Strategic Business unit - Meaning, Role, Characteristics, Structure, Models & Examples

Summary

This video from Marketing91 explains the concept of a Strategic Business Unit (SBU), a profit center that focuses on specific market segments and product offerings within a larger business. It covers SBU characteristics, structure, and strategic models such as the GE-McKinsey matrix and the BCG matrix. The video highlights the benefits of SBUs, including better decision-making, financial advantages, and strategic direction. Real-world examples from companies like Amazon, Tesla, Google, and Apple are provided to illustrate how SBUs function within major corporations.

Takeaways

• 📊 SBU (Strategic Business Unit) is a profit center within a larger business entity that focuses on specific market segments and product offerings.
• 🏢 SBUs function as separate business units with their own competition analysis, marketing plans, and strategies, but they must report to the parent corporation.
• 🔄 Companies can have multiple SBUs, each responsible for its profitability and performance.
• 📈 SBUs are run like independent businesses but are accountable to corporate management, which oversees their strategy and performance.
• 🏆 SBUs allow businesses to conduct strategic planning for different divisions or segments, enhancing flexibility and focus.
• ⚖️ Large corporations like General Electric (GE) use models like the GE 9-Cell Matrix to allocate resources across their various SBUs based on industry attractiveness and business unit strength.
• 📉 Another popular model, the BCG Matrix, helps companies allocate resources to SBUs based on their market growth and market share.
• 🚀 Strategic Business Units help organizations make better decisions, boost financial performance, and establish a clear strategic direction.
• 🔓 SBUs provide companies with greater freedom to act, improve brand identity, and develop marketing strategies.
• 💼 Examples of companies with SBUs include Amazon (with North America, International, and AWS segments), Tesla, Google (Alphabet), and Apple (iPhone, Mac, iPad, and more).

Q & A

What is an SBU (Strategic Business Unit)?

An SBU is a profit center within a larger business entity that focuses on a specific market segment and product offering. Despite being part of a larger corporation, it operates independently with its own competition analysis, marketing plans, and strategies.

How does an SBU function within a corporation?

An SBU functions as an independent entity within a corporation, handling its own marketing, profitability, and performance metrics. However, it is still accountable to the parent corporation, following the overall strategic direction set by corporate executives.

What are some characteristics of a Strategic Business Unit?

An SBU operates as an independent business or a group of similar businesses. It has its own competitors, management team, and strategic planning. SBUs also promote collaboration between departments and are responsible for their own profitability.

How is the structure of an SBU organized?

An SBU structure is made up of operating units that function like independent businesses. Top corporate executives assign managers who are responsible for the strategy and daily operations of the SBU, with financial and strategic controls in place.

What are the strategic models associated with SBUs?

Two common strategic models for SBUs are the GE-McKinsey matrix and the BCG matrix. The GE-McKinsey matrix helps analyze a company’s portfolio based on business strength and industry attractiveness, while the BCG matrix compares business units based on market growth and market share.

Why is having a Strategic Business Unit beneficial for organizations?

SBUs provide financial benefits, improve business longevity, allow for strategic direction, and facilitate better decision-making. They also give companies the flexibility to develop specific marketing strategies and create brand identities without direct interference from the parent firm.

Can you provide examples of companies with SBUs?

Examples include Amazon, which has three SBUs (North American, International, and Amazon Web Services); Tesla with its automotive, services, and energy segments; Google under Alphabet with subdivisions like YouTube, Google Search, and Android; and Apple with SBUs such as iPhone, Mac, iPad, and services.

How does the GE-McKinsey matrix work in relation to SBUs?

The GE-McKinsey matrix uses two main variables—business unit strength and industry attractiveness. It plots SBUs on a graph based on these variables, helping management decide whether to grow, hold, or harvest the unit.

What is the BCG matrix and how does it apply to SBUs?

The BCG matrix categorizes SBUs based on their market growth and relative market share compared to competitors. This helps companies allocate resources effectively depending on the position of each SBU within the matrix.

How do SBUs contribute to a company’s long-term strategy?

SBUs allow companies to focus on specific market segments with tailored strategies. This specialization helps in developing long-term plans, ensuring profitability, and enhancing the overall market position of the company.