offers to its customers, and in the essentially human means by which they are created. The organizations that are going to succeed will be those that make it possible for individuals to make the highest and most creative individual contribution and who see success as having its foundations in the abilities of confident people to make unique contributions. Only people can generate ideas and turn them into action, and future success is increasingly determined by the abilities of an organization to express the ideas of its people quickly enough. The individuals in the organization are valuable resources. Most organizational competencies start with the individual skills and knowledge, and can develop expertise. Competence develops partly as an individual action learning process and through reflective learning between practice and cognition to result in superior competitive positions (Chattel 1995, Schon 1983).

The competencies may be described, as the precious seeds of growth as it takes into account the individual characteristics, many of which are difficult to change. It provides a way of matching the individuals to organizations that is highly acceptable to global companies. Organizations arrive at competencies through different routes, the most important being to strike a balance between individual motivation and organizational needs. There is a growing recognition, especially among multinationals, that individuals who can contribute to the achievement of company goals in the future will be qualitatively different from the past, depending less on skills of today and more on their ability to perform in the face of change. The real sources of competitive advantage are to be found in the management's ability. There is a need for communication, involvement, and a deep commitment to working across organizational boundaries. It involves many levels of people and functions. The competence carriers should be regularly brought together from across the corporation to trade ideas. The goal is to build a strong feeling of community among these people (Wisher 1994, Hamel and Prahalad 1990).

The increasing global nature of competition requires that firms utilize all of their valuable resources in order to survive and succeed. This has resulted in an emphasis on the alignment of all functional activities of the firm (e.g., finance, marketing, operations, etc.) toward the achievement of strategic objectives. Core competencies deal with the internal resources or capabilities of an organization that are competitively unique and add value to the firm. The frequent innovations in product offerings require more human inputs, thus creating greater potential for value added from employees. These organizations obviously perceive that competitive advantage is created through people, and attempt to develop and exploit such advantages (Wright et.al 1988).

The competence at the level of people enables the organizations to generate innovative ideas and translate those ideas into actions. People are the source of competitive advantage as the frequent innovations in product development are the results of human capabilities. All organizations provide worthwhile goods and services through people working together. The identification of the people with specific competencies to do the specified jobs well is an important step. Training the people for delivering superior performance at their respective work places can develop the competencies. People with the right competencies in the right jobs means competitive advantage, producing better profitability, which serves the ultimate goals of a good business to maximize the satisfaction of the owners and customers. The select key issues on People as a source of Core competence are listed down in table 4.

Formulation of Strategy with Core Competence and Flexibility

Strategy may be defined as the match that an organization makes between its internal resources and skills, and the opportunities and the risks created by its external environment. Top management's role must go beyond the buying and selling of business to building integrity in the company's operations and commitment among employees. However, the value of full strategy cannot be realized in practical terms, unless and until it is expanded to the real complexities of the organizations. The key to resource based approach to strategy formulation is understanding the relationships between the resources, capability and an indepth knowledge of the mechanisms through which the competitive advantage can be sustained overtime. This requires the design of strategies that exploit to maximize the effect of organization's unique characteristics. Mangers can leverage their firm's skills and resources for increased competitiveness. When intelligently combined, core competence and extensive outsourcing strategies provide improved returns on capital, lowered risk, greater flexibility, and better responsiveness to customer needs at lower costs. The concept of strategic intent comes into play here as its goal is to fold the future back into the present. It implies a sizeable stretch of an organization, where current capabilities and resources will not suffice. Achieving strategic intent requires enormous creativity; this forces an organization to be more inventive (Hamel and Prahalad 1994, Quinn and Hilmer 1994,Grant 1991, Hamermesh 1986, Chaffee 1985).

The selection of strategy and structure is to a great extent at the discretion of management. The culture is to be considered, as the deep-rooted beliefs are extremely difficult to change. The organization's culture is related to the organization's identity. Successful organizations having their own style and shared values tend to fit into one of the four basic identities: license giver, license taker, jobber and consultant. In case of license giver, the bulk of revenues come from license fee and only a minor part from own production. The license taker's aim is to exploit the potential of a particular existing product in a limited regional market. The technology jobber offers a multifunctional manufacturing or servicing capacity to the local market. His aim is to get his capacity utilized to the full.

The consultant hires his knowledge capacity in a particular field. The use of technology as a corporate resource helps to sense if the organizational culture on the one hand and strategy and structure on the other hand is in harmony with each other. The most wrenching of the changes that Indian business houses are experiencing involves acquiring a strategy to cope with liberalization. It demands a process of rigorous and analytical exploration of the environment, opportunities, and capabilities. There is a need for new strategic imperative that emphasizes on nurturing a core competence, which forms the foundation of a sustainable competitive advantage for an organization. A well-defined strategic direction is essential for surviving competition (Gunstren 1987, BT 1998).

