Strategic Business Unit Flashcards, test questions and answers

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What is Strategic Business Unit?

A strategic business unit (SBU) is an independent division or organization within a larger firm that is responsible for its own strategy, objectives and performance. It typically has its own leadership team, resources and distinct product portfolio. SBUs are often used by large companies to focus on specific markets, products or services that require different strategies and operational models than the parent company’s other businesses.In most cases, an SBU is treated as a stand-alone entity in terms of corporate planning, budgeting and decision-making. Its objectives are usually determined based on the parent company’s overall mission and goals as well as current market conditions. The SBU is then responsible for developing its own strategies to reach those goals while following the guidelines set by the parent company. This means it will have to take into account such factors as customer feedback, competitor analysis and industry trends when making decisions about pricing, marketing tactics or product innovation initiatives.The advantages of having an SBU structure include increased accountability for results since each unit has its own responsibility for performance; more focused strategic direction since each unit can develop their own strategies; greater responsiveness to changing market conditions; more efficient use of resources; better alignment between corporate strategy and individual business units’ goals; and improved customer service through customized offerings that meet specific needs in each market segment. On the other hand, there are some potential drawbacks to this type of structure including a lack of collaboration between departments due to differences in strategies; difficulty measuring success across various business units due to different metrics being used; overlap between functions which can lead to redundancies or conflicts between teams; reduced flexibility in responding quickly when changes occur outside the organization’s control such as shifts in consumer demand or new competitors entering the market; high costs associated with setting up multiple organizations with separate infrastructure requirements; and slower decision-making processes since all decisions have to be approved at both corporate headquarters and at each individual unit level. Overall, creating an SBU structure can provide significant advantages for larger firms who want to focus their efforts on specific markets or services while still utilizing resources from across their entire organization. However like any organizational model there are both pros and cons associated with this setup which should be taken into consideration before implementing it within a firm’s operations.