What Is the Core Business?

The core business of an enterprise is a concept connected with diversified operations. Generally, the core business refers to a business that has a competitive advantage in a diversified enterprise or enterprise group and can bring main profit income. The core business of an enterprise must be the most competitive business in the industry in its business portfolio. Core business can give the market and consumers a clear concept: "What business do I (businesses) do?"

Core Business

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Core Business

Enterprises

1. The market share is in a leading position;

2, product profitability is strong, there is a good profit model, and this profit model is not easy to copy;

3. It has strong anti-competitive ability and consumers have high loyalty to the product;

4. Expansion strategies that can improve the comprehensive capabilities of enterprises and stabilize the core business of financial foundation. Expansion of core business.

Core business relies on internal development

Internal development is mainly to expand core business through the integration of the company's existing resources. The specific forms of internal development generally include: vertical chain fission. Vertically integrated enterprises will provide some of the value chain links to the market to provide the market with many products different from the final product; wholly-owned new enterprises and factories; full use of technology by-products Research and development sometimes produce technical by-products, which can be independently produced to produce products different from the company's existing products; make full use of talents, and sometimes the company has talents capable of engaging in other business areas, and can use such talents as the core to organize resources to engage in new business Development. With a new perspective, it takes a long time to form a product. Internal development requires companies to have strong resources and capabilities. The advantage of internal development is that it is easy to control and compare, but internal development also has its limitations. It hinders enterprises from obtaining external resources and new ideas. Therefore, internal development is suitable for large-scale and technology-leading enterprises.

Core business restructuring and debt

None of the world's top 100 companies have been developed solely through the accumulation of profits, and they must rely on the organization and coordination of social resources to expand their strength. As George Stigler, a Nobel laureate in economics and a famous American economist, pointed out: No big American company has grown up through some degree or some kind of merger, and almost no big one The company grew mainly by internal expansion. In fact, the M & A behavior of the world's largest enterprises is indeed becoming more and more intensive today. The first is to "strongly combine" to form a larger company to create a monopoly position; .

Successful mergers should consider whether a company's overall strategic advantages and core capabilities can be strengthened, and the company can be placed in an advantageous position that cannot be achieved by itself. Before the company uses capital operation to rapidly expand its scale, it should have a superior or relatively leading performance in product management and technological innovation, and leave product management and technological innovation to expand the scale blindly, and even rely on administrative methods to piece together the enterprise group. In the end, the fate of being eliminated by the market is inevitable.

Core business alliances

Strategic alliance refers to the joint action of any equity or non-equity investment to share risk and benefit for two companies to achieve specific goals. There are three types of strategic alliances: first, loose relationships, including network organizations, opportunistic alliances, etc .; second, contractual relationships, including subcontracting, licensing, and franchising; and third, all formal relationships, including joint operations, Joint venture, cooperative enterprise, etc.

The use of strategic alliances to expand core business can make up for the lack of resources when companies enter new industries, and through cooperation they can also obtain multiplier effects and sustainable competitive advantages. However, there are also many problems in strategic alliances, mainly because the motivations of all parties in the alliance are not the same, the pursuit of interests is not consistent, and more importantly, there is sometimes lack of trust. In addition, the league may sometimes cultivate stronger opponents than itself.