Core competence is a company's unique ability to provide customers with a distinctive competitive advantage. A company's core competence results from its investment in research and development and its ability to commercialise new products and technologies. Core competence is also the lowest cost provider of a product or service. The concept of core competence is vital in product development because it provides a framework for companies to assess their strengths and weaknesses and identify areas where they can create a competitive advantage. To create a competitive advantage, companies must first identify their core competencies and then focus on creating products and services that leverage those competencies. This process can lead to sustained competitive advantages and superior financial performance when done correctly.

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