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Strategic Business Unit

Strategic management involves three levels: corporate, business unit, and operational. A strategic business unit (SBU) is a part of an organization that has a distinct external market. SBUs have related products/services, similar technologies and markets, and compete against a defined set of rivals. Guidelines for formulating SBUs include determining dimensions, grouping similar needs, determining viability, and cost-benefit analysis. The BCG matrix is used to analyze SBU portfolios by market growth and market share to identify stars, cash cows, dogs, and question marks. Assumptions of the BCG matrix include its simplicity and that growth rate and market share do not fully determine attractiveness or profitability.

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129 views12 pages

Strategic Business Unit

Strategic management involves three levels: corporate, business unit, and operational. A strategic business unit (SBU) is a part of an organization that has a distinct external market. SBUs have related products/services, similar technologies and markets, and compete against a defined set of rivals. Guidelines for formulating SBUs include determining dimensions, grouping similar needs, determining viability, and cost-benefit analysis. The BCG matrix is used to analyze SBU portfolios by market growth and market share to identify stars, cash cows, dogs, and question marks. Assumptions of the BCG matrix include its simplicity and that growth rate and market share do not fully determine attractiveness or profitability.

Uploaded by

Tibin Joseph
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Strategic management

strategic business unit (SBU)

Presented by:Tibin joseph No:56

LEVELS OF STRATEGY

Corporate level Determine overall scope of the organisation Add value to the different business units Meet expectations of stakeholders Business level (SBU) How to compete successfully in particular markets Operational How different parts of organisation deliver strategy

Strategic Business Unit (SBU)

A strategic business unit (SBU) is a part of an organisation for which there is a distinct external market for goods or services that is different from another SBU

Definition of strategic business units


The SBUs are the natural grouping of part of a SBUs corporation.  The SBU has a range of related products/services which has similar technologies and production processes.  The products/services are sold in similar or related market segments.  The production/services are sold against a wellwell defined set of competitors.  An SBU is managed by an SBU manager, largely as an independent unit.  The SBU has its own set of goals and strategies.  Each SBU in a particular organization should be able to operate independently of any other SBU.

GUIDELINES FOR FORMULATING SBU


    

Detrermine inventory dimensions Identify similar and group need Form units that satisfy similar need Determine its viability Undertake cost benefit analysis

STRATEGIC ANALYSIS OF BUSINESS UNITS




BCG MATRIX

The Growth Share (or BCG) Matrix

How to do a portfolio analysis?




Construct a summary of the industry and competitive environment of each business units. Appraising the strength and competitive position of each business unit. Understanding how each business unit ranks against its rivals on the key factors for competitive success. success. Identifying Identifying the external opportunities, threats and strategic issues peculiar to each business units. Determining how much corporate financial support is needed to fund each units business strategy and what busine corporate skills and resources could be deployed to boots the competitive strength of various business units. strength Comparing the relative attractiveness of the businesses in the corporate portfolio. Compare the businesses on ompare various historical and projected performance measures sale growth, profit margin, return on investment, and the like. Checking the corporate portfolio to ascertain whether the mix of businesses is adequately balanced

Assumptions and limitations of BCG




The use of highs and lows to make just four categories is too simplistic. simpl The link between market share and profitability isnt necessarily strong. Low-share businesses Lowcan be profitable, too (and vica versa.) vic Growth rate only one aspect of industry attract attractiveness. High-growth market may not Highalways be the best for every business unit or product line. It considers the product line or business unit only relation to one competitor: the market leader. It misses small competitors with fastfastgrowing market share. Market share is only one aspect of overall competitive position.

Indicators of SBU Strength and Market Attractiveness

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