STRATEGIC BUSINESS UNITS (SBUs)

TWO SIMPLE QUESTIONS

1. What do we call the collection of businesses and products that make up a company?a) investment diversityb) needs inventoryc) business portfoliod) none of the above

2. Pinto Gardens is a company that operates as two distinctive businesses – one that sells lawn and garden products and one that markets booklets. Each business is called a _____.a) separate entityb) strategic business unit (SBU)c) profit centerd) division

STRATEGIC PLANNING

Steps in Strategic Planning

LEVELS OF STRATEGY

LEVEL 1: CORPORATE LEVEL

At this level the fundamental task is to develop a balanced portfolio of businesses which will achieve the goals of the corporation and satisfy its stakeholders

LEVEL 2: STRATEGIC BUSINESS UNIT LEVEL (SBU)

SBU level strategy is a comprehensive plan providing objectives for SBUs, allocation of resources among functional areas and coordination between them for making optimal contribution to the achievement of corporate-level objectives

LEVEL 3: FUNCTIONAL LEVEL

At this level the major task is to provide appropriate functional strategies (finance and accounting, marketing, R+D, production, personnel) for SBU or corporate level strategy

STRATEGIC BUSINESS UNITS (SBUs)

The SBUs are the natural ‘grouping’ of part of a 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 well-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.

BUSINESS PORTFOLIO

A business portfolio is the collection of Strategic Business Units that together form a corporation. The optimal business portfolio is one that fits perfectly to the company's strengths and helps to exploit the most attractive industries or markets.

To perform business portfolio analysis, one of the most widely used tools is the Boston Consultancy Group’s BCG Matrix.

AN EXAMPLE

THE BOSTON CONSULTING GROUP MATRIX

KODAC

BCG Business portfolio analysis for Kodak’s SBUs for 2003 (solid circles) and 2010 (hollow circles)

VIDEOCON

SBUs of VIDEOCON

DANKE SCHÖN