In business, a strategic business unit (SBU) is a profit center which focuses on product offering and
market segment. SBUs typically have a discrete marketing plan, analysis of
competition, and a marketing campaign,
even though they may be part of a larger business entity.
An SBU
may be a business unit within a larger corporation,or it may be a business unto
itself or a branch. Corporations may be composed of multiple SBUs, each of
which is responsible for its own profitability. General Electric 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. General Electric has 49 SBUs.
Companies
today often use the word segmentation or division when referring to SBUs or an
aggregation of SBUs that share such commonalities.
Characteristics of SBU
The
strategic business unit (SBU) is a separate, specialized subsystem in
the company, which acts as an independent company. For the first time SBU concept has been applied by the U.S.
company General Electric. SBUs are small businesses with a high functional and
decision-making autonomy.
Such units may or may not need to work closely with companies, from
which they have been separated. SBUs can be used to prepare the diversified
company's strategy.
SBU features
The main
features are:
§ Location
in the organizational structure.
§ These are organizational units without legal
personality,
§ They
utilize formula "product-market",
§ Type of
activity performed by them is of crucial and decisive importance for the whole
company,
§ Functional
and decision-making autonomy include: laboratory testing, production
preparation, production, finance, accounting and marketing.
§ SBU has divisional structure, which is
determined by the size of production, technology and
research activities, financial and accounting processes and marketing influences.
SBU
organizational units
SBU usually includes following
organizational units:
§ Research and Development.
§ Manufacturing.
§ Technology.
§ Marketing for
a homogeneous product groups.
The
division of units responsible for particular groups of products are created in
accordance to:
§ Needs of customers of this products
§ Technologies
of their manufacture,
§ Utility of
products
§ Place in a
production. portfolio
Above
criteria are the basis for assembling products in homogeneous groups of
products and creating their strategic organizational units. Such SBUs allows
company to improve the overall efficiency.
SBU advantages
The main
advantages are:
§ SBU supports cooperation between the departments of the company
which has a similar range of activities;
§ Improvement
of strategic management
§ Improvement
of accounting operations,
§ Easier
planning of activities
SBU
disadvantages
§ Difficulty
with contact with higher management
§ May cause
of internal tension due to difficult access to internal and external sources of
funding,
§ May be the
cause of the unclear situation with regard to the management activities.
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