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STRATEGIC BUSINESS UNIT: In business, a strategic business unit (SBU) is a profit center which focuses on product offering and

market segment. SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity. An SBU may be a business unit within a larger corporation, or it may be a business unto itself or a branch. Corporations may be composed of multiple SBUs, each of which is responsible for its own profitability. General Electric is an example of a company with this sort of business organization. SBUs are able to affect most factors which influence their performance. Managed as separate businesses, they are responsible to a parent corporation. General Electric has 49 SBUs. Companies today often use the word segmentation or division when referring to SBUs or an aggregation of SBUs that share such commonalities. An autonomous division or organizational unit, small enough to be flexible and large enough to exercise control over most of the factors affecting its long-term performance. Strategic Business Unit (SBU) is a group of products divisions that are operating on the same strategic characteristic within the market. It creates it's a profit center that focuses on marketing, or buying and selling segments. INTRODUCTION: Functional strategies include marketing strategies, new

product development strategies, human resourcestrategies, financial strategies, legal strategies, supply-chain strategies, and information technology

management strategies. The emphasis is on short-term and medium-term plans and is limited to the domain of each departments functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, so to some extent their strategies are derived from broader corporate strategies.

Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have re-engineered according to processes or strategic business units (SBUs). An SBU is a semi-autonomous unit that is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is a profit center which focuses on a product offering and a market segment. SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity. An SBU may be a business unit within a larger corporation or it may be a business unto itself. Corporations may be composed of multiple SBUs, each of which is responsible for its own profitability. General Electric is an example of a company with this sort of business organization. SBUs are able to affect most factors which influence their performance. Managed as separate businesses, they are responsible to a parent corporation. Companies today often use the word segmentation or division when referring to SBUs or an aggregation of SBUs that share such commonalities. There are three factors that are generally seen as determining the success of an SBU: 1. The degree of autonomy given to each SBU manager 2. The degree to which an SBU shares functional programs and facilities with other SBUs 3. The manner in which the corporation adopts to new changes in the market

STRATEGIC PLANNING PROCESS WITHIN BUSINESS UNITS: Markets are diverse, and strategies need to be tailored to individual markets. In this respect, a company is often divided into business units according to its different products in order to develop and follow a specific strategy. Consequently, these are called strategic business units (SBUs) and they are based on three characteristics (Kotler & Keller, 2009). An SBU:

is a single business (product), or a collection of related businesses (products), that can be planned separately from the rest of the company

has its own defined market (with customers, competitors etc.) has a manager responsible for strategic planning and profit performance.

Once a company has defined its SBUs, management has to decide how the budget needs to be allocated. Each SBU must therefore be assessed according to its value, which is based on potential growth opportunities.A review of opportunities for improving existing businesses can be performed within the framework of Ansoff's product-market expansion grid. Based on current products and markets, a company must assess whether it could gain a higher market share (better market penetration) or needs to explore new markets (market development) for its current products. New markets may be new customer segments or international markets, for example. The second consideration focuses on new products and whether they can be offered in the existing markets (product development) and/or should be offered to new markets. When approaching markets in other countries especially, a certain degree of product adjustment is required to suit the local context (language, legal issues etc.).

Figure 2: Ansoff's product-market expansion grid (1957, in Kotler & Keller, 2009). Definition: Strategic business unit (SBU) An ideal strategic planning process within a business unit is presented below. It consists of several steps and is based on the business mission (derived from a wider company or corporate mission).

Figure 3: Strategic planning process within a business unit (adapted from Kotler & Keller, 2009). SWOT analysis A successful business activity is built on the company's core competences. The SWOT analysis is a popular concept to conduct an overall evaluation of a company's strengths (S), weaknesses (W) - the internal environment - and

opportunities (O) and threats (T) - the external environment. Based on contrasting the company's strengths and weaknesses with market opportunities and (potential) threats, it gives recommendations for actions in the resulting cells.

Figure 4: SWOT analysis. Definition: Marketing opportunities Goal and strategy formulation:Goals are set to define what is important to achieve. Within an organization there is a series of goals of different kinds and on different levels. The goals that concern the most important company relations, or the company as a whole, are strategic goals and they are usually developed over several years. Examples of (generic) goals: maximize sales revenue; maximize market share; maximize market value of the company's products (in their segments); maximize brand loyalty. Definition: Goals -All companies have ways of working to achieve a particular goal. Sometimes, this goal arises from the company's historical operations; sometimes it is a goal that someone has decided upon and directs the company. When conducting management by objectives, there are four relevant criteria:

Objectives must be arranged hierarchically, from the most to the least important.

Objectives should be quantitative whenever possible.

Goals should be realistic. Objectives must be consistent (for example, sales and profit cannot be maximized simultaneously).

