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CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: Internal Environment

Meera Electricals uses Hamel and Prahalad's tests to judge whether a capability is a core competence. Which of the following capabilities would most clearly qualify?

A capability that opens access to many markets, adds significant perceived customer benefit and is hard for rivals to imitate qualifies as a core competence. Common skills, single-product skills of minor value, and one-time gains from asset sales fail these tests.

  1. AA skill that is common across the industry and easy to buy in
  2. BA skill that gives access to many markets, adds significant perceived customer benefit and is hard for competitors to imitateCorrect
  3. CA skill used only in one product line with minor customer value
  4. DA one-time cost saving from selling surplus land

Explanation

A core competence provides potential access to a wide variety of markets, makes a significant contribution to perceived customer benefits, and is difficult for competitors to imitate. The common, narrow or one-off options fail these tests.

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