Core of a Business
Core of a Business
We know that firms need to adapt their strategies as per the changes in the business environment.
Strategies are highly context specific.
What was good five years back will not hold good now. The business model that works for a particular firm may not work in a similar manner for another firm. The strategy that pays off in one country may not produce similar results in another country. While responding to the changes in the environment, sometimes companies have even moved away from their core business.
- Today, Nokia is a world leader in digital technologies, including mobile phones, telecommunications networks, wireless data solutions and multimedia terminals. You would be surprised to know that Nokia started with a wood pulp mill in Finland as a manufacturer of paper. The company later went on to manufacture rubber bands, industrial parts and raincoats. After World War II they expanded into Electronics and then into telecommunications.
- HP’s first product was an audio oscillator – an electronic test instrument used by sound engineers. They shifted to computers, printers, servers & imaging products.
- Reliance Industries Limited (RIL) started as a textile manufacturing business in 1966, and is one of the world’s most vertically integrated and horizontally diversified group with a wide range of businesses such as retail, telecom, textiles, petrochemicals, infrastructure development, etc. RIL sold off its textiles business and its ‘Only Vimal’ brand in 2012.
Alternately there are businesses that diversify into other areas while retaining their core business.
- Indian Tobacco Company ITC has diversified from its main business of cigarette into various other businesses like FMCG, lifestyle retailing, stationeries, hotels, paper businesses, and agriculture products.
- IBM started as a computing, tabulating & recording company in 1880s, moved to PCs in 1980s , to integrated solutions and consulting servicers.
- Pepsico has broken out of confines of cola drinks to become one of world’s most successful suppliers of drinks, snacks and breakfast cereals. Pepsico had diversified into restaurant business after acquiring Pizza Hut in 1977, Taco Bell a year later, and Kentucky Fried Chicken in 1986. But these acquisitions failed to live up to expectations of the shareholders, as Pepsi began losing ground to Coca Cola in the soft drinks. In 1997 PepsiCo decided to spin off its under-performing restaurants and Yum brands was created. PepsiCo has since expanded to a broader range of food and beverage brands, the largest of which include an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001, adding with it the Gatorade sports drink to its portfolio.
So we see that the core of a business need not necessarily be static. It can very well be a moving target.
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