Core business
Core business ( English core business ) is at companies with multiple lines of business , the name of the principal and most sustainable source of revenue .
General
The business purpose of a company is described in the commercial register as the “object of the company”. The (main) activity pursued by a company , which is referred to as core business, is derived from it. A mostly generalized description of the operational purpose, however, enables one to be active in other (similar or even alien) areas in addition to the central area of work . With regard to their importance and subsequent diversification , the main business is then referred to as the core business to distinguish it. New business models can only be implemented as long as the core business is still healthy and growing. A functioning core business is therefore a prerequisite for further diversification. The core business in the organizational structure is usually a strategic business area . The business lines outside the core business are called ancillary business or ancillary area .
Scope and content
The starting point is the work of Gary Hamel and CK Prahalad , who initially described the core business in 1991 as the intangible link between core competence and the end product . In 1994 Hamel and Prahalad examined the core competencies of companies more closely. Core competencies are then skills and technologies that a company from the competition differ ( English competitor differentiation ,) to an extended marketability ( English extendability contribute) and a future-oriented customer value ( english customer value donate). Many secondary areas, such as in a conglomerate, required higher capacities in human resources and materials management , broader know-how , more comprehensive qualifications of employees and market development in possibly very heterogeneous market segments . As a result, the overview could be lost, synergies were usually not developed, and the economies of scale and economies of scope that were hoped for could often not be realized to the extent expected.
This was followed by a trend towards “concentration on the core business” with structural change due to decreasing diversification activities, especially in large companies . Diversification can therefore be viewed as a strategy in contrast to the core business. This corporate strategy of “concentration on core business” pursued in the context of shareholder value is intended to direct the main tasks of management to the main sources of income ( English cashcows ) of a company. For example, by concentrating on its core business ( engine construction ), Deutz AG returned to profitability in 1997 ; its secondary activities (mainly industrial plant construction ) only accounted for 20% of the business volume.
Effects
The result of “concentrating on the core business” is the outsourcing of “non-core” activities (through outsourcing , spin-off , offshoring ), divestment , mergers & acquisitions and a company organization based on the principle of lean management . In addition, as part of lean production , the vertical range of manufacture - even in the core business - can be reduced. The cost reductions resulting from these measures ultimately improve the sustainable profitability of a company. On the other hand, it can make sense to place the core business on a broader basis or to supplement it (for example with the maintenance service for devices sold).
See also
Individual evidence
- ↑ Eberhard Dülfer, Die Aktienunternehmung , 1962, p. 60
- ↑ Michael E. Raynor / Clayton M. Christensen, The Innovator's Solution , 2003, pp. 253 ff.
- ↑ Gary Hamel / CK Prahalad, Only core competencies ensure survival , in: Harvard Business Manager 13, February 1991 edition, p. 73
- ^ Gary Hamel / CK Prahalad, Competing for Future / Wettlauf um die Zukunft , 1994, pp. 203 ff.
- ↑ Helmut Lang, New Theory of Management , 2014, p. 153
- ↑ Jörg Link / Daniela Tiedtke, Successful practical examples in online marketing , 2001, p. 124
- ↑ Helmut Lang, New Theory of Management , 2014, p. 74