An Integrated Core Competence Evaluation Framework for Portfolio Management in the Oil Industry

Abstract

The proponents of resource-based theory argue that efficient management of core competence portfolio provides sustainable competitive advantages. However, literature demonstrates little evidence regarding (i) how to identify core competence, specifically for a company operating in the oil sector, (ii) how to identify tangible and intangible resources related to the core competence of the company, and (iii) how to manage a company’s competence portfolio more efficiently by forging network alliances with collaborating firms. Drawing upon resource-based theory this paper presents a core competence evaluation framework for managing the competence portfolio of an oil company. The paper introduces a network typology to illustrate how to form different types of strategic alliance relations with partnering firms to manage and grow the competence portfolio. The framework is tested using a case study approach involving face-to-face structured interviews with twenty-five divisional managers of a large oil company in the Middle East. We identified purchasing, refining and sales and marketing as strong candidates to be the core competencies of the company. However, despite the company’s core business of refining oil, the core competencies were identified to be their research and development and performance management (PM) capabilities. We further provide a procedure to determine different kinds of physical, intellectual and cultural resources making a dominant impact on company’s competence portfolio. In addition, we provide a comprehensive set of guidelines on how to develop core competence further by forging a partnership alliance choosing an appropriate network topology. The paper makes many contributions to the field of strategic management and core competence evaluation in the oil sector. The guidelines provided can assist practitioners with devising appropriate network relationships with partnering companies in order to outsource, divest, protect and/or develop their core competence portfolio.