What Is The Core Business And What Is It For?
Core business is the core activity of an organization .
In free translation into Portuguese, the term means core, the part of the center, the core of a business.
Its main function is to determine what the company should do and, especially, what it is not responsible for.
A very simple example: the core business of a bakery is to manufacture and sell bread and other baked goods.
For this, it has all the machinery and qualified personnel to deliver the products.
Based on this core activity, the business understands that the sale of shoes, for example, does not fit into its objectives, nor within its competences as an organization.
Thus, the core business is a definition that allows the focus on what effectively brings results to the company.
In addition, it enables the conscious rejection of what is not part of the organization’s DNA.
Why Do Companies Need To Define A Core Business?
The definition of a core business is essential for the organization to have clarity and focus on achieving its goals.
After all, knowing how to say “no” is as important for achieving a company’s results as knowing how to say “yes” to what really adds value to it.
The establishment of a central activity for the business is necessary because it will guide: the planning, the organizational activities and the decision making of the managers.
Below, you will see details about the reasons for designing a core business for companies.
To Know Your Market
Understanding customers , competitors, suppliers and other market elements only happens from a clear understanding of the focus of the business .
It is quite clear that a building materials store is inserted in a different universe from the segment of an accounting services provider, right?
But how to accurately identify market elements that differ between a conventional drugstore and a compounding pharmacy , for example?
By clearly establishing the core business, the drugstore knows that its focus is not on the sale of compounded drugs.
Therefore, it can distance itself from the competitor‘s positioning more easily.
In addition, the conventional drugstore, knowing its core business, understands its target audience and how it can adequately serve it within its business proposal.
To Set Priorities
Every day, new opportunities arise in the market for different business segments.
But that does not necessarily mean that the open doors are for everyone.
Each company needs to clearly define which “doors” it wants to go through in order not to deviate from its path towards the business objective.
Marcelo Andrade, founder of Papo de Gestão , points out that:
“ Every opportunity that distances you from your core business will take your focus away (…) and you will start investing in situations, activities, products, ways of working that distance you from your focus, your essence, your positioning .”
He also adds that: “ it is important for the entrepreneur, the entrepreneur to understand that an opportunity that is not part of your core business is not an opportunity for you; may be for others ”.
Therefore, having a key activity means that companies are also able to define priorities for action.
To Get Satisfactory Results
Imagine that a startup is booming .
For a specific product launch, it needs to hire and train dozens of new employees over the next few months.
Its core business is the delivery of digital solutions for entrepreneurs – such as automations for social networks .
The current business team has excellent expertise in what the company already develops.
However, the current Human Resources sector is small and does not have enough staff for new hires.
The question is: hire new employees for HR or use the services of a specialized company?
Before answering this question, we have other questions:
- Is the startup’s core business related to Human Resources?
- How much time and money will she spend recruiting, selecting and assembling a robust HR team?
- If the startup expands its HR team, how much of these invested resources could be applied to activities aimed at the core business of the business?
Although the costs involved in assembling an HR team may be lower than hiring a supplier, the company can lose focus of its core business and have losses in its key activities.
Therefore, defining the focus of business operations makes all your efforts focus on what really matters to the company’s goals and profit.
To Add Value To The Brand
In general terms, we can say that the brand is a graphic and symbolic representation that remains in the public’s mind .
Red Bull doesn’t sell “only” energy drinks: it offers freedom, fun, lightness and “wings” to its consumers.
In this sense, the core business points to a direction for the brand to remain faithful to its essence .
If Red Bull were to sell luxury wines and sparkling wines, changing its casual tone to more serious, sophisticated and austere communication, customers could feel a big break with the brand.
Thus, establishing the core business and keeping it in focus also contributes to strengthening the organization’s branding.
To Be Assertive In Decision Making
Peter Drucker once said that “ every decision is risky: it is a commitment of present resources to an uncertain and unknown future ”.
So, deciding between one or the other option is a task that requires a lot of clarity and responsibilities from decision makers .
After all, it is the present time that will be compromised so that a possible future result can be achieved.
Having a well-designed core business allows managers to have a clear view of what is important and what is not for the business objectives.
In this way, it is possible to be more assertive in decisions, having more confidence in what was chosen.
How To Define The Company’s Core Business?
Now that we understand the reasons for having a core business – and keeping the company focused on it – it is time to know how to put the concept into practice .
See, then, in what ways you and your team can arrive at the definition of the key activity of the enterprise.
Understand The Specifics Of Your Business
Although two companies are fierce competitors, with many similarities in their product mix and operations, each will have a diversified audience, positioning, offers and strategies .
These differences are not always very clear.
Therefore, when determining the core business of the business, it is necessary to understand the nuances that differentiate one business from others .
For example, two supermarkets operating in the same location may work in different ways.
While one of them focuses on high sales volume and low price , the other focuses its efforts on quality service and services – such as delivery.
So, the first step in defining the core business is to understand the aspects that make the company unique .
