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Strategy Development of Non-core Business

Paper Type: Free Essay Subject: Business Strategy
Wordcount: 3361 words Published: 23rd Sep 2019

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The study is intended to cover some major issues concerning non-core assets, their management and strategy development. The objective of this project is to describe their role in the business success and investigate the impact of non-core assets financial indicators on financial results of the company. Studies similar to the following are intended to be easily adapted to practical purposes and yield more definite results of searching interrelations between these issues. The field of knowledge about non-core assets has developed over the past decades, but this issue still awaits detailed analysis, so further research in this area of studies is urgently required.


Background. Today, in the information age, many terms, initially used only by narrowly focused specialists, have become widely used and are perceived as self-sufficient and understandable things that do not require explanation. Non-core asset is one of these economic terms. Quite a number of researchers register broadening of the role of non-core business in a company’s success (Kondaurov, 2012; Tiwari et al., 2015). However, the answer to the question of what is meant by this term remains vague. It is very likely that by opening any source of information, a person can find an interpretation of this term, and not one. The problem is all the definitions will describe the phenomenon very generally. Despite the fact that the debate over this issue seems to gain popularity, many questions still need further investigation. It is necessary to consider an example from the life of the company to provide deeper understanding of this issue. Otherwise stated, we need to investigate what non-core assets are important for and what role do they play in the company’s success.

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Problem Statement. The relevance of the formation of models of management and development of non-core assets is largely due to the search for adequate solutions related to the management of this type of assets. Thus, we can conclude that the topic of management and development of non-core assets is relevant for us as many issues remain poorly understood. The ultimate goal of this will be to attempt to explore the approaches to the problem of strategy development of non-core assets that various investigators have advocated and test the following hypothesis:

  •     The presence of a non-core business at the Lukoil-Uralnefteprodukt LLC gas stations, such as a cafe, a car wash, a grocery shop, has a positive correlation with their financial results and company’s success.

Delimitations of the Study. The present study will be limited in the amount of information to be collected. There is a number of strong restrictions to be considered. First of all, availability and accuracy of information received should be mentioned, as not every entrepreneur is ready to provide relevant data on their own business. Another constraint is the limited scope of respondents, since it will not be possible to engage the entire Lukoil leadership, but only the managers of Lukoil-Uralnefteprodukt LLC. Moreover, the research is limited to business area, one city and one company, so we cannot make an inference for a valid practical implication of the findings.

Professional Significance. The purpose of my work is to examine and consequently to determine the impact of non-core assets on the core business more precisely and provide valuable insights into their role in the organization. It will be relevant to identify a set of means employed to distinguish between economically advantageous non-core assets from non-profitable ones. Having defined the type of non-core asset, managers will be able to take actions to develop non-core assets with further profit from them. What is more, the study will provide an example of either negative or positive impact of non-core assets on the core business.


Literature review

The present literature review will be developed through systematic way of studying the existing literature on the subject. A considerable amount of work has been already done to investigate the essence of non-core assets and strategy development separately, but our goal is to link these studies. Recent investigations strongly support the idea of the prominent role of non-core assets in company’s success and approve the importance if their strategic development. However, knowledge needs further development.

Drawing up a development strategy is the foundation for the successful operation of any enterprise. Currently, all long-term goals that are subject to the management of entrepreneurs are usually attributed to strategic management. In other words, the formation of a strategy in an enterprise is part of strategic management, without which company cannot successfully compete in the market (Kyshtymova, Medic, 2017, p. 83).

First and foremost, we see it necessary to consider several approaches to defining a strategy. The word “strategy” has changed its meaning over a long period of time. It comes from the Greek word “strategos” which means “army general” when literally translated. Initially, it was used exclusively in military affairs, but over time, it began to be used by various organizations, using it in the sense of achieving their own economic benefits and fighting other organizations for limited resources and customers (Fairbanks, Buchko, 2018, p. 6). The term business strategy was very popular at the turn of the 80s. It is worth noting that quite often it is understood incorrectly. Even if the task to develop a business strategy is given to people deemed to be knowledgeable in this area, development process often does not proceed properly due to a misunderstanding of this term. Thus, Craig S. Fleisher gives the following definition to the term: business strategy, in his opinion, is a concept that describes how an organization will compete and associate itself with various stakeholders (Fleisher, 2018, p.2).

According to Alfred Chandler, the strategy is determination of the main long-term goals and objectives of the enterprise and the approval of the course of action, as well as the allocation of resources necessary to achieve these goals. Chandler believes that the concept of strategy must necessarily include three components (Chandler, 1962, p. 68):

  1.              Long-term goals and objectives of the organization, i.e. determining the direction the organization wants to follow;
  2.              Line of effort, i.e. actions aimed at achieving previously set goals;
  3.              Allocation of resources, which are divided into: financial resources (money needed for investments in capital and current assets), human resources (employees of the organization), material resources (land, buildings, premises, equipment, inventories) and intellectual resources (data bases, classified materials, know-how, valid patents and licenses, logos, etc.).

The importance of non-core assets is a widely accepted perspective, but some of the investigators hold opposite opinions. Robert Jonas states that strategy of business development has nothing to do with goals and objectives (Jonas, 2000, p. 141). The researcher believes that it determines the process of achieving these results. In other words, a business strategy is a kind of step-by-step plan including a series of actions that allow the company to accomplish its mission. This plan needs regular revision, monitoring and management as well as any other business process. S.A. Zahra and J. G. Covin have a similar opinion and maintain that business strategy defines a long-term action plan that a company can accomplish in order to achieve its goals (Zahra, Covin, 1993, p. 454).

Speaking about approaches to studying strategy types it is important to mention Igor Ansoff’s matrix (Tab. 1).






