Business competences,

processes and activities

Chapter 4

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Learning Objectives
• explain the concepts of core competences,
competences, resources and the relationships between
them
• determine the relationship between core competences
and core activities
• explain how the configuration of value-adding activities
can improve business performance
• explain the concept of the value chain and the value
chain framework
• explain how the value chain framework ‘works’

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Competences
A competence is an
attribute or collection of
attributes possessed by all
or most of the companies
in an industry.

A core competence is an
attribute, or collection of
attributes, specific to a
particular organization
that enables it to produce
above-average
performance.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

Competences and resources

Competitive advantage

Core competences/distinctive capabilities

Resources Competences

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Core Competence

Made simple
Core competence (distinctive
capability) = superior acquisition
and employment of resources +
superior development of 'general'
competences.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Core Competences
Core competences are distinguished from competences in
several ways:
• they are only possessed by those companies whose
performance is superior to the industry average;
• they are unique to the company;
• they are more complex;
• they are difficult to emulate (copy);
• they relate to fulfilling customer needs;
• they add greater value than 'general' competences;
• they are often based on distinctive relationships with
customers, distributors and suppliers;
• they are based upon superior organisational skills
and knowledge.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Core Competences cont.
customer focus - does it adequately focus
on customer needs?
uniqueness - can it be imitated by
competitors as if so, how easily?
flexibility - can it be easily adapted if
market or industry conditions change?
contribution to value - to what extent does
it add value to the product or service?
sustainability - how long can its superiority
be sustained over time?

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Dynamic Capabilities
Dynamic capabilities represent the ability
for organisations to innovate, adapt and
adopt in terms of their tangible and
intangible resources, and is the foundation
of many forms of competition in today’s
business environment. It is therefore also
necessary to analyse the way in which
value adding activities are configured and
co-ordinated

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Value
S
D'
Consumer Surplus

Price RP

Market Price

O A
Quantity Demanded

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Value Types
Economic value, best expressed in terms of wealth;
resources or the economic conversion process.
Physical value, associated with a person’s well-being, health,
comfort or rest.
Emotional value which is linked to a person’s emotions and
includes fear, joy, contentment or excitement.
Social value, reflecting the interpersonal and relationships
dimension of society.
Cognitive value in relation to the quest for knowledge and
ultimately wisdom.
Political value which relates to influences, control and power.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Value Adding

Inputs Activities Outputs

Resources: Competences
Physical, and core
financial, competences, Products
human, skil s and
intellectual. knowledge.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Reading
Barney, J.B and Clark, D.H (2007) Resource-Based Theory:
Creating and sustaining competitive advantage, Oxford
University Press, Oxford

Jarillo, J.C (1993) Strategic networks : creating the

borderless organization, Butterworth Heinemann, Chapter 4-
5

Petts, N. (1997) Building Growth on Core Competences - a

Practical Approach, Long Range Planning, 30 (4), August,
551 - 561

Porter, M.E., (1985) Competitive Advantage, New York: Free

Press.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction

 Review Questions
1. Explain the difference between competence and core
competence

2. Explain each element of the value chain and how

organisations can create value through efficient and
effective activities.

3. Evaluate how value adding activities can be configured

to improve business performance in the banking
sector.

David Campbell, David Edgar & George Stonehouse

Business Strategy: an introduction