A
strategic business unit (SBU) is an organizational subunit that acts like an
independent business in many major respects, including the formulation of its
own strategic plans and its own marketing strategy. An SBU may share its parent
organization’s corporate identity or develop its own brand identity, depending
on the degrees of freedom allowed to the management of the division.
A
one-fit-all strategic approach would be inadequate in large, diversified
organizations and multinational companies. Dividing the corporation’s
operations into SBUs increases efficiency and market focus and efficiently organizes
the business portfolio of a broadly diversified company.
SBUs
are found to be a viable form of organizational sectioning because they ensure
that products and product lines are given specialized focus, as if they were
developed and marketed by an independent company.
Products with smaller sales
volumes and profit margins than a corporation’s top performers would still be nurtured
and promoted by its SBU. The division would focus on a market sector that may
be small in comparison but still constitutes a profitable market niche.
