A strategic business unit, popularly known as SBU, is a
fully-functional unit of a business that has its own vision and direction.
A strategic business unit or SBU operates as an independent
entity, but it has to report directly to the headquarters of the organisation
about the status of its operation. It operates independently and is focused on
a target market and is big enough to have its own support functions such as HR,
training departments etc.
Once a unit is given an SBU status, it can make its own
decisions, investments, budgets etc. It will be quick to react when the product
market takes a shift or changes start happening before the shift happens.
Strategic business units are absolutely
essential for multi product organizations. These business units are basically
known as profit centres. They are focused towards a set of products and are
responsible for each and every decision / strategy to be taken for that
particular set of products.
Strategic business unit would be to
take organizations like HUL, P&G or LG in focus. These organizations are
characterized by multiple categories and multiple product lines. For example,
HUL may have a line of products in the shampoo category, Similarly LG might
have a line of products in the television category. Thus to track the
investments against return, they may classify the category as a different SBU
itself.
Each Business Unit must meet the following criteria:
1. Have a unique business mission, independent from
other SBUs.
2. Have clearly definable set of competitors.
3. Is able to carry out integrative planning relatively
independently of other SBUs.
4. Should have a Manager authorized and responsible for
its operation.
BEST EXAMPLE FOR SBU WOULD BE TATA GROUP
SBU's
which form a major part of the Tata group include:
Tata
steel
Tata
motors Ltd.
Tata
consultancy services
Tata
Technologies
Tata
tea
Tata
power
Tata
Communications
Tata
Teleservices
Tata hotels
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