Core competence development through the fusion of endogenous factors | |
| Author | Pasu Decharin |
| Call Number | AIT Diss. no.SM-99-1 |
| Subject(s) | Strategic planning Strategic planning |
| Note | A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy, School of Management |
| Publisher | Asian Institute of Technology |
| Abstract | The concept of core competence has been a popular concept since its introduction in 1990. Various theories have been developed to elaborate and explain the significance and usefulness of core competence. Core competence combined with the resource-based view has been used as one of the main concepts to explain the sources of a firm's competitive advantage. However, despite the popularity of the concept, there are questions that need to be resolved. Questions have been raised concerning the constituents of the development process of core competence. A more systematic approach to analyze the major components that make up core competence is still lacking. Moreover, the clarification of how these major components contribute to the development of core competence is needed. By acquiring su~h an understanding, a firm will be able to assess its strengths and weaknesses in developing core competence and determine where and how it needs to improve itself so as to develop core competence for market competition. This study presents a systematic framework to explain the development of a firm's core competence. Based on the synthesis of the work that has been done thus far, core competence can be defined as the collective knowledge in an organization, resulting from the integration and interaction of resources and capabilities in order to create value for customers. In this study, cm e competence is classified into three categories, which are: operational; product/service innovation; and market-access. The categorization of core competence is based on the major functions of a firm that help create a firm's competitive advantage, namely, operation or production; innovation or R&D; and marketing. After classifying core competence into three types, the elements of developing core competence are investigated. From a review of the relevant literature, it has been found that core competence consists of skills, resources, capabilities, technologies, etc. This study classifies these major aspects in a more systematic way. Core competence is considered to consist of resources and capabilities, together called endogenous factors. Resource refers to what the firm owns or controls while capability is the ability of the firm to perform certain tasks or deploy resources. Resources and capabilities are interdependent. Further, resources can be classified into technological; physical; financial; human; intellectual property; information-based; and intangible. Capabilities can be classified into . managerial; marketing; investment; transaction; operation; and innovation. Moreover, a firm's capabilities can be further divided into core and supporting capabilities. Core capabilities are operative, innovative, and marketing capabilities. These capabilities can subsequently be developed into operational, product/service innovation, and market-access competence. Suppotting capabilities are other capabilities that help support the development and acquisition of other resources. Whether a firm's core capabilities can be developed into a core competence or not depends on the interaction and integration between these core capabilities and other resources and capabilities. This process is call fusion of endogenous factors. The fusion process of a firm consists of three parts: a clear vision of what type of competence it wants to develop; learning mechanisms; and a supportive infrastructure. A clear vision is what a firm intends to be and what type of competence it needs to achieve that vision. Moreover, a firm must have system thinking abilities in order to see the whole rather than the part. System thinking is the awareness of how resources and capabilities are Ill interrelated to one another. Learning mechanisms consist of: learning from actual experiences or learning from a firm's past successes and failures; learning from experimentation through improvement and innovation of products, processes, or organizational arrangements; learning from experiences of others which can come about through modalities such as benchmarking studies or customer feedback; and learning from education and training. Supportive infrastructure refers to systems, rules, and aspects of corporate culture that support the learning of a firm. These could include structures and cultural factors that encourage learning; systems that support the importance of education and learning of employees; systems that provide rewards and incentives; and systems that support how employees are expected to act towards each other and towards customers. Three case studies have been carried out based on this framework. The case study of 3M focuses on product/service innovation competence. The integrated chicken business of CP, a Thai multinational firm, is an example by which to examine operational competence. Finally, a case study of S&P, a Thai leader in the food business, illustrates market-access competence. Conclusions drawn from the framework and case studies show that a specific set of resources and capabilities is necessary for the development of core competence. These are called unique resources and capabilities. Unique endogenous factors are difficult for competitors to imitate and transform core competence into competitive advantage. This does not imply that other resources and capabilities are unimportant. It can be seen from the three case studies that unique endogenous factors normally consist of a firm's core capabilities. This means that to be able to develop each type of core competence, a firm must excel in its core capabilities first. Moreover, it can be observed that most of the unique endogenous factors in the three firms are normally in the form of capabilities or resources that reside within the firm. Such capabilities are difficult to imitate because they are the products of the accumulated learning of the firm, which might have taken several years. Resources that are firmly rooted within the firm like culture or well-known brandname also take time to develop. It can be said that these unique resources and capabilities are the result of accumulated and continuous learning. Besides the difference in resources and capabilities required for each type of competence, different types of vision setting and learning mechanisms are also required for each competence. However, this supportive infrastructure does not seem to follow a set path but appears to depend on the firm's situation and history. It can be seen that the framework developed in this study does not try to identify specific resources, capabilities, learning processes, or supportive infrastructure for every firm. But this framework is intended to be a tool or means for analyzing or studying the core competence development process in various firms. The three case studies provided in this study are intended to illustrate how to analyze components and mechanisms for different types of core competence development. |
| Year | 1999 |
| Type | Dissertation |
| School | School of Management |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Tang, John C. S. ;Ramanathan, K. |
| Examination Committee(s) | Sharif, Nawaz ;Tabucanon, M. ;Sununta Siengthai ;Glick, J. Leslie; |
| Scholarship Donor(s) | Faculty of Commerce and Accountancy, Chulalongkorn University; |
| Degree | Thesis (Ph.D.) - Asian Institute of Technology, 1999 |