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An organization must adopt business unit strategic planning to grow in size and profits, especially if it has a wide variety of products to offer. An SBU-level strategy allows an organization to allocate resources and teams that manage products as independent entities. They focus on the long-term objectives of each product.
Here we’ll discuss SBU in marketing and some examples of strategic business units (SBUs).
When SBU-level strategy is adopted by large organizations, they form independent departments that are fully functional and manage specific areas or products. The objective is to increase profits. Panasonic has separate divisions to manage its range of products. The SBU organizational structure allows them to make critical decisions and manage investments, apart from overseeing manufacturing and delivery.
The SBU example of Coca-Cola shows how effectively an organization can manage multiple subsidiary products that exist in the same industry. Panasonic and Coca-Cola are examples of strategic business units that have demonstrated that business unit strategic planning isn’t about managing small projects. It’s managing a business separately, with strong support functions, to tap its true potential and create an opportunity for the product to become big. In an SBU organizational structure, the units oversee training and development, marketing and human resource management.
Studying an SBU example can show exactly how beneficial it can be for an organization with multiple product structures. SBU in marketing can help recognize shifts and allow the organization to respond quickly, which is beneficial in the long run. Examples of strategic business units have demonstrated that by allowing independent operations, parent organizations can direct their focus on tracking costs and profits.
Business Unit Strategic Planning
SBU in marketing establishes a clear vision, course and mission pertaining to a particular product. Examples of strategic business units show how these subunits function as specialized, independent structures and focus on a given objective. Objectives are not similar to that of the parent company. SBU-level strategy planning is done separately and emphasis is on long-term success and business performance. Although the SBU organizational structure grants operational independence to subunits, mandatory status reports on operations and performances have to be periodically submitted to the head office. Some SBUs may have the power to make crucial business decisions but most have to report to the parent firm.
Strategic business units are not limited to products and services but can extend to geographical areas and customer service. Here are the areas where we can apply the SBU-level strategy:
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Products
An organizational structure can have multiple divisions to manage different products. Each product will have its own goals, but divisions can share administrative and brand functions such as information systems and human resources.
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Regions
Multinational brands commonly use SBU in marketing for operating promotion and distribution capabilities as separate units in different regions.
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Services
Organizations can set up separate units for specialized services.
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Customers
Separate units for managing segments of customers are quite common in big organizations. It’s most commonly practiced by banks that have divisions particularly dedicated to catering to premium customers.
SBU-level strategy is also used by organizations to launch innovative products. Innovation allows growth investment and organizations can focus on the long-term success of these products without worrying about immediate returns.
Examples Of Strategic Business Unit
A strategic business unit can be a segment of a business or a group of such businesses with coherent business strategies. Let’s look at some examples of strategic business units:
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British Petroleum
British Petroleum is an SBU example that enhanced organizational capabilities. They either removed or reduced central functions and empowered each business unit to choose their own method for implementing changes. They exercise full autonomy in operations. They analyze their locations and develop appropriate processes to increase profits.
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Dell
Dell improved sales by identifying different needs of customers. They set up a series of business units with their own finance, service, sales, manufacturing and tech support. The idea was to intimately look at customer feedback to improve products and refine their relationship with customers.
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Hewlett-Packard (HP)
HP is the best SBU example in a large-scale organizational model that demonstrates sustained customer satisfaction, customer intimacy and innovation. They set up divisional structures for test, management and customer feedback to focus on quality, improvement and customer service.
Managers must follow the ideals of strategic business units to avoid trade-offs and compromises. They must have clear objectives before making divisional structures. Based on the returns of a unit, they can further allocate resources and decide whether to invest in other SBUs if there are profits or kill a project if it’s becoming a liability.
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