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What Is Core in Business

Therefore, the easiest way to identify a core business function is to examine whether the primary cash flows of the company`s revenue model flow directly through it. Core business functions are always directly involved in the primary cash flow of the company`s revenue model(s), while non-core business functions typically do not, meaning that the company can hypothetically operate without non-core business functions without affecting primary cash flows, while core business functions are critical to the pursuit of its primary cash flows. By determining with certainty what the core business of the company is, we can know which path to take to develop action plans to improve the company that can generate new business opportunities. In this way, we need to know the following points: once you have analyzed the above points, you can define exactly what is the core business of your company; What you do well, what corrections need to be applied and what decisions need to be made to improve them. Why do so many companies need to transform? Think of the cycle that long-term businesses often go through: they thrive first by relentlessly focusing on what they can do, then expanding that core to grow, and then, when the core has lost its relevance, redefining itself and refocusing on another fundamental force. It seems clear that this focus-expand-refine cycle has accelerated over the decades. Companies are moving from one phase to another faster than before. The forces behind acceleration are widely known. New technologies reduce costs and shorten the life cycle of products. New competitors – currently in China and India – are shaking up entire industries. Capital, innovation and management talent flow more freely and quickly around the world.

The exodus caused by all this is considerable. The average holding period for a common share has increased from three years in the 1980s to nine months today. The average company lifespan has fallen from 14 years to just over ten years, and the average CEO tenure has dropped from eight years a decade ago to less than five years today. The first is profit pools – locations along an industry`s value chain where attractive profits are made. If your business is aiming for a declining or shifting profit pool, improving your ability to execute can`t accomplish much. Take Apple`s position, whose share of the personal computer market fell from 9% in 1995 to less than 3% in 2005. But more than that, the entire profit pool on PC has steadily decreased over these years. If Apple hadn`t shifted its business to digital music, its outlook might not be very optimistic. General Dynamics found itself in a similar situation in the 1990s, when defense spending fell sharply. In order not to be blocked by the shrinking profit pool, it sold many of its units and defined the company around only three main businesses in which it had significant advantages: submarines, electronics and information systems. Business support functions refer to business activities where they act solely to support core functions in operations and do not generate revenue. Their production is not intended for sale on the market, but to be used through essential functions.

Thus, figuring out what the core business is allows you to focus only on what you`re really good at, setting aside activities that require time, money, and effort without generating significant benefits or gains for your business. The main activity of an organization is an idealized construction intended to express the “main” or “essential” activity of that organization. This deserves to devote all efforts to the development of certain areas of the main activity, without affecting the aggregate for the operational equipment of the company. Anyone who lives in a business environment, whether as an entrepreneur or as an employee, must have heard the term “core business.” Even though this term is quite deeply rooted and commonly used, can you answer what is the core business of your company? Or can you answer in advance what this term means? So the real question is how to open management`s eyes to the assets hidden within it. One way is to identify the richest hunting grounds. Our research suggests that hidden assets tend to fall into three categories: undervalued trading platforms, untapped customer knowledge, and underutilized skills. The exhibition “Where is your future?” describes the types of assets we saw in each category. To better understand how these assets came to light, let`s look at a few individual examples. It`s hard to know when your core business needs to change.

Some companies cling to their hearts for too long, even in the face of overwhelming competition. Others, attracted by new and booming markets, are abandoning their core business prematurely – with devastating consequences. PerkinElmer was once the market leader in optical electronics for analytical instruments such as spectrophotometers and gas chromatographs. Its optical capabilities were so strong that the company was selected to manufacture the Hubble Space Telescope`s mirrors and sighting equipment for NASA. But by 1993, PerkinElmer, whose commodity lines were under attack from cheaper and more innovative competitors, was at a standstill. Revenue was stuck at $1.2 billion, exactly where it was ten years earlier, and the company`s market value had eroded with its profits; In the end, there was a loss of $83 million in 1993.

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