A Strategic Business Unit (SBU) is a distinguishable business unit within the overall corporate identity. It operates in a defined external market and allows management to conduct strategic planning for products and markets. The SBU aggressively promotes its unique benefits in a consistent manner. As companies grow larger, they can be seen as consisting of multiple SBUs.
In the field of strategic management, the term “Strategic Business Unit” was first used in the 1960s, mainly due to General Electric’s numerous units. These entities are sufficiently sizeable and similar to have significant control over the key strategic factors impacting their performance. They are operated as independent planning units, allowing for the development of distinct business strategies. A Strategic Business Unit can represent an entire company or a smaller division within a company assigned to fulfill a particular objective.
The SBU, or Strategic Business Unit, has its own unique business strategy, objectives, and competitors which may differ from those of the parent company. Research, such as the BCG Matrix, is conducted to analyze the SBU. An SBU is a specific operating unit or planning focus that encompasses a distinct range of products or services. These offerings are sold to a consistent customer base and compete against a well-defined group of rivals. The identification of an SBU is primarily based on the external market perspective. Therefore, it is important for an SBU to have external customers rather than solely relying on internal suppliers.
Generally, a SBU is defined by its commonalities and traditional aspects. These aspects include separate competitors and a profitability bottom line, as defined by ‘hary. There are five commonalities that are generally seen as success factors for an SBU. These factors include the degree of autonomy given to each SBU manager, the degree to which an SBU shares functional programs and facilities with other SBUs, and how the corporation is affected by new changes in the market.
