Strategic Business Units Defined
A strategic business unit is a
significant organization segment that is analyzed to develop
organizational strategy
aimed at generating future business or
revenue. Exactly what constitutes an SBU varies from organization to
organization. In larger organizations, an SBU could be a company
division, a single product, or a complete product line. In smaller
organizations, it might be the entire company.
Although SBUs
vary drastically in form, they have some common
characteristics.
All SBUs are a single business (or
collection of businesses), have their own competitors and a manager
accountable for operations, and can be independently planned for.
Why Divisional Structure?
"The bigger a company gets, the smaller it's brains get."
~ Clark Howard
When organizations get large, they become slow,
awkward, unmanageable, inflexible, and difficult to focus. They distance
people from each other, and consume more energy than they release.
Problem to
Address
Divisions can create internal competition that
ruins cooperation,
cross-pollination of ideas, and
learning within
your firm.
Division Defined
Division is a business unit having a clear set
of
customers
and
competitors.
A division can be independently planned for within the organization and has
profit and loss responsibility.
Business Unit Level
Strategy
A strategic business unit may be any
→
profit
center that can be planned independently from the other business units of
your corporation. At the business unit level, the
strategic issues are about both practical coordination of operating units
and about developing and sustaining a
competitive advantage
for the products and services that are produced...
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Hewlett-Packard
Hewlett-Packard set the pattern for a
divisional structure of an
innovative organization
long ago. Divisions aggregated into units such as Test and Measurement
Organization are the core dominant organizational entities of the company.
When John Chambers, President and CEO of Cisco Systems looked around for
large-scale organizational models that sustained innovation, customer
intimacy and satisfaction, he found Hewlett-Packard to be the best...
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