Market penetration strategy

Product development strategy


Market development strategy

Diversification strategy

Tab. 1. Ansoff strategy typology (Ansoff, 1957, p. 116).

The researcher has made a valuable contribution in strategic management as the matrix is considered to be the most common tool today. Entrepreneurs can choose between four scenarios to help the company to choose the right direction (Ansoff, 1957, p. 117):

  1.               Penetration strategy – this type of strategy is the conquest of an existing market with an existing product, for example, by lowering prices.
  2.               Market development strategy involves the development of the company through an existing product, but in a new market.
  3.               Product development strategy means that the company already offers new products to consumers.
  4.               Diversification strategy is the opening of completely new markets with new opportunities at the same time.

Kovalenko B.B. and Savushkin A.A. offer another classification. They identified three types of development strategies (Kovalenko, Savushkin 2015, p. 336):

  1.            Internal development is a type of enterprise development strategy in which development occurs at its own expense, as well as opportunities.
  2.            Mergers and acquisitions strategy involves the development of an enterprise through the acquisition of assets of other companies. It has such advantages as entering new markets, new strategic opportunities and increasing the value of the company’s shares.
  3.            Joint development is a strategy in which companies share resources to achieve strategic goals. The advantages can be attributed to the fact that there is no need to acquire any skills, materials or innovations, because thanks to the alliance, companies can acquire these resources through cooperation with each other.

In order to come closer to understanding what a non-core business (assets) of a company is, I would like to offer several options for interpreting this concept, as well as consider how it is determined which assets of an enterprise to refer to as non-core. Salimov I. believes that the type of asset is determined through the formation of the goals and objectives of the owner of the enterprise. And if this asset does not fit into the business concept of the enterprise, then it can be considered non-core (Salimov, 2006, p. 58). A. Kondaurov is of the opinion that non-core assets are the resources of an enterprise to some extent related or not at all related to the main type of activity, acquired to earn additional income or to implement any projects (Kondaurov, 2012, p. 344). According to V.R. Denisovа, non-core asset is a property of a company, which performs any functions not related to the main activity, as well as not providing support or service functions (Denisova, 2009, p. 288).

Maintaining sustained attention to business priorities is a key factor in the success of management today. With increasing competition in any market, any distraction from the main type of activity may lead to a decrease in its own position in relation to competitors. In addition, at a time when difficult economic conditions limit growth opportunities for many companies, cost control takes on increased importance for achieving profitable results. The importance of non-core assets is a widely accepted perspective, but some of the investigators hold opposite opinions. Reshma Tiwari, Debabrata Das and Jasojit Debnath say that in recent times many companies with a high leverage in India have chosen to get rid of non-core assets, while the authors of this article aim to develop a conceptual framework on non-core assets to use them (Tiwari et al, 2015, p. 29). Lauralee Martin also insists that the company should get rid of non-core assets after the research conducted (Martin, 2004, p. 24).

It is worth mentioning exactly how enterprises determine the type of assets. Ermashkevich N.S. identifies three approaches (Ermashkevich, 2013, p.17):

  1. Mundane approach is considered the most popular among entrepreneurs. The essence of the approach is that the owners of the enterprise classify assets into core and non-core, based on their subjective judgments.
  2. Strategic approach – the essence of this approach lies in the fact that the type of assets is determined by the company’s strategy. If the asset does not fit into the company’s strategy, it is referred to non-core assets.
  3. The classical approach – the essence of this approach is that there is a main production, auxiliary production, and also a serving farm. If the asset does not relate to the main production, it is considered to be a non-core asset.

The field of knowledge about non-core assets ​​is constantly broadening. It is difficult to exaggerate the importance of further research in this field of study. Investigation of non-core assets as one of the strategy development issues will be undoubtedly useful as it can aid managers in making pivotal decisions.


The empirical research will give special emphasis to the analysis of data. It is aimed to apply such methods of investigation as survey and statistical data analysis. Survey was chosen to identify key non-core assets from the point of view of members of the management of Uralnefteprodukt LLC. As a result, we will clarify the development strategy of Uralnefteprodukt LLC in relation to non-core assets, with further identifying specific methods of their management and development.

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Further, statistical data will be collected. It is crucial to analyze such indicators as revenue, profit, average bill and total number of customers before and after reconstruction when cafes, mini markets, car washes, etc. appeared at the gas stations. So, it is planned to reveal how the average customer’s check and number of customers of a particular gas station has changed due to its improvement. It will serve the purposes of the present inquiry if the data is analyzed using the method of correlation analysis to reveal statistical dependencies, which will be conducted in the SPSS statistics program. On the basis of these dependencies conclusions will be made regarding non-core assets of Uralnefteprodukt LLC with a further provision of recommendations regarding certain non-core assets.

Results anticipated

In the part to follow the results which are likely to be obtained will be reported accurately and objectively. It is expected to define non-core assets more precisely, to collect the data and conduct the analysis. As a result, the research will provide deeper investigation of the problem of defining non-core assets and their strategic management. The data obtained with the methods mentioned of will be thoroughly examined to offer a sufficient proof to the results of the analysis. The material will serve to provide support to the hypothesis that there is an interrelation between financial results of the company and certain indicators related to the non-core assets. The presentation of the results and recommendations will use an appropriate organizational pattern.


It appears from what has been discussed that serious attention should be paid to the investigation of non-core assets as a part of a successful organization. My findings might have some practical implications as every managerial decision (for example, outsourcing, reorganization or liquidation of these assets) needs a convincing proof and this study can be a matter of significance for all those who are engaged in non-core asset management in conterminous business areas. To conclude I can state that the project will be an attempt to provide a relatively fertile area for further examining in this field of study.



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