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ACCA Strategic Professional · Strategic Business Leader · The internal resources, capabilities and competences of an organisation

Harbourlight Foods, a regional bakery group, has a patented fermentation process that rivals cannot copy, which lets it produce bread with a longer shelf life at lower cost. Using Hamel and Prahalad's view of core competences, which feature of the competence is most important in explaining why it supports competitive advantage?

A core competence supports competitive advantage when customers value what it delivers and rivals find it hard to imitate. Harbourlight's patented process gives longer shelf life at lower cost and cannot be copied, so it meets both tests. Commonplace routines or balance sheet assets do not.

  1. AIt is widely available in the industry, so customers expect it
  2. BIt is difficult for competitors to imitate and gives customers a valued benefitCorrect
  3. CIt is a low-cost routine activity that every bakery performs
  4. DIt is a tangible asset recorded in the statement of financial position

Explanation

Core competences, in Hamel and Prahalad's sense, provide access to a wide variety of markets, make a significant contribution to the perceived customer benefit, and are difficult for competitors to imitate. The process meets the last two points. Widely available routines or recorded tangible assets are not what make a competence core.

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