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Business unit

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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.

Commonalities

A SBU is generally defined by what it has in common, as well as the traditional aspects defined by McKinsey: separate competitors; and a profitability bottom line. Four commonalities include:

  • Revenue SBU
  • Like Marketing Cost SBU
  • Like Operations/HR Profit SBU
  • Like sales judged on net sales not gross

Success factors

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, and
  3. the manner in which the corporation is because of new changes in market.

BCG matrix

The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that had been created by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analyzing their business units or product lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis.

When using the Boston Consulting Group Matrix, SBUs can be shown within any of the four quadrants (Star, Question Mark, Cash Cow, Dog) as a circle whose area represents their size. With different colors, competitors may also be shown. The precise location is determined by the two axes, market Growth as the Y axis, Market Share as the X axis. Alternatively, changes over or two years can be shown by shading or other differences in design.xx.[1] Thus,Star products are currently have high growth and high market share however question mark is product with low share but high growth. Cash Cow has high share but low growth. Finally,dog is product that has low growth and low share.

References

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