Which approach best helps identify core competencies?

• A. Assessing the organization's capabilities through financial metrics alone.
• B. Analyzing capabilities that are valuable, rare, hard to imitate, and exploited across multiple products.
• C. Evaluating resources strictly by their monetary value.
• D. Copying competitors' capabilities.

Answer: (B)

The idea being tested is that core competencies come from capabilities that deliver valuable, rare, and hard-to-imitate advantages and can be leveraged across multiple products. This perspective focuses on what the firm actually does well—the integrated skills, routines, and know-how that create value and are transferable beyond a single product. When a capability fits all those criteria and can be applied across several offerings, it becomes a sustainable source of competitive advantage because competitors would struggle to replicate it and the firm can exploit it in multiple markets or products.

Financial metrics alone look at outcomes, not the underlying strengths that generate them. Valuing resources only by monetary cost misses tacit knowledge, organizational processes, culture, and routines that constitute capabilities. Copying competitors’ capabilities isn’t about building your own strength; it’s imitation, which tends to be less durable and can erode your distinct position.