Strategic business unit

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Strategic business unit
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The strategic business unit (SBU) is a separate, specialized subsystem in the company, which acts as an independent entity. SBU concept has been applied first time by the U.S. company General Electric. Strategic business units are small businesses with a high functional and decision-making autonomy. Such units may or may not need to work closely with companies, from which they have been separated. They can be used to prepare the diversified company's strategy.

Features of strategic business units

The main features of strategic business units are:

Fig. 1. Strategic Business Unit structure example

Types of organizational units

Strategic business unites usually are created from following organizational units:

The division of units responsible for particular groups of products are created in accordance to:

  • needs of customers,
  • manufacturing technologies,
  • product application,
  • place in company portfolio.

Above criteria are the basis for assembling homogeneous groups of products and creating their strategic organizational units. Such SBUs allows company to improve the overall efficiency.

Advantages of strategic business units

The main advantages are:

  • SBU supports cooperation between the departments of the company which has a similar range of activities,
  • improvement of strategic management,
  • improvement of accounting operations,
  • easier planning of activities.

Disadvantages of strategic business units

  • difficulty with contact with higher level of management,
  • may cause of internal tension due to difficult access to internal and external sources of funding,
  • may be the cause of the unclear situation with regard to the management activities.

See also: