In 1990, Prahalad and Hamel published a landmark article, The Core Competence of the Corporation, in Harvard Business Review, formally establishing the position of core competence in management theory and practice. Its main point is that “the core competence of an enterprise is the source of sustained competitive advantage”. Core competence is “the accumulated knowledge in an organization, especially the knowledge about how to coordinate different production skills and organically combine multiple technology flows”, “the organization of work and the transmission of value”, “core competence is the deep work of communication, intervention and crossing organizational boundaries, which involves people at many levels and all functions”. Core competence comes from the collective learning of corporate organizations and the transmission of experience norms and values. The formation of core competence must go through the accumulation and integration of unique resources, knowledge and technology within the enterprise. Core competence is a combination of a series of complementary skills and knowledge within an organization, which can enable one or more businesses to reach world-class levels.
Core competence is based on the core resources of an enterprise, and is specifically manifested as the reflection of the comprehensive advantages of the enterprise’s intelligence, technology, products, management, culture, etc. in the market. Through learning and accumulation of core competence, enterprises may discover product trends and market opportunities as early as possible. Therefore, the sustainable development of enterprises is closely related to core competence, and enterprises must continuously improve their core competence.
Prahalad and Hamel proposed a very vivid tree theory in further describing core competence, comparing a diversified enterprise to a big tree, the core product is the trunk and main branches, the business unit is the branch, the leaves and flowers and fruits are the final products needed by customers, and the root system that provides nutrients, maintains life, and stabilizes the tree is the core competence. Core competence is actually the knowledge, skills or their collection hidden in the core products (core components), especially how to coordinate the complex production skills and integrate various technological trends. In order to obtain and maintain lasting competitive advantages, enterprises must participate in competition at three levels: core competence, core products and final products. Core competence is the source of the enterprise’s competitive advantage, the final product is the market performance of the core competence, and the core product is the material carrier of the core competence. Based on the above understanding of core competence, the goal of enterprise strategy is to identify and develop core competence that is difficult for competitors to surpass. In short, the core competitiveness of an enterprise is the organic integration and unique advantages of various resources and capabilities of the enterprise, with the characteristics of efficiency, uniqueness, expansibility and enterprise ownership. The core competitiveness of an enterprise is the internal capability resources that the enterprise uniquely possesses, which can bring special benefits to consumers and enable the enterprise to have a long-term competitive advantage in a certain market. The above two views are representative views on core competitiveness. Only with this core competitiveness can an enterprise quickly adapt to the rapidly changing market situation, continuously meet the needs of customers, and distinguish the enterprise from its competitors in the minds of customers. Only after the core competitiveness reaches a certain level can the enterprise form its own unique strategic resources that are not easy to be imitated, replaced and possessed by others through a series of combinations and integrations, and can it obtain and maintain a lasting competitive advantage.
Core competitiveness usually refers to the unique advantages of an enterprise that cannot be traded (non-competitive) and cannot be imitated. Core competitiveness is often difficult to compare directly and difficult to measure directly. Every enterprise has a certain degree of competitiveness (otherwise it would not be possible to survive in market competition), but it may not have its own core competitiveness. Core competitiveness can become the most long-term and decisive internal factor in the competitiveness of an enterprise, and usually exists in the innermost layer of the knowledge level of competitiveness. The essence of core competitiveness is the core concept. The core concept of an enterprise is the unique ideas and skills that enterprise leaders have when making major decisions, handling major issues, and conducting organizational communication, and it can be transformed into an internally consistent behavior of the entire enterprise, becoming the core element or holographic gene of the enterprise’s life body. In other words, the core competitiveness of an enterprise is not only the personal concept of the entrepreneur, but also the core concept of the enterprise. With the core competitiveness of the enterprise as the core, a complete enterprise competitiveness analysis framework can be constructed by integrating the basic viewpoints of enterprise resource theory, capability theory, knowledge theory and innovation theory.
With the deepening of the research on the core competitiveness theory, how enterprises identify and apply core competitiveness in the management process has become a new topic of research on this theory. In the application process of the core competitiveness theory, one of the primary issues faced by enterprises is which or which competitive capabilities are the core competitiveness of their own enterprises, that is, the problem of identifying the core competitiveness of enterprises. In other words, if an enterprise wants to cultivate and improve its core competitiveness, it must first clearly define basic issues such as whether it has its own core competitiveness, where its core competitiveness is, and how strong its core competitiveness is. By establishing a core competitiveness evaluation and identification system for each industry, enterprises can not only clearly know their core expertise and weaknesses, and guide the future strategic development direction of the enterprise, but also consciously adjust resource allocation and business processes in the process of operation and management, and guide the scientific operation of the entire enterprise system. At the same time, enterprises can also consciously build their own core competitiveness barriers, which can not only protect their core competitiveness from leakage, but also prevent damage from competitors or erosion of the environment, so as to maintain their differentiation or leading advantages.