A company must first take an objective look at its existing businesses and the value added by the corporation in order to translate the principles of corporate strategy into successful diversification. The understanding of good corporate strategy should guide future diversification as well as the development of skills and activities with which to select further new businesses. A corporate strategy that truly enhances competitive advantage of each business unit is the defense against the corporate raider. The core competencies are the highest level and longest lasting units for strategy making; they must be the central subjects of corporate strategy. Top management must have a point of view on which new competencies should be built. A key challenge in competing for the future is to preemptively build the competencies that provide gateways to tomorrow's opportunities, as well as to find novel applications of current core competencies. The approach that provides a link between strategic vision and core capability focuses on a strategic vision that pulls together the insights obtained from examining the multiple scenarios, the industry's competitive structure, and the organization's distinct core capabilities. It enables the management to indicate which core capabilities the organization must develop further and how, so as to succeed in its chosen business segments. The approach emphasizes a resource-based view of the organization and aims at identifying core capabilities that are important in multiple segments. Since the strategic vision on core capabilities complements other capabilities, synergy is developed that results in surplus returns (Hamel and Prahalad 1994, Schoemaker 1992, Porter 1987).

In order to manage a multi-business organization, there has to be a good relationship between executives in the central office and those who run the business units or divisions. The best way to manage depends on the nature and the needs of the business in a company's portfolio, styles of the people in the corporate office, and the organization's strategy and goals. There is no one best way to make strategy; each is characterized by a particular way of organizing the relationships between headquarters and the business units. The secret to chose strategy is to find the style that suits the circumstances best. Strategy plays a vital role in diversified organizations. The process of diversification is an important method of providing a company with protection from obsolescence in present products and with opportunities of future growth. The situation calls for tools that companies can use in assessing the suitability of various diversification routes. These tools need to be designed to help the organizations to formulate the strategies in more individualized directions for diversification so that they will not follow their close competitors. These tools should focus on the basic competencies of the company so as to diversify successfully (Goold and Campbell 1987, Conrad 1963).

Sugiura chairperson of Honda Motor Company, shares his practical experience to describe successful localization strategy which consists of four target concepts: localization of products, profits, production and management. The localization of products mean developing manufacturing and marketing the products best suited to the actual and potential needs of the customers and to the social and economic conditions of the market place. The localization of profits addresses the issue of reinvesting as much of the profits as possible in the local market. A company investing abroad must regard itself as a local company and endeavor to prosper together with the host country. There could be two ways to make the localization of the production most effective: one is to increase the ratio of local content which gives added impetus to related industries, The other is to increase the value added in local production which not only depends upon employment opportunities, but also gives employees a greater sense of responsibility for, and pride in, manufacturing their own products. The localization of management modifies the corporate philosophy to suit local conditions. Managers should avoid forcing people to accept management know-how or corporate philosophy in its original form, which may be foreign to them. These efforts create a sense of unity that is essential for achievement of common goals. Good communication between management and labor, as well as delegation of authority, elevate the employees' sense of responsibility and motivation, which lead to improved productivity and maintenance of high quality standards. In short, corporate behavior must be such that the corporation itself and all of its activities are satisfactory to the community, society, and country.

At corporate level, a competency perspective provides insight into the kinds of businesses in which the firm can compete successfully. The competence approach to strategic management argue that it is the firm's capabilities which should guide the decisions on portfolio building, diversification, acquisitions, divestments, and resource allocation. The corporate strategy defines the business in which a company will compete, preferably in a way that focuses resources to convert distinctive competencies into competitive advantage. A sound understanding of internal capabilities is necessary because an organization may not realize the full profitability potential or may even lose money unless it has the capabilities required for success in the new venture. The capabilities must be strategically important ones so that the competitors cannot easily imitate or acquire them. The basis of successful diversification is the transfer of underlying capabilities from existing businesses to new ones, thus the extendibility or the relatedness of core competence can be the source of competitive advantage (Makrides and William 1994, Andrews 1980, Ansoff 1965).

The process of strategy formulation involves matching of opportunities and corporate capabilities, which results in the generation of economically feasible strategic alternatives. The choices that satisfy the personal aspirations of top management and perceived social responsibility of the company, and which survive the organizational politics, are implemented. The proper understanding of environmental trends and corporate capabilities is of paramount importance in the process of diversification. In the new businesses, although being unrelated to the existing one, the issues like size of investment, timing of entry, sequencing of projects, organization design etc. are to be resolved. Thus the strategic analysis is necessary at every stage of diversification. The strategic competition has a profound impact on business productivity. Its basic elements are: the ability to understand competitive behavior as a system in which competitors, customers, money, people and resources continually interact; ability to use this understanding to predict how a strategic move can rebalance the competitive equilibrium; resources that can be permanently committed to new users even though the benefits will be deferred; ability to predict risk and return with enough accuracy and confidence to justify that commitment; and willingness to act. Success usually depends on the culture, perceptions, attitudes, and characteristic behavior of competitors and on their mutual awareness of each other (Chaudhary 1979, Henderson 1989).

