Core Competencies

“Concentration on core competencies” is a often used argument during the divestiture of partial operations and divisions by performing a spinoff or a carve-out. 

The concentration on core competencies is the opposite of diversification (when diversification means the participation in different industries to be less dependend on the core business).

The diversification leads to a not existing business focus. Often the additional divisions underperform in comparison to other, more focussed, companies in the given industry.

Therefore it makes sense to divest those divisions if the present value of the expected cashflows is below the outcome of a sale.

After such a divest the management is able to concentrate on the expansion of the core business and the optimisation of the corporate profitability.

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