Find Out What Sets You Apart
Answer the following question: what makes you buy from one store and not buy from another?
There are a multitude of possible answers to this question, isn’t there?
But in the core business design process, the company needs to understand the reasons that keep customers active and the reasons they buy from the competition.
Understanding the business differential is an important step, which will determine at which points the organization is already good enough and in which details it needs to improve – if they are within its core activity.
Define Your Target Audience
Understanding the profile and behavior of the consumer is certainly a very important activity for any company.
However, even before analyzing who the customer is, the company needs to define its target audience – that is, delimit a portion of the market that it intends to serve.
With the advancement of technologies, it is becoming easier and faster to track demographic data, as well as the consumption habits of populations.
So, choosing the people to whom the company wants to sell is part of the core business designation process .
Go beyond traditional definitions – for example, “men between 35 and 45 years old, residents of that region” – and look for even more relevant and precise information, such as purchase intention and frequency.
Define Your Field Of Activity
Just as it is important for the core business to determine the customer profile to be served, the organization must clearly define in which segment it wants to operate .
It is not uncommon or unusual for a single company to be able to serve different industries at the same time.
But if this is the case, it is essential to understand how different areas can align themselves to adequately meet the demands presented by the clientele.
Develop A Growth Strategy
Once that’s done, it’s time to create a strategic plan that takes the business to another level.
Planning is nothing more than tracing “paths” to make the company get from where it is to its objective – that is, to take it from point A to point B , in simpler terms.
So, ask yourself the question: how can the business achieve the desired results without being distracted from its focus of action, that is, from the core business?
Expand Your Business Niches
Finding a key activity of the organization does not necessarily mean that it is limited to a single type of product or service.
The core business is related to the essence of the business – and, therefore, it can be linked to different market niches.
For example, a coffee shop focuses on the morning and daytime entertainment of its customers.
In this sense, in addition to coffee delicacies, it can serve other products and activities to entertain its customers – such as books, plants, decorative objects and live music.
Do you see how different niches can align in order to meet the core business of the business?
Can A Company Change Its Core Business?
According to Marcelo Andrade, from Papo de Gestão, it is possible to change the core business, yes.
The specialist even considers change an important decision for the business at crucial moments:
“ If your activity today does not generate income, if it does not create cash, it is not bringing in revenue, you may have to adjust your strategy, adjust your core business, adjust its essence (…). You need to discern what is your reality, what is your moment, what is the decision you must make .”
So, if the company does not present the expected results for a controlled period, it may be interesting to analyze the organization’s core activity again .
Core Business, Mission, Vision And Values: What’s The Difference?
The concepts are somehow related, it is true, but they are not synonymous.
- Mission is the raison d’être of the business
- Vision is the way the company sees itself in the future
- Values are the behaviors that the organization requires of itself.
And the core business, as we have seen, is something directly related to the focus of a company’s operations.
Core Business And Core Competence: Understand The Differences
Here we also talk about two terms that can cause some confusion.
So let’s clarify.
Core competence describes the company’s competencies – that is, what the organization excels at.
On the other hand, the core business is the main activity of an enterprise.
Core Business: Examples
Nike’s Core Business
Sportswear and footwear company Nike defines itself as “we believe in the power of sport to move the world”.
In this sense, the brand develops solutions for different sports practices and has social actions to include children in physical activities.
McDonald’s Core Business
The food market giant determines, among other commitments, food quality and transparency , in addition to generating formal employment for young people.
Thus, McDonald’s has been improving its menu to meet new food demands and reformulating its recruitment practices .
Samsung’s Core Business
Samsung works to “ take the lead in technological innovation ”.
To that end, it develops electronics, mobile communication devices, IT solutions and other technologies to “help people around the world lead happier, healthier lives”.
Thus, Samsung’s core activity is related to the “discovery” of technologies applicable to products and services that lead to a better quality of life for its customers.
Coca-Cola’s Core Business
Coca-Cola ‘s core business is “ creating delicious drinks ” and so it acts intensively in the market, developing offers and partnerships with other industries.
Amazon’s Core Business
Amazon is the most valuable brand on the planet and its e-commerce , which started as an online bookstore, is one of the most diversified today.
Although the company sells a variety of items, it understands that its customers are constantly looking for “ lower prices, better selection and convenient service ”.
So, according to Amazon:
“ We work every day to earn and keep customers’ trust. We do this through convenient services and thousands of small and medium-sized businesses, who significantly contribute to our product selection.”
Nubank’s Core Business
According to the Brazilian company of the “purple card”, Nubank was created to simplify people’s financial lives , with transparency and security.
In this way, the company focuses on deconstructing complexities and bureaucracies from that “old way of dealing with money”.
For this, it was one of the pioneers in the financial applications segment and gained appreciation from the young clientele in the country.
Nubank’s core business is, therefore, to facilitate the financial management of users and, among its solutions, there are credit cards without annuity, statement facilitated by the app and account for investments .