A customer whose pricing and cost-to-serve characteristics enable the company to earn a positive return on net capital employed, but a return below its total cost of capital, on sales made to the customer through the business cycle.
(See also Core Customer, Non-core Customer)
No matter how many willing buyers are out there, big builders aren't rushing out to build $60,000 homes because it's harder to make money with low-priced houses.
(Year 1996-SIC 1531)
Explanation: Big builders have decided that the customers for low-priced houses pay a low enough price that they cannot earn their full cost of capital producing homes for them. These customers are, at best, Near-Core Customers. For some builders, they are Non-Core Customers.
Seven construction companies in the Bay Area hope to win a contract to remodel the Crocker Center. However, most of the firms specialize in building skyscrapers, not remodeling them. Their change in focus is due to a slump in commercial building. Firms that prospered building large commercial spaces in the 70s and early 80s are now taking interior or public works jobs to make ends meet.
(Year 1987-SIC 1542)
Explanation: These companies normally constructed larger buildings for corporate customers. By accepting these contracts, the companies were serving Near-Core Customers because that was the only business available.
Caterpillar has been selling to smaller contractors, as the interstate highway boom is long gone and the Third World's huge dam projects have dried up with oil prices.
Explanation: These smaller contractors were previously only Near-Core Customers. Caterpillar must serve them in order to avoid lay-offs as demand from Core Customers shrinks.
As a result of falling demand in the U.S., elevator companies plan to stress less mature markets like Asia, Europe and Eastern Europe. While the U.S. market has expanded by about 2% per year since 1986, annual growth in Europe has remained at about 10%.
(Year 1990-SIC 3534)
Explanation: The U.S. contained most of the Core Customers for the U.S. domestic elevator companies. But, as demand growth fell, these companies began to seek the business of Near-Core Customers in Asia and Europe. As the companies grow in these new markets, many of these new customers are likely to become Core customers.
American President Lines attributes poor results to a larger proportion of earnings from its less profitable business in Asia.
(Year 1994-SIC 4412)
Explanation: The business in Asia is largely with Near-Core Customers, which offer returns below those of the Core Customers.