Introduction
Strategic Business Unit (SBU) is a business unit within an organization and is responsible for popularity and profitability of its products. SBUs are usually charged with making decisions that can be related to sales, product roles, operating plans and other strategic investments. The goal of a SBU is to focus on its customers, products and market segments in order to identify and capitalize on changing trends in order to improve their value chain.
SBUs are generally structured independently from a company’s other business units and are responsible for the marketing, sales, product development and the general management of their product lines and services. By doing so, the SBUs can maintain a sufficient degree of autonomy in the face of changes in the market or product related challenges.
Types of SBUs
Companies often refer to their SBUs as “operating divisions” or “business lines.” There are several different types of SBUs, but the most common ones are:
• Market: This type of SBU is formed when a company has more than one product line, and the various product lines that make up the product portfolio can serve radically different types of customers in different marketplaces.
• Product: The product SBU is typically focused around the development and life cycle of a single product within an established marketplace.
• Geographic: A geographic SBU is organized around a given geographical area, like a country or region.
• Customer: This type of SBU is focused on addressing the needs of a certain customer base or demographic, such as specific government agencies or large corporations.
Advantages of SBUs
The SBU concept is beneficial for organizations for a number of reasons:
• It allows the organization to focus on each of its markets or product line specifically and to customize strategies for a particular customer or geographical area.
• SBUs can provide a competitive edge when the company is operating in a dynamic environment.
• It provides a framework for the organization to set organizational goals and the ability to better motivate employees.
• It helps to decentralize decision making processes, thereby providing better efficiency and more effective decision making.
• It allows the organization to track and monitor performance and progress, in order to assess performance and identify areas for improvement.
Conclusion
SBUs are a useful tool for businesses, allowing them to focus strategically on their products and markets. By dividing their company into SBUs, businesses can take advantage of a number of advantages and improve their overall organizational performance. As such, SBUs are an essential part of any company’s overall strategy.
