business. If the core competence of toilet
preparations to a detergents corporation is
surface chemistry, this core competence may be
underutilized, or at worst dissipated, if it is
spread across the detergent, toilet preparations,
drugs etc. divisions which have been set up as
autonomous productlmarket orientated businesses.
Indeed Prahalad and Hamel (1990)
suggest that the market share with which a
business should be concerned is not that achieved
by its finished products, but that which reflects
the exploitation of its core competence; and they
argue that in the case of Black and Decker this
is its share of the world market in small electric
motors. Prahalad and Hamel (1990) list three
tests which should be applied to identify a core
competence: firstly it should provide potential
access to a wide variety of markets, i.e. it
possesses leverage potential, secondly it should
be relevant to the customers’ key buying criteria,
and thirdly it should be difficult for competitors
to imitate. They suggest that few companies will
lead in more than six core competencies.
We have seen that Coyne (1986) identified the
sources of sustainable competitive advantage
as being four types of capability differential:
‘regulatory differential’, ‘positional differential’,
‘functional differential’ and ‘cultural differential’.
It is possible to extend Coynes’ model of
capability differentials by identifying the intangible
resources which act as the ‘feedstock’ to
each differential. This extension is shown in
Figure 2.
The main thrust of the theoretical argument
in this article is that intangible resources are the
‘feedstock’ of the four capability differentials,
and that an understanding of the role of the
intangible resources in a business may be achieved
by analyzing the competitive advantage observed
in the market place, the capability differentials
which produce this advantage, and the intangible
resources which act as the wellsprings. The model
presented in Figure 2 has proved effective in
teaching and research situations in achieving
these objectives because it quickly imparts an
understanding of the subject matter, provides a
framework for analysis, and acts as a checklist.
When the essence of the business has been
identified in this fashion then the key management
responsibilities are concerned with exploitation,
development and protection of the essential
intangible resources.
Where the organization is a collection of