Strategic Business Unit: Meaning, Characteristics and Structure


Meaning of Strategic Business Unit

Strategic business unit is an autonomous division of a big company that operates as a fully independent entity. It is also termed as SBU which is an important part of a parent company. Strategic business unit has own vision, mission and objectives that are distinct form parent enterprise. It formulates its own plan and strategies for attaining its established set of goals. These separate business units target particular market segment and deals in specific product line only. 

Principle of strategic business unit best fits to large scale organizations that deals in multiple range of products. Every strategic business unit need to regularly report to headquarter of organization regarding their ongoing operations and progress. It is big enough in size to have their own separate departments relating to HR, training, finance and marketing. Strategic business unit enable parent enterprise to attain expertise by serving the interests of particular market segment. These units have a fast-decision making process as they take all decisions on their own which lead to quick reactions toward any product market changes. 

Characteristics of Strategic Business Unit

Various characteristics of strategic business unit are discussed in points given below: –

  1. Strategic business unit are separate business units enjoying autonomous planning.
  2. They have their own set of competitors.
  3. SBUs enables parent enterprise to independently track all revenues, cost as well as profits of each of its units.
  4. They have their unique set of mission for which they formulate their separate plan and policies.
  5. SBU manager can formulate and implement decision independent from other SBUs.
  6. Activities performed by these units are crucial for whole company as they contribute towards attaining objectives of parent organization.
  7. SBU managers are accountable for strategic planning, performance and profitability of their respective divisons.

Structure of Strategic Business Unit

Strategic Business unit comprises of three levels: At top there is corporate headquarters, in middle there are SBU’s and at bottom there are division which by grouped by similarity under each SBU. 

Each of the divisions included under SBU are associated with one another. Whereas, SBU’s operates independent to each other. Each SBU is considered as a separate unit from strategic viewpoint.

There are different operating units included within the structure of Strategic business units that operates as an autonomous business. Managers within these units are assigned business responsibility by top corporate officers with regard to regular operations and strategy implementation. The corporate officer is accountable for strategy formulation and implementation within the SBUs. They monitor the performance of these units using financial and strategic controls. In this way, all business divisions of similar nature are combined into SBU under this type of structure. Each unit work under the direction of senior executive. The chief executive officer supervises all activities of senior executive of distinct units. 

Strategic business units are termed as profit centre supervised by corporate officers. These units pay more attention on strategic planning instead of operational control with a view that separate divisions of SBU can react with fast pace to fluctuating business environment.