Every organization, whether a business or not, has a theory of the business. The assumption on which the organization has been built and is being run has to fit the reality. These assumptions are about markets, identifying customers and competitors, their values and behavior. They are about technology and its dynamics, and about a company's strengths and weaknesses. The core competence of an organization also plays a pivotal role to accomplish the organization's mission, as it defines where an organization must excel in order to maintain leadership. The theory of business has to be tested constantly. When it shows the first signs of becoming obsolete, it is time to start thinking again and take effective action with the new realities of environment, with a new definition of its mission and with new core competencies to be developed and acquired. The process of revival (in the case of sick organizations) cannot be initiated without a clear strategy, articulation of policies, isolation of problems, and sequencing of actions. Moreover strategy for revival is a result of series of negotiations with key interest groups such as trade, distributors, labor unions, financial institutions and the government. The formulation of strategy consists of matching the organization with its environment while its implementation includes the motivation and commitment of internal and external publics to the new strategy (Drucker 1994, Prahalad and Thomas 1977).

Minzberg (1987) defines managers as craftsmen and strategy as their clay. They bring their work an equally intimate knowledge of the materials at hand by sitting between a past of corporate capabilities and future of market opportunities. Strategies are both plans for the future and patterns from the past. Once the strategy is formulated, people take actions one by one and respond to them, so those patterns eventually form. Strategies take root in all kinds of places wherever people have the capacity to learn and the resources to support that capacity. To manage strategy is to craft thought and action, control and learning, stability and change. There is a need to create the climate within which a wide variety of strategies can grow. In more complex situations, this may mean building flexible structures, hiring creative people, defining broad umbrella strategies, and watching for the patterns that emerge. Like potters at the wheel, organizations must make sense of the past if they hope to manage the future. Like managing craft, Grafting strategy requires a natural synthesis of the future, present, and past.

Strategy is given a serious thought in today's new manufacturing technologies. The notion of economies of scale implies greater production volumes at lower unit costs. There is a need to plan for economies of scope that brings in efficiencies by variety and not by volume. The new technical capabilities rest on economies of scope, where the same equipment can produce multiple products more cheaply in combination than separately. The major barrier to the effective use of this new technology is a lack of understanding of its impact on strategy. Managers must reinterpret its often considerable costs in the light of expanded options it makes available and of the costs of not adopting it. In short, managers will have to learn to accumulate a whole new set of strategic possibilities taking into account the structure, marketing, accounting and finance, and strategy. The long-range strategies should be formed from an integration of an understanding of the customer, competitor, and the company. Thus the long range strategies or strategic visions must address the present and future needs of the customers and the responses of competitors, while simultaneously it has to be consistent with the capabilities and the culture of the organization. The strategic visions, technological advances and R&D must be developed in concert with the corporation's core competencies, affording it the opportunity to leverage past success into future opportunities. An understanding of one's core competency helps organizations identify businesses which do not leverage the core capabilities of the organization and, therefore, are not a good fit with the company. One's core technology forms the basis for many of the company's core capabilities and thus provide the essence for developing sustainable competitive advantage in the market place. The vision development and core competencies management must be on-going business processes in any organization (Goldhar and Jelinek 1983, Kesler, Kolstad and Clarke 1993).

Goold and Alexander (1995) developed a further perspective on the link between core competencies and corporate strategy. The key to clear thinking in this area is to recognize the important role of the parent company in the corporate strategy. If the parent company is able to create skill pools, linkage mechanisms and knowledge sharing between business units that have similar competencies, in a way that raises these competencies such that they become a shared source of advantage, then there is a logic for competence based portfolio strategy. If the parent does not have the competence management skills, then there is no logic for competence based portfolio strategy. The concept of parenting skills, i.e., the core skills of the parent organization, has to be a key link between competence and corporate strategy. It is a long-term challenge that requires the parent to learn new skills. Companies without sound corporate level strategies generally lose strength and fall prey to hostile predators. On the other hand, the companies with sound corporate level strategies create value from a close fit between the parent's skills and the needs of the business.

