A strategic business unit (SBU) in business

strategic management In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of Resource management, resources ...

, is a profit center which focuses on product offering and market segment. SBUs typically have a discrete

marketing plan A marketing plan is a plan created to accomplish specific marketing objectives, outlining a company's advertising and marketing efforts for a given period, describing the current marketing position of a business, and discussing the target market a ...

, analysis of competition, and

marketing campaign Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce. Marketing is usually conducted by the seller, typically a retailer or ma ...

, even though they may be part of a larger business entity. An SBU may be a business unit within a larger

corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

, or it may be a business into itself or a branch. Corporations may be composed of multiple SBUs, each of which is responsible for its own

profitability In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as surplus value. It is equal to total revenue minus total cost, including both Explicit co ...

. Companies today often use the word '' segmentation'' or '' division'' when referring to SBUs or an aggregation of SBUs that share such commonalities.

General Electric General Electric Company (GE) was an American Multinational corporation, multinational Conglomerate (company), conglomerate founded in 1892, incorporated in the New York (state), state of New York and headquartered in Boston. Over the year ...

(GE) is an example of a company with this sort of business organization. SBUs are able to affect most factors which influence their performance. Managed as separate businesses, they are responsible to a parent corporation. GE has 49 SBUs. Business writer

Michael Porter Michael Eugene Porter (born May 23, 1947) is an American businessman and professor at Harvard Business School. He was one of the founders of the consulting firm The Monitor Group (now part of Deloitte) and FSG, a social impact consultancy. ...

has developed a

value chain A value chain is a progression of activities that a business or firm performs in order to deliver goods and services of Value (economics), value to an end customer. The concept comes from the field of business management and was first described ...

model which focusses on the business unit, i.e. a firm's activities within a particular industry.

Commonalities

A SBU is generally defined by what it has in common, as well as the traditional aspects defined by McKinsey: separate competitors; and a profitability bottom line. Four commonalities include: *Revenue SBU *Like Marketing Cost SBU *Like Operations/HR Profit SBU *Like sales judged on net sales not gross

Success factors

There are three factors that are generally seen as determining the success of an SBU: #the degree of

autonomy In developmental psychology and moral, political, and bioethical philosophy, autonomy is the capacity to make an informed, uncoerced decision. Autonomous organizations or institutions are independent or self-governing. Autonomy can also be ...

given to each SBU manager. #the degree to which an SBU shares functional programs and facilities with other SBUs. #the way in which the corporation handles new changes in the market.

BCG matrix

The BCG Matrix, a chart designed by Bruce Henderson for the Boston Consulting Group in 1968, may help corporations to analyze their business units or product lines. This helps the company allocate resources; brand marketing, product management,

, and portfolio analysis can use it as an analytical tool. When using this matrix, SBUs can appear within any of the four quadrants (Star, Question Mark, Cash Cow, Dog) as a circle whose area represents their size. With different colors, competitors may also be shown. The precise location is determined by the two axes, market Growth as the Y axis, Market Share as the X axis. Alternatively, changes over or two years can be shown by shading or other differences in design.xx.For an example, see Robert Cushman, "Norton's Top Down, Bottom-Up Planning Process", ''Planning Review'' 7 (6), November 1979 Star products currently have high growth and high market-share. The Question Mark identifies products with low share but high growth. A Cash Cow has high share but low growth. Finally, Dog labels a product which has low growth and low share.

References

{{Portal bar, Business, Economics Strategic management

Commonalities

Success factors

BCG matrix

See also

References