For a core competence to be a viable basis for the corporation strengthening a new business unit, there are three requirements. Which one of the following is not one of these requirements?
The new business must be similar to existing businesses to benefit from a core competence
The competence must help the business gain strength relative to its competition
The collection of competencies should be unique, so that they cannot be easily imitated
The new business must have an established large market share
The correct answer and explanation is :
The correct answer is:
The new business must have an established large market share.
Explanation:
A core competence refers to a unique set of skills, knowledge, or capabilities that give a company a competitive advantage. These competencies are not easily replicated by competitors and play a crucial role in strengthening a business unit or even expanding into new business areas. For a core competence to be a viable basis for strengthening a new business unit, there are three key requirements that need to be met:
- The new business must be similar to existing businesses to benefit from a core competence.
- A core competence helps a company leverage its existing strengths, so when a new business unit is similar in terms of operations, processes, or market, it becomes easier to transfer and utilize the existing core competencies. This ensures that the company can derive maximum benefit from its expertise, technology, or organizational capabilities.
- The competence must help the business gain strength relative to its competition.
- Core competencies should give the company an edge over its competitors. This can be through superior technology, unique products, or other competitive advantages that differentiate the company from its rivals. These competencies should enable the company to perform better, faster, or more cost-effectively, thus strengthening its competitive position in the market.
- The collection of competencies should be unique, so that they cannot be easily imitated.
- A core competence is only valuable if it is difficult for competitors to replicate. If the competencies are easily imitable, they lose their strategic advantage. Companies strive to develop competencies that are rare, hard to copy, and offer sustained differentiation over time.
Why the “large market share” requirement is not one of them:
Having a large market share is not a necessary requirement for leveraging core competencies in new business units. While a strong market share can indicate success in an existing market, it doesn’t directly correlate with the ability to strengthen a new business unit. What matters more is whether the core competencies can be applied effectively in the new unit, whether the competencies offer a competitive advantage, and whether they are unique and hard to replicate. A company can enter new markets or business units with small market share but still benefit from its core competencies if those competencies are valuable, transferable, and difficult for competitors to imitate.