Strategic Business Unit SBU implies an independently managed division of a large company, having its own vision, mission and objectives, whose planning is done separately from other businesses of the company.
The company headquarters still gives the divisions strategic direction.
Strategic Business Units, or SBUs, are organizationally complete Strategic business unit separate units that develop their own strategic direction. They still report back to company headquarters but operate as independent businesses organized according to their target markets.
They are often large enough to have their own internal organizational divisions. Historic Differences Starting incompanies became too large and diversified to manage under a traditional, pyramid organization. The solution was decentralization via the creation of organizational divisions that performed some functions independently of the company headquarters.
This strategy was successful untilwhen growth of profits stagnated. Given strategic direction from headquarters, some divisions could not adjust to their markets while others were stuck in low growth areas. InGE pioneered the introduction of a new, different approach based on strategic business units.
Each SBU developed its own strategic approaches to its markets. This difference let each SBU adjust to its market requirements and generate maximum growth for its segment.
Differences in Implementation For a company to implement the SBU approach means adopting a completely different management style and company orientation. Instead of looking at and analyzing themselves, companies must analyze markets.
The main difference is that divisions are internally focused while SBUs look outward. Strategic Differences The creation of SBUs highlights the differences in strategic direction from a divisional organization.
Trying to develop an overall strategy for the direction of a diversified company is difficult and means that particular strategic elements are never quite right for all the divisions. A division may often receive directions that are unclear or not completely applicable.
Once a company sets up SBUs, they develop their own strategies. They analyze their competitive position in their market, they develop products that respond to the needs of their customers and they evaluate their performance.
Divisions generally do not carry out such tasks. Differences in Results It is difficult for companies organized along divisional lines to identify which activities create the most value and which should be abandoned.
This is especially true of companies where the divisions are functional, such as those with operating, sales and service divisions. While divisions may have profit centers, decisions on where to best allocate resources are often not easy.
For companies organized along SBU lines, such decisions are easier and result in a more efficient use of resources.
It is clear when an SBU is active in a growing or stagnant market and whether it is a market leader. SBUs that are leaders in growing markets are assigned additional resources while those that lag in stagnant markets are shut down so that the company as a whole operates more efficiently.Bain's strategy experts help clients with their most complex strategic challenges.
We build tailored solutions to help clients achieve sustained growth and emphasize mobilization from day one. We begin by helping clients choose where to focus so they can outexecute and outinvest their competitors―and ultimately generate higher returns. Editor’s Note: In , Robert S.
Kaplan and David P. Norton’s concept of the balanced scorecard revolutionized conventional thinking about performance metrics. By going beyond traditional. Making Good Strategic Decisions.
Para mis visitantes del mundo de habla hispana, este sitio se encuentra disponible en español en: Versión en Español Sitio Espejo para América Latina. Decision-Making is central to human activity. Notes Not all specialisation courses are available on-campus.
For further information, contact the Faculty of Business, Education, Law and Arts. There are limited courses available in semester 3. Back to top. Basic Approach to Strategic Planning.
A critical review of past performance by the owners and management of a business and the preparation of a plan beyond normal budgetary horizons require a certain attitude of mind and predisposition. “Strategic” may be one of the most over-used words in business today.
This observation is especially valid in the world of alliances, where managers must distinguish between those alliances that are merely conventional and those that are truly strategic.