Strategic Management and Core Competencies: Theory and Application

In this chapter, I propose that competence-based strategy should be applied as a separate decision area in the strategic management of firms. I present a framework for competence-based strategy that will guide the remaining part of the book. First, however, let us discuss the relevance of applying competence-based strategy.

The why of competence-based strategy has two starting points. One is that competencies must be seen as the starting point for competitive advantage; the other is the empirical challenges of the postindustrial age that many firms face today.

I have said that competencies can be perceived as the key to competitive advantage, based on two observations. First, several authors have expressed dissatisfaction with the static equilibrium framework of much of the product-market strategy literature (Wernerfelt, 1984; Barney, 1986). This seems to be a logical stance to take in light of the discussions on the new competitive situation in the introduction to this book. The second inspirational source of work is the increasingly persuasive case examples of successful organizations that appear to have developed strategy around their existing and future competencies rather than simply market and competitor analysis (3M, Honda, and Canon are examples) (Prahalad & Hamel, 1990).

-123-