What are core competencies in a firm?

The topicality of firm core competencies has beenthat results in the ability to execute one or more critical
accentuated amongst business analysts in their searchprocesses to a world class standard." Two ideas are
of root causes for competitive success. A company'sespecially important here. The skills or knowledge must
specific competency is things that a firm can do wellbe complementary, and taken together they should
and that meet the following three conditions asmake it possible to provide a superior product."
specified by Hamel and Prahalad (1990).For example, Black and Decker's core technological
 competency is in 200 to 600 W electric motors. All of
            1. It provides customer benefits,their products are modifications of this basic
            2. It is hard for competitors totechnology (with the exception of their work benches,
imitate, and,flash lights, battery charging systems, toaster ovens,
            3. It can be leveraged to manyand coffee percolators).
products and markets. 
 Tidd lists out 21 products of Canon demonstrating
A core competency can take various forms, includingcompetencies in precision mechanics, fine optics and
technical know-how, a reliable process, and/or closemicro electronics. In late 1950s, canon applied these
relationships with customers and supplierscompetencies to other areas of products than
(Mascarenhas et al. 1998). If a core competency yieldscameras such as business machines. By 1964, Canon
a long term advantage to the company, it is said to bediversified its product lines to electrofax copier and
a sustainable competitive advantage. The ability toelectronic calculator. The main factors behind increase
consolidate corporate wide technologies andin the number of products, technologies and markets
production skills into competencies enables firms toseem to be the rapid growth of information technology
adapt quickly to changing opportunities.and electronics, technological transitions from analogue
 to digital technologies, technological fusion of audio and
C.K. Prahalad and Gary Hamel writing in 1990 Harvardvideo technologies. Canon provides an example how a
Business Review article said that a core competencyfirm turns its specific competencies to a competitive
is "an area of specialized expertise that is the result ofadvantage and how it inevitably influenced the pattern
harmonizing complex streams of technology and workof diversification. 
activity." As an example they gave Honda's expertise 
in engines. Honda was able to exploit this core 
competency to develop a variety of quality products 
from lawn mowers and snow blowers to trucks andReference
automobiles. 
 Galunic, D.C. and Rodan, S. (1998). "Resource
According to Leonard-Barton, D. “Capabilities arerecombination in the firm: knowledge structures and the
considered core if they differentiate a companypotential for Schumpeterian innovation". Strategic
strategically”. On the other hand Galunic and RodanManagement Journal Vol 19. p. 1193-1201.
(1998) argue that “a core competence 
differentiates not only between firms but also inside aGary Hamel and C. K. Prahalad, (1990) "The Core
firm it differentiates amongst several competencies. InCompetence of the Corporation", Harvard Business
other words, a core competency guides a firmReview, vol. 68, no. 3, May-June 1990, pp 79-93.
recombining its competencies in response to demands 
from the environment”.Mascarenhas, B., Baveja, A., and Jamil, M. (1998)
 "Dynamics of Core Competencies in Leading
Coyne, Hall, and Clifford (1997) proposed that "a coreMultinational Companies", California Management
competence is a combination of complementary skillsReview, Vol 40, no. 4, pp. 117-132.
and knowledge bases embedded in a group or team