Strategic Business Unit

The idea was developed by Mckinsey & Co. (Consulting Firm) & General Electric in 1971. Separate operating entities within an organization. After defining mission, a company establishes SBU’s which is self contained division, product line or product department within an organization. To be identified an SBU, an entity should,

 Be a separate identifiable business
Have a distinct mission Have its own competitors Have its own executive group with profit responsibility In 1990 AT&T had 19 business units General Electric & SBU’s are electrical motors, Major appliances, Jet Engines Lighting Equipments Commercial Credit and Broadcasting.

Analyzing SBU’s

Several different planning models are there
1. The Boston Consulting Group Matrix

The Boston Consulting Group Matrix identifies four types of SBU’s: Star, cash cow, problem child (question Mark) and dog. A star is a leading SBU (high market share) is an expending industry (High growth) A cash cow is a leading SBU (high market share) in a relatively matured or declining industry (low growth) A problem child or question mark is an SBU that has made little impact in the market place (low market share) is an expanding industry (high growth).

The Product / Market Opportunity Matrix

It identifies four alternative marketing strategies that may be used to maintain and / or increase sales of business units and products : market penetration, product development, market development, and diversification.

Market Penetration More adults use in commercials, you can not beat the feeling at theme new Coke ads aimed at core market of 12-24 years olds. Market Development Company products marketed in 155 countries around the world greater emphasis placed on consumers in China, South America, Eastern Europe, Africa and the Middle East. Product Development Improving product quality adding new brands and flavors (such as Minute Maid Soda and Cherry Coke, Decaffeinated versions of coke and tab). Diversification Producing juice, coffee, tea, bottled water and frozen foods Manufacturing water – treatment and conditioning acquiring an operating Columbia picture, Embassy communications, and Marry Griffin Enterprises.

The Product / Market Opportunity Matrix Applied to Coca Cola

General Electric Business Screen
It examines industry attractiveness and company business strengths.

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