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

Which of the following best describes a 'core competence' in the sense used by Prahalad and Hamel?

A core competence is the collective learning in an organisation, especially the ability to coordinate diverse production skills and integrate multiple technologies, which gives access to a wide range of markets. It is not simply an owned asset, a bulk-buying benefit or a legal protection such as a patent.

  1. AA collective learning in the organisation, especially how to coordinate diverse production skills and integrate multiple streams of technology, that gives access to many marketsCorrect
  2. BAny resource a firm owns that can be listed on its balance sheet
  3. CA short-term cost advantage obtained by buying raw material in bulk
  4. DThe legal protection given to a firm through patents and trademarks

Explanation

Prahalad and Hamel define core competence as collective learning in the organisation, particularly coordinating diverse skills and integrating technologies, which opens access to a wide variety of markets. Balance-sheet assets are only tangible or recorded resources and do not capture such organisational learning. Bulk buying and patents are narrower items, not the concept.

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