Business Policy - Rover Honda Case Study Analysis

Introduction

What are "core competencies" ?

- Core competencies are those capabilities that are critical to a business achieving competitive advantage.

- The starting point for analysing core competencies is recognising that competition between businesses is as much a race for competence mastery as it is for market position and market power.

- Senior management cannot focus on all activities of a business and the competencies required to undertake them.

- So the goal is for management to focus attention on competencies that really affect competitive advantage.

- These areas of expertise may be in any area but are most likely to develop in the critical, central areas of the company where the most value is added to its products.

- Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.

What is Competitive Advantage ?

- When a firm sustains profit that exceed the average for its industry , the firm is said to possess competitive advantage over its rivals .

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Michael Porter identified two basic types of competitive advantage : Cost Advantage and Differential Advantage

A competitive advantage exists when a firm is able to deliver the same benefits as competitors but at a lower cost ( cost advantage ) , or deliver benefits that exceed those of competitive products ( differential advantage )

Thus a competitive advantage enables a firm to create superior value to its customers and superior profits for itself .

- Cost and differentittion advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation.

WHAT ARE RESOURCES ?

Resources are the firm specific assets useful for creating a cost or differenciation advantage and that few competitors can acquire easily . The following are the examples of resources :

- Patents & Trademarks

- Proprietary Know-How

- Installed Customer Base

- Reputation of the firm

- Brand Equity

What are capabilities ?

Capabilities refer to the firm's ability to utilize its resources effectively.For example , an ability of the firm to bring the product to the market faster than its competitor .

Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate .