Marketing
A business that primarily generates value by communicating to customers. For example, a firm that simply brands products designed and manufactured by another company. This helps the manufacturer, that may have no idea how to market what they are producing.Sales
A real estate firm that sells property and represents buyers. This is primarily a people skill with lightweight support functions in areas such as human resources, information technology and accounting.Design & Manufacturing
A brand of headphones that doesn't do much marketing but designs products that are popular with DJs and musicians such that they generate significant word of mouth. The company is completely focused on design, manufacturing, distribution and customer service with other functions such as accounting viewed as non-core.Technology
An ecommerce company provides a two-sided market for buyers and sellers. They view technology as their core-business and provide self-service tools for functions such as customer service. In other words, they view everything as a technology and solve all problems with software development.Services
A hotel views hotel management, revenue management, marketing and customer service as its core business. It outsources a large number of non-core functions including architecture, construction, interior design, security, legal, food services, maintenance, information technology, entertainment and certain types of guest services such as spas.Operations
A train company in Tokyo runs extremely high traffic rail lines such that platforms and train lines need to be carefully managed to avoid delays. If a single train is delayed by 30 seconds, all the trains behind it are also delayed such that the system needs to be run precisely or it will become inefficient. When the system becomes inefficient stations quickly fill up with people and this spills out on to the street. Delays may make the news as they can easily impact hundreds of thousands of passengers. The firm views operations of its transportation networks and facilities as its core business.Financial Intermediation
A bank has a complex core-business that can be described as financial intermediation that connects supply of money with demand. They view their core business in terms of business units that launch and operate financial products such as savings accounts, mortgages, credit cards, loans, brokerage services, insurance products and mutual funds. Risk management, treasury management, technology, information security, banking operations, marketing and customer service are also viewed as core business. Certain elements of technology, such as operating data centers is viewed as non-core. Additionally, functions such as human resources and facility management are viewed as non-core.Summary
Core business are the teams, processes and capabilities that generate most of the value created by an organization.
Notes
It is common for mandatory functions such as human resources and accounting to be considered non-core.It is up to each business to define what it considers core. For example, some businesses consider human resources to be absolutely critical to their strategy as they seek to build a valuable organizational culture or recruit talent who are in high demand.Generally speaking, core business functions are areas where you try to innovate and build competitive advantages. Non-core functions are areas where you follow best practices and attempt to reach competitive parity with minimal resources. "Non-core" should not be confused with "not important." For example, accounting is often considered non-core because few firms seek to innovate in this area. Nevertheless, accounting is critical to the survival of a firm.| Overview: Core Business | ||
Type | ||
Definition (1) | The set of functions, processes and capabilities that produce most of the value created by a firm. | |
Definition (2) | Functions that a firm identifies as competitive advantages such that they are a focus of strategy. | |
Related Concepts | ||
