How to study for Core Competencies in IBBI valuation exam?

How to study for Core Competencies in IBBI valuation exam?

An easy scoring area in the Insolvency and Bankruptcy Board of India (IBBI) Valuation Examination

The topic of core competencies appears under the heading Valuation Applications in the syllabus (https://ibbi.gov.in/SFAsyllabuswef01062020.pdf) for the IBBI valuation examination (asset class – securities or financial assets).

IBBI has assigned this heading a combined weightage of 35%. Within this heading, several business strategies such as Porter’s five forces, SWOT, PEST etc are discussed.

Cleary, these are theory areas and a reasonable effort in this section would yield great benefit in the valuation exam. The questions are easy, testing only one’s basic understanding of these topics.

Typically, students ignore these areas and focus on harder topics, looking to score well in those areas. Whereas, these (Core Competencies) are low hanging fruits. From a professional perspective as well, these business strategies give the IBBI Valuer the necessary tools to analyse a given business/industry. Therefore, right so, business strategies like core competencies are tested in the IBBI’s valuer exam.

Now, let’s move to understand the basics of core competencies.

Core competency

Core competency may be a narrowly defined field or task at which a corporation excels. A firm's core competencies are difficult for its competitors to mimic, allowing the corporate to differentiate itself. Most core competencies are not applicable only to products and markets but they go beyond these.

They apply to a large range of business activities, giving them the edge to differentiate. Core competencies are the abilities to procure and utilise all kinds of resources in comprising the strategic advantages of a business. A modern management theory which has gained popularity recently, suggests that businesses must cultivate and utilize its core competencies so as to succeed against the competition.

For example, a variation of the principle that has emerged in recent years recommends that job seekers specialise in their personal core competencies so as to differentiate itself from the competition. You should take your positive characteristics that you also have developed and list them on a resume. Some personal core competencies comprise of analytical abilities, creating thinking, and problem-solving skills.

Knowing what you are the best in is really helpful on achieving success. Equally important is knowing why. Its core competencies are the why. Core competency, as a management theory is relatively new. It was first introduced during a 1990 Harvard Business review, “The Core Competence of the Corporation”.

In the article, C.K. Prahalad, and Gary Hamel review three conditions a commercial activity must meet so as to be a core competency:

The activity must provide superior value or benefits to the buyer.

It should be difficult for a competitor to duplicate or imitate it.

It should be rare.

As mentioned above, core competencies are the ability to best utilize a variety of resources, like its talent pool, physical assets, patents, and brand equity. Knowing the core competencies is the first step of the corporation. The second one is for the corporate to properly focus all of these resources and maximise their utility.

In order to achieve this, it is not strange for it to even outsource activities that are outside their core competencies. Core competencies are developed through the method of continuous improvements over periods of time, instead of one large change. To be successful in an emerging global market, for instance, it's more important and a better strategy to create core competencies instead of spreading out.

Core competences do not vary only based on the company but, competencies vary deeply by the industry in which the company operates in. A hospital or clinic may try to improve specific specializations. A manufacturer may identify superior quality control. Some examples of the core competencies of established and successful companies are as follows:

McDonald's has standardization. It serves nine million pounds of french-fried potatoes a day, and each one among them has precisely an equivalent taste and texture.

Apple has style. The beauty of its devices and its brand name gives them a foothold over its many competitors.

Wal-Mart has buying power. The sheer size of its buying operation gives Wal-Mart a purchasing power to dictate the price on its suppliers. Thanks to this power, it can purchase supplies for cheap prices and undersell retail competitors.

The use and understanding of the concept of core competencies are often vital to enterprises. They can use core competencies so as to excel within the development of core products. Enterprises could also use core competencies to boost the values of consumers and stakeholders.

In many respects, the competitiveness of a corporation is deeply connected on its ability to develop core competencies, and having the ability to create core competency is an outcome of strategic architecture, which must be enforced by top management so as to achieve success at building core competencies.

According to business theory, company executives should develop a focus on which core competencies can be created in order to revitalize the method of value added and business creation. Having an objective and independent point-of-view of tomorrow's opportunities is quite important. It allows the company to focus and exploit these opportunities. Having these skills is vital to the role of executives in industry leadership.

With this article you must have got an overview of core competencies. This is a topic within Valuation Applications of the IBBI Valuation exam syllabus. Its total weightage is 35%. Being a relative difficult area (bond valuation, derivatives etc), these business strategy type concepts are low hanging fruits for the student. Hence, study them and score well.