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Strategic business unit

Definition

What is a strategic business unit?

A strategic business unit (SBU) is a term used to designate an independent operational entity or services firm. Those strategic business units have their mission, vision, directions, and objective.

A strategic business unit operates independently and is given authority to make its own strategic decisions within the corporate guidelines and focuses on a target market. 

This unit is big enough to have its support functions such as training department, human resources, and management team. 

Despite operating independently, it must report directly to the company’s headquarters on the condition of its operations.

What is a strategic business unit?

Characteristics of strategic business unit

Strategic business units have the following characteristics:

  • SBU is in charge of autonomous planning;
  • It works in different markets and reaches out to different groups of customers;
  • It has different expertise in production or management that do not exist in the parent business, and;
  • It has control over those factors necessary for successful performance but should determine how resources are used to effectively carry out the strategy.

Advantages of strategic business units

Using the strategic business unit allows your company to expand with a great focus within the competitive market. 

Building a strategic business unit has a different effect for every business. So, here are some of the advantages of strategic business units.

Strategic business unit identifies a strategic direction

Strategic business units give your company a chance to create a realistic mission, vision, and goals.

This allows each unit to strongly meet the objectives of the parent company. There is also the freedom to achieve opportunities with the strategic business unit, the goals must be in line with the vision of the company, 

Better decisions and coordination

When strategic business is created it allows the members of the organization to focus their attention on the concerns that impact the company. 

You are given the chance to allocate your resources and decide which projects make the most sense to invest in to create growth within targeted marketplaces.

Strategic business units provide better coordination between different divisions because they have the guideline of what to do and the objectives that the business is going to. 

With a strategic business unit, there is more complementary and teamwork in the business rather than competition.

It enhances the lifespan of the business

Every day the business world is endlessly growing and evolving. Each market has its unique pattern of potential business growth.

Any business must be able to react quickly and recognize the changes to survive the environment. With the help of a strategic business unit, any organization can easily adapt to changes in the speed of time.

This speed becomes an asset and as the strategic business unit adapts, the parent company can adjust as well. 

Examples of a strategic business unit

BSU can be a division, team, or completely separate business. They can also be a marketing team that helps the whole company in operational functions.

Below are some simple examples of strategic business units.

Products or services

Based on the product or service categories it provides, a large company can split up into small ones. This type is the most common when it comes to strategic business units. 

Customer Segment

Today, customers play a big role in business development. When it comes to the customer segment, businesses can have a separate division to focus on customer’s needs.

Locations

The location category or region category is when an organization targets customers from different areas of the world. 

It is an example of a strategic business unit to help the company sell more products to consumers in each nation.

Innovation

People want the latest and on-trend products. The innovation category is used to innovate products or services. 

This type of strategic business unit is built not only to launch and innovate new products but also to focus on what the market desires.

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