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competitively and reflect its personality. Core competencies emerge over time
through an organizational process of accumulating and learning how to deploy
different resources and capabilities. As the capacity to take action, core competencies
are “crown jewels of a company,” the activities the company performs especially well

compared with competitors and through which the firm adds unique value to its
[4]
goods or services over a long period of time.
Sometimes consistency and predictability provide value to customers, such as
the type of value Walgreens drugstores provides. As a Fortune magazine writer
noted, “Do you realize that from 1975 to today, Walgreens beat Intel? It beat Intel
nearly two to one, GE almost five to one. It beat 3M, Coke, Boeing,
[5]
Motorola.” Walgreens was able to do this by using its core competencies to offer
value desired by its target customer group. Instead of responding to the trends of the
day, “During the Internet scare of 1998 and 1999, when slogans of ‘Change or Die!’
were all but graffitied on the subway, Walgreens obstinately stuck to its corporate
credo of ‘Crawl, walk, run.’ Its refusal to act until it thoroughly understood the
implications of e-commerce was deeply unfashionable, but…Walgreens is the
[6]
epitome of the inner-directed company.” Thus, Walgreens creates value by
focusing on the unique capabilities it has built, nurtured, and continues to improve
across time.
During the past several decades, the strategic management process was
concerned largely with understanding the characteristics of the industry in which the
firm competed and, in light of those characteristics, determining how the firm should
position itself relative to competitors. This emphasis on industry characteristics and
competitive strategy may have understated the role of the firm’s resources and
capabilities in developing competitive advantage. In the current competitive
landscape, core competencies, in combination with product-market positions, are the
[7]
firm’s most important sources of competitive advantage. The core competencies of
a firm, in addition to its analysis of its general, industry, and competitor
environments, should drive its selection of strategies. As Clayton Christensen noted,
“Successful strategists need to cultivate a deep understanding of the processes of
competition and progress and of the factors that undergird each advantage. Only thus
will they be able to see when old advantages are poised to disappear and how new
advantages can be built in their stead.” By drawing on internal analysis and
[8]
emphasizing core competencies when formulating strategies, companies learn to
compete primarily on the basis of firm-specific differences, but they must be aware of
how things are changing as well.
Resources and Capabilities
Resources
Broad in scope, resources cover a spectrum of individual, social, and
[9]
organizational phenomena. Typically, resources alone do not yield a competitive
advantage. [10] In fact, the core competencies that yield a competitive advantage are
created through the unique bundling of several resources. [11] For example,
Amazon.com has combined service and distribution resources to develop its
competitive advantages. The firm started as an online bookseller, directly shipping
orders to customers. It quickly grew large and established a distribution network

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