Non Core Activities



Dealing with Non Core Activities

In much earlier times, archetypal railways needed to be highly self-sufficient. Often, they manufactured at least some of their own rolling stock and/or constructed their own infrastructure according to the specifications of their own design offices, in which they employed engineering staff who had been trained in their own educational institutes. Railways also printed their own tickets, timetables, and manuals, employed their own security force, and sometimes accrued other businesses such as hotels, ferries, ports, haulage companies, and so on.

Few railways now retain such a wide range of activities. This section explains the historical reasons behind archetypal railways initiating so many non core activities, why most railways now find it necessary and desirable to reject this strategy, and business processes for dealing with these non core activities.

What is ‘core’ business? ‘Core’ is generally interpreted to mean the market focus of organizational activities—a focus that differentiates a business from its competitors, or from activities of other sorts of businesses.62 For railways the core business is delivering competitive transport services through efficient use of railway technology. Constructing railway lines, manufacturing rolling stock, or printing tickets and timetables are non core activities—not only unnecessary for a railway to do itself to be successful, but also responsible for diverting resources from the core business.

Four main groups of activities associated with archetypal railways can be considered, prima facie, outside the ‘core’ railway business. These are social and recreational services for employees; materials supply and manufacturing companies; business support services; and ‘extended’ businessesthat are ancillary, diversified, or involvereal estate holdings. Box 5.7 gives examples of such activities.




Modern, competitive railways must concentrate on sourcing and procuring those necessary but non core services in the way that will best support the core transport business. They must pose a number of questions. Is the activity necessary at all? If so, what are the alternative sources of supply? Which alternative delivers the activity at the most efficient cost?

Each group of activities shown in Box 5.7 has a different origin and rationale, therefore each requires a somewhat different assessment.

    


62 An influential management text by Peters and Waterman (1982) identified poor results among companies that diversified beyond their fields of real competence, and concluded that an organization's core business consists of activities delineated by its core competencies.
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