Strategic business units (SBUs) play a crucial role in the strategic management of large corporations, allowing them to focus on specific product offerings and market segments. This article explores the structure
and function of SBUs, highlighting their importance in achieving corporate goals.
Understanding Strategic Business Units
A strategic business unit is a profit center within a larger corporation, designed to focus on specific products and market segments. SBUs operate with a degree of autonomy, having their own marketing plans, competitive analysis, and campaigns. This structure enables corporations to manage diverse business activities efficiently, ensuring that each unit contributes to the overall profitability.
General Electric (GE) serves as a prime example of a company utilizing SBUs effectively. With 49 SBUs, GE manages a wide range of products and services, each responsible for its own performance. This approach allows GE to adapt to market changes and maintain competitiveness across various industries.
Success Factors for Strategic Business Units
The success of an SBU depends on several factors, including the degree of autonomy granted to its managers and the sharing of functional programs and facilities with other SBUs. Autonomy allows SBU managers to make decisions tailored to their specific market conditions, fostering innovation and responsiveness.
Additionally, the corporation's ability to handle market changes plays a significant role in the success of SBUs. Companies must be agile in adapting to new trends and technologies, ensuring that their SBUs remain competitive. The BCG matrix is a valuable tool in this regard, helping corporations analyze their business units and allocate resources effectively.
Strategic Business Units in Practice
The implementation of SBUs requires careful planning and coordination. Corporations must define clear objectives and performance metrics for each unit, aligning them with the overall corporate strategy. This alignment ensures that SBUs contribute to the company's long-term goals while maintaining their focus on specific markets.
Moreover, SBUs benefit from shared resources and expertise within the corporation. By leveraging common facilities and programs, SBUs can reduce costs and enhance efficiency. This collaborative approach fosters innovation and allows SBUs to capitalize on synergies across the organization.
In conclusion, strategic business units are integral to the success of large corporations, providing a focused approach to managing diverse business activities. By granting autonomy and fostering collaboration, companies can ensure that their SBUs contribute to overall profitability and competitiveness.
