In the increasingly competitive business environment in today's society, more and more organisations have recognized the importance of building and developing core competencies to maintain their competitiveness in the market (Boam, 1992). Meanwhile, some organizations fail due to overreliance on their core competencies. The paradox of core competency and core rigidity has spurred growing attention in both academia and practitioner side. This essay will first introduce the term core competence as well as its benefits and limitations. Secondly, it will define core rigidity and discuss the steps managers can take to prevent core competencies becoming core rigidities. .
To identify a company's core competency, it is crucial to be aware of its meaning. Competencies, also known as capabilities are "the ability to do something successfully or efficiently" (Oxford English Dictionary, 1989). There are three tests to distinguish the core competency (Prahalad and Hamel, 1990). Firstly, the capability allows the company to have potential to diversify their market. Secondly, it offers a significant contribution to perceived benefits of the product, in this case, provide superior products for customers. Thirdly, it must be difficult for other company to imitate. Powell (2014) pointed out there should be a fourth test, the capability of being better than competitors, in terms of lower costs, higher quality or better distribution network. For example, Ben & Jerry's core competency is the combination of unique flavours and the way they name their products which allow them to stand out in the market (Thompson et al., 2013).
Similarly, in the resource-based view, core competency is the ability which enables the company to leverage its resources (Wernerfelt, 1984). Including both physical assets such as machines, buildings, and intangible assets such as the structure and culture within the company(Kraaijenbrink, 2010).