Strategic thinking is about syntheses; it involves intuition and creativity. Planners should make their greatest contribution around the strategy making process by aiding and encouraging members to think strategically, and by supplying the formal analysis that strategic thinking requires. The outcome of strategic thinking is an integrated perspective of the enterprise. Strategies often cannot be developed on schedule; they must be free to appear at any time and at any place in the organization typically through processes of informal learning of people at various levels who are deeply involved with the specific issues at hand. Strategy making is not an isolated process, but an interwoven one with all that it takes to manage an organization. The core' competence and strategy of an organization are also managerially interlinked. The core competencies are the major resources of the organization. In order to have a significant role in maintaining the competitiveness, the resources underlying the development and nurturing the core competencies must be the forces that drive the organization. The failure of managers to deal effectively with core competencies is the major cause of the strategic oversights. Effective organization-wide communication is necessary to assure coordination of effort and enhancing of core competencies (Constantin and Lusch 1994, Minzberg 1994).

Purpose of strategy is to exploit the unique advantages of the organization in facing the challenges of the environment. A strategy begins with a concern and a burden of how best to use the limited resources of the organization in realizing the objectives, and confronting successfully the environmental realities. The successful corporations make their strategic priority to build their core competencies and long term competitive advantages, so that they will serve the real back up for the business level strategies of the business units of the corporation. While competitive advantage serves as the back up to the strategy formulation, strategy is needed for competitive advantage. The point is that while corporate level ground strategies take care of competitive advantage, the business/market level strategies of the organization use the corporation's competitive advantage as the foundation to work on. Competitive advantage building is thus a conscious and strategic activity of the corporate management (Ramaswamy and Namakumari 1996).

Strategies can be developed through the process of informal learning of people involved at different levels as strategy making is not an isolated process but an interwoven one with all that takes to manage an organization. In order to stay competitive in the changing environment, the organizations must design their strategies that exploit to maximize the effect of their core competencies. The top management needs think carefully which of the capabilities really create unique value and which activities can more effectively be bought from outside. In order to stay competitive in future markets, there has to be a competitive innovation rather than competitive imitation. Since core competencies are the well-spring of future product development, it provides improved returns on capital and better responsiveness to customer needs. They are the primary factors upon which an organization can establish its identity and create competitive advantage that can be sustained overtime. The resources, skills and capabilities of an organization should form the focus for strategy formulation. There is a need for flexible approach for strategy formulation so as to have a broad vision to adopt to the changing environment. The select key issues on Strategy with Core Competence and Flexibility are listed down in table 5.

Conclusion

A review of the literature makes it clear that recent trends in management have been towards the development of core competencies, The globalization of market and liberalization has enhanced competition A powerful way to prevail in global competition is invisible to many companies. The area of core competence is emerging and needs a lot of attention in order to describe the capabilities which may lead to leadership in a range of products or services.

Effective technology management and organizational processes direct attention to organizational capabilities instead of focusing on specific technologies, to build and refine core competencies, skills and integrate multiple streams of technologies. It is important to incorporate the multidimensional concept of flexibility that demands agility and versatility, creativity and innovation, responsiveness to change, non-rigidity, sustainable competitive advantage and capabilities that may evolve over time. The less imitable the core competencies are, the more they become the factors for corporate success and greater is their economic return.

Strategies are broad statements of intent which show the types of action required to achieve the objectives. A payoff for reaching those objectives is the corporate success and can be measured on the basis of profitability and growth. The top management has to think carefully which of its activities really create unique value and which activities can effectively be bought from outside. The core competence perspective must be the central subject of corporate strategy to be implemented with a perspective of strategic flexibility so as to effectively cope with the emerging challenges.

Rexibility Mapping : Practitioner's Perspective

1. Which variants of flexibility do you envision in a practical situation of a "Sustainable Competitive Advantage with Core Competence" on the following planes :

* Rexibility in terms of "options?'

* Rexibility in terms of "change mechanisms"

* Rexibility in terms of "freedom of choice" to participating actors.

2. Identify and delineate the types of flexibility conducive to establishing a regime for sustainable competitive advantage in your organization. On which planes does the flexibility need to be enhanced ?

3. Attempt mapping the sustainable competitive advantage of your organization on the following continua. (Rease tick mark in the appropriate box(es)).

4. Develop a SAP-LAP (Stuation Actor Process-Learning Action Performance) model of "Sustainable Competitive Advantage with Core Competence" appropriate to your organization.

Reflecting Applicability in Real Life

1. Implement the methodology of formulation of strategy with core competence and flexibility discussed in the paper.

2. Identify at least five select key issues on people as a source of core competence relevant to your organization.

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Anjana Kak

Regional Engineering College

Srinagar, India

Sushil

Department of Management Studies Indian Institute of Technology Delhi

Hauz Khas, New Delhi, India

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