What is strategic business unit?

Answer: Strategic business unit is a business unit comprising one or more products having a common market base whose manager has complete responsibility for integrating all functions into a strategy again an identifiable competitor.

Strategic business unit is an arrangement of an organization. It is an individual business unit. Every business is separate from business unit.

It has three characteristics;

  • It is a single business or collections of related business that can b e planned separately form the rest of the company.
  • It has its own set of competitors.
  • It has a manager who is responsible for strategic planning and profit performance and who controls most o f the factors affecting people.

Why is the strategic management used?
There are three types of philosophies

  • Portfolio management of diversified firm.
  • Separate strategy form separate SBU.
  • Proper allocation of corporate resource among SBUs for this proper management.

 

Guidelines for strategic business unit

  • The number of SBU should be minimized.
  • Basis; Related products, related process technology, may contribute SBU.
  • Distinct different from others; differences are process, distribution, market, or delivery of product.

Criteria for Strategic Business Unit

  • A strategic business unit must serve an external rather than internal market in, must have a set external customers.
  • It should have a clear set of external competitors.
  • It should have control over its own destiny.
  • Its performance must be measurable in terms of P/L statement.

 

Transparency, accountability is the main approach for strategic management unit or Portfolio management.

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