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Spur Business That Runs Well

Posted November. 01, 2002 23:09,   


Profit from the Core, by Chris Zook and James Allen, translated by Keun Lee, et al.

247 pages, \13,000, Chongrim Publishing Co.

The common agony of the CEOs is to what to do in this unknown world filled with uncertainties. A CEO compares doing business to looking for a road with just a flashlight in the peach darkness. A CEO would probably wants to increase the success rate by decreasing uncertainties by whatever means he/she could mobilize. The book Profit from the Core suggests several ways to relieve the agony of the CEOs.

The authors throw a question: which one conveys less uncertainty, the existent one or a new business just to be embarked on, and thereby gives more chance at success. Of course, the existent one poses less uncertainty since it has gone through lots of trial and error, and in the process cumulated vast experience on it. Nonetheless, many businessmen fail by trying new one, rather than concentrating on the ones that they have already run. Therefore, a CEO should review in full the competitiveness, potential and possibility for improvement of the existent business, prior to making any plans for commencing a new business. The CEO knows a lot about the existent one through the vast experience he/she has cumulated.

In this context, the authors stress a concept called "core business." A core business is defined as an aggregate of product, ability, customer, path and region that constitutes the essence of the current or future status of a company, whose goal is to achieve growth. For example, corporations like Coca Cola, Dell, Nike, Starbucks and Gillette have concentrated their operations on the core business of each, and achieved a constant, high growth. Thus, the most urgent task is to calmly understand what is the business he/she is doing, how the core business should be defined and how much potential for growth lies in the core business.

Another error pointed out in the book lies in the high possibility that the more achievement a business unit records, the less likely the potential of the business is fully mobilized. Most businessmen pitch in their efforts to boost their sluggish business entities, rather than focusing on the business field which reaps in the most profits. The authors, however, demonstrate how usual it is to make the core business much stronger. For example, they point out Sony and Intel. They stress the importance of strengthening the core business by means of securing loyal customers, investment in distribution network and differentiation.

Of course, this book does not categorically deny the diversification effects a new business could bring about. The authors just recommend that expansion should be made into an area closely related to the core business. Disney has built up a strong group of business units, based on its powerful core business of animation, like theme part, publication, music business, TV and home video.

In some respect, this book sounds much too common. But it points out the aspects Korean CEOs have ignored due to their zeal for expansion. That is why this book feels attractive.

Lee Dong-hyun, Professor of Management at Catholic University