In essence, the SBU is a profit making area that focuses on a combination of product offer and market segment, requiring its own marketing plan, competitor analysis, and marketing campaign. A Strategic Business Unit emerges at the cross-over between:
That is to say, if there's a big enough market niche for a product we can supply, then we may want to create a SBU that focuses on that opportunity. Strategic Business Unit or SBU is understood as a business unit within the overall corporate identity which is distinguishable from other business because it serves a defined external market where management can conduct strategic planning in relation to products and markets. The unique small business unit benefits that a firm aggressively promotes in a consistent manner. When companies become really large, they are best thought of as being composed of a number of businesses (or SBUs).
In the broader domain of strategic management, the phrase "Strategic Business Unit" came into use in the 1960s, largely as a result of General Electric's many units.
These organizational entities are large enough and homogeneous enough to exercise control over most strategic factors affecting their performance. They are managed as self contained planning units for which discrete business strategies can be developed. A Strategic Business Unit can encompass an entire company, or can simply be a smaller part of a company set up to perform a specific task. The SBU has its own business strategy, objectives and competitors and these will often be different from those of the parent company. Research conducted in this include the BCG Matrix.
This approach entails the creation of business units to address each market in which the company is operating. The organization of the business unit is determined by the needs of the market.
An SBU is an sole operating unit or planning focus that does not group a distinct set of products or services, which are sold to a uniform set of customers, facing a well-defined set of competitors. The external (market) dimension of a business is the relevant perspective for the proper identification of an SBU. (See Industry information and Porter five forces analysis.) Therefore, an SBU should have a set of external customers and not just an internal supplier.[1]
Companies today often use the word 「Segmentation」 or 「Deviasion」 when referring to SBU's, or an aggregation of SBU's that share such commonalities.
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A SBU is generally defined by what it has in common, as well as the traditional aspects defined by McKinsey, of separate competitors and a profitability bottom line. The commonalities are four in number: Revenue SBU - Like Marketing Cost SBU - Like Operations/HR Profit SBU - Like sales judged on net sales not gross
There are three factors that are generally seen as determining the success of an SBU:
The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis.
When using the Boston Consulting Group Matrix, SBUs can be shown within any of the four quadrants (Star, Question Mark, Cash Cow, Dog) as a circle whose area represents their size. With different colors, competitors may also be shown. The precise location is determined by the two axes, market Growth as the Y axis, Market Share as the X axis. Alternatively, changes over or two years can be shown by shading or other differences in design.xx[2]