The next step is to form a strategy that will provide methods of achieving particular goals. A strategy is a framework for action; it channels all programmes and activities according to the defined goals, often in the form of a plan. A well-developed strategy works as both a guide and an aid for the distribution of resources, identification of needs, changes in the organization etc. At this level you define the company's basic orientation and create guidelines for implementing what you want to do.The content of a strategy is also decided by its relationship with its environment. Competitive strategies are influenced by factors such as current competition, access to different markets, trade barriers, power relations, legal and institutional standards and laws etc. The dynamic nature of the company environment requires strategies to be reviewed continuously to see whether they remain appropriate for achieving specific goals.In summary, a strategy describes how the organization will act on a general level in order to handle these factors and to achieve its long-term goals. As you can see, there is a causal relationship between goals and strategies. Put simply, one could also say that every company should focus on strategic planning, because 'failing to plan means planning to fail'. Definition: Strategy Another perspective is given by comparing your company with your most important competitors. In principle, there are three basic strategies to follow:

Cost leadership - 'being cheaper than ...' Differentiation - 'being different from ...' Concentration/focus - 'being narrower/more specialized than ...'.

Figure 5. Porter's generic strategies (adapted from Porter, 1980, 1985; in Kotler & Keller, 2009). The core difference lies between having cost superiority and one of the other two strategies. Concentration is built on the same basic elements as differentiation, but focuses on specific niche markets or segments as compared to a whole industry. Thus, the company's products target only a small number of segments within a few sectors or markets. Programme formulation and implementation Strategies only work if they are implemented appropriately. Practicable programmes must be therefore formulated. If the strategy is to attain technological leadership for the development of specific products, then programmes must be devised to strengthen research and development (R&D), production, and processing units in the company. Similar requirements apply to marketing programmes in which the effectiveness of its tools (product, price, place, promotion) needs to be evaluated and adjusted if necessary.Programmes can be related to several elements. One example is provided by Peters and Waterman (former employees at McKinsey & Company) who distinguished between a company's 'hardware' elements (the 'bones': strategy, (organizational) structure, and (information and communication) systems), and 'software' elements (the 'blood': (leadership) style, skills (competencies), staff, and shared values (culture)).

Feedback and control:This final aspect emphasizes the need for constant evaluation of the company's strategic fit with the market and further environmental dynamics.
Strategic business units are absolutely essential for multi product organizations. These business units are basically known as profit centres. They are focused towards a set of products and are responsible for each and every decision / strategy to be taken for that particular set of products. Strategic business units can be best explained with an example. Example of Strategic business units The best example of strategic business unit would be to take organizations like HUL, P&G or LG in focus. These organizations are characterized by multiple categories and multiple product lines. For example, HUL may have a line of products in the shampoo category, Similarly LG might have a line of products in the television category. Thus to track the investments against return, they may classify the category as a different SBU itself. There are several reasons SBUs are used in an organization and they are mentioned in my post on the importance for using SBUs in a multi product organization. However, along with the reasons for using SBUs there are also some powers which needs to be inferred on an SBU. Planning independence, Empowerment and others are such powers which influence a SBU. 3 of such features are discussed below. 1) Empowerment of the SBU manager Several times the empowerment of SBU managers is crucial for the success of the SBU / products. This is mainly because this manager is the one who is actually in touch with the market and knows the best strategies which can be used for optimum returns. Thus several times, the SBU manager might need a higher investment for his products. At such times the manager should be supported from the organization. Only this confidence will help the manager in the progress of the SBU. 2) Degree of sharing of one SBU with another This point is directly connected to the first one. What if one SBU needs some budget but the same is not offered because the budget is being shared by 2 other SBUs and as it is the budget is short. Thus the first SBU does not get the independence to implement some important strategies. Similarly there might be other restrictions applied to one SBU as it is using some resources which are shared by another SBU. This might not always be negative. Of one SBU gains more profit then usual, this revenue might also become useful for the other SBU thereby promoting growth of both of them. This is where sharing actually plays a positive role.

3) Changes in the market An SBU absolutely needs to be flexible because it needs to adapt to any major changes in the market. For example if an LCD manager knows that LEDs are more in demand now, he needs to communicate to the top management that he would also like a range of LED products to make the SBU even more profitable. Thus by adding LED to its portfolio, the SBU can immediately become double profitable. Thus by adjusting to change on SBU levels, the organization as a whole can become profitable. The key to Strategic business management is to have a strict watch on the investment and returns from each SBU. The SBU manager too plays a crucial role in this and hence he is recruited from the industry with extensive experience of that particular industry. Portfolio / Multi SBU management and is done at the absolute top level of the management. Each and every change in the market, and its affect on SBUs is anticipated which is then taken into consideration. Hence, for a multi product organization, business management may actually mean product portfolio management or SBU management.