“Theory of evolution says continuous change is inevitable and if one does not evolve, they will perish.”[/b]
A core competency is a specific factor that a business sees as being central to the way it, or its employees, works. This is true for businesses and corporations. If corporations do not evolve then their survival is in jeopardy. One thing key to survival is a core competency that the company has built over time. Yes, it is important to make and sell products or services. However, I believe products and services are just the end product or end result.
Core competencies are those capabilities that are critical to a business achieving competitive advantage. The starting point for analyzing core competencies is recognizing that competition between businesses is as much a race for competence mastery as it is for market position and market power. Senior management cannot focus on all activities of a business and the competencies required undertaking them. So the goal is for management to focus attention on competencies that really affect competitive advantage.
Corporations that are successful and continue to survive have shown that they focus more on building core competency. Based on their core competence these corporations have build products or services that can be applied to variety of applications. Successful companies are more eager to build competence that will help them become world leaders. They do not solely focus on products alone.
Among others, one place to look for such corporations is the list of dividend aristocrats. Many in this list have built some competency around which they make and sell products. Proctor and Gamble, Clorox, McDonalds, Sysco, Family Dollar Stores, Coca-Cola, and PepsiCo are corporations that have strong brand value, franchise network, cost controls, distribution network that it is hard for competitors to eat away their lunch.
Whether it is running a business or individuals’ investment portfolio, it is important to build a core competency for long term sustainability. In my case, I focus on good quality companies that consistently pay or have potential to pay growing dividends over time. I also know that chasing 100% success rate is an allusive dream. Corporations will face difficulties and they will cut dividends, but the key is to manage them by asset allocation and keep looking for newer opportunities. It may seem to be an ambitious approach but worth pursuing as it is paved with relatively less risk.