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Strategic Business Unit (SBU)

Definition: Strategic Business Unit (SBU) implies an independently
managed division of a large company, having its own vision, mission and
objectives, whose planning is done separately from other businesses of the
company. The vision, mission and objectives of the division are both distinct
from the parent enterprise and elemental to the long-term performance of
the enterprise.

Simply put, an SBU is a cluster of associated businesses which are

responsible for its combined planning treatment, i.e. the company engaged
in a diversified range of businesses, categorises its multitude of businesses
into a few separate divisions, in a scientific way. The task may include
analysis and bifurcation of a variety of businesses.

It can be a business division, a product line of the division or even a

specific product/brand, targeting a particular group of customers or a
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Characteristics of Strategic Business Unit
Separate business or a grouping of similar businesses, offering scope for
autonomous planning.
Own set of competitors.
A manager who is accountable for strategic planning, profitability and
performance of the division.

A strategic business unit is specially formed to target a particular market

segment, which requires expertise in production or management, not
present in the parent company.

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Strategic Business Unit Structure

The structure of SBU consist of operating units; wherein the units serve as
an autonomous business. The top corporate officer assigns the
responsibility of the business to the managers, for the regular operations
and business unit strategy. So, the corporate officer is accountable for the
formulation and implementation of the comprehensive strategy and
administers the SBU by way of strategic and financial controls.

In this way, the structure combines related divisions of business into the
strategic business unit and the senior executive is empowered for taking
decisions for each unit. The senior executive works under the supervision of
a chief executive officer.

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There are three levels in a strategic business unit, wherein the corporate
headquarters remain at the top, SBU’s in the middle and divisions clustered
by similarity, within each SBU, remain at the bottom. Hence, the divisions
within the SBU are associated with each other, and the SBU groups are
independent of each other. From the strategic viewpoint, each SBU is an
independent business.

A single strategic business unit is considered as a profit centre and

governed by the corporate officers. It stresses over strategic planning
instead of operational control so that the separate divisions of the SBU can
respond as fast as they can, to the changing business environment.
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Related Terms:
1. Strategic Planning
2. Strategic Alliance
3. Transfer Pricing
4. Demerger
5. Strategic Intent

Comments

ROSALIE D. BENERIO says

September 4, 2021 at 7:43 pm

Thank you so much it is very helpful for my presentation.

very much appreciated.

Reply

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