What is a strategic business unit?

A definition of a strategic business unit can be the set of activities carried out by a company for which a common strategy can be set and different from those of the rest of the company's activities. This strategy is autonomous from the rest, but it is not completely independent since all the strategies of the different strategic business units are linked within the global plans of the company.

The origin of the strategic business unit concept must be sought in the 60s of the last century given the high degree of diversification that the General Electric company had achieved, which led it to differentiate areas within the company in which it could specify defined strategies.

This term arises from the idea that by combining different businesses but linked together, value could be created through synergy. This thought was widely accepted and served in some way to justify the diversification that the United States experienced, especially in the 70s.

The strategic business unit allows entities to have certain business units, which compete in different markets, where users have specific needs requiring a series of services or items.

Characteristics of the strategic business unit

Among the main characteristics of the strategic business unit, also known as SBU, are the following:

  • It has a competition which is perfectly identified.
  • They have a differentiated and unique objective from the rest of the entity or from the other strategic business units.
  • The market they are targeting is perfectly identified.
  • In a company with several businesses or activities there should not be a global competitive position of the company, but a competitive position of each of the activities.
  • Management of your business functions.

Example of a strategic business unit

To understand the concept of a strategic business unit, we can use an example to clarify it. To find out what a business unit consists of, we can take the example of the Coca-Cola company, which has different strategic business units through Fanta, Aquarius, Nestea or Aquabona, since each one focuses differently on the market.

Another example of a strategic business unit could be the company Zara, which owns different SBUs such as Pull & Bear, Bershka or Massimo Dutti.

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