A strategic business unit (SBU) is a unit of the company that has a separate mission and objectives and that can be planned independently from other company businesses. As time passes, SBUs change their position in the growth-share. Matrix, Successful SBUs has a life cycle. They start as question marks, become stars, then cash cows, and finally dogs. For this reason, companies should examine not only their businesses current positions in the growth-share matrix but also their moving positions. If a given SBU’s expected trajectory is not satisfactory, the corporation should ask its manager to propose a new strategy. The company’s next task is to determine what objective, strategy and budget to assign to each SBU.
Strategic Business Unit (SBU) Strategies –
Four strategies can be pursued: build, hold harvest, or divest.
- The building is appropriate for question marks whose market shares must grow if they are to become stars.
- The holding strategy is appropriate for strong cash -cows if they are to continue yielding large positive cash flows.
- The objective of the harvest strategy is to increase short-term cash flow ‘regardless of long-term effect. This strategy is appropriate for weak cash cows whose future is dim and from which more cash flow is needed. Harvesting can also be used with question marks and dogs.
- The objective of the divest strategy is to sell or liquidate the business because resources can be better used elsewhere, this strategy is appropriate for dogs and question marks that are acting as a drag on the company’s profit.
The important strategies of strategic business units are:
- They are present in the managerial formation,
- They are managerial units without detaching legal behavior,
- They make use of “product-market” strategy,
- Functional and decision-making independence include – laboratory testing, manufacture research, production, investment, accounting, and marketing,
Empowerment of the SBU manager: Several times the empowerment of SBU managers is critical for the accomplishment of the SBU / products. This is mostly because this administrator is the one who is essentially in handle with the market and knows the best strategies which can be used for best returns.
Degree of sharing of one SBU with another: This position is in a straight line connected to the first one. What if one SBU needs some financial plan but the similar is not accessible because the budget is being shared by 2 other SBU’s and as it is the budget is short. SBU has a divisional organization, which is determined by the size of production, technology and research activities, economic and accounting processes, and marketing activities.
Changes in the market
An SBU completely needs to be flexible because it needs to acclimatize to any key changes in the market. Type of activity performed by them is of vital and influential importance for the entire company.