SBU-"Strategic Business Units"

For decades of upgrading and improving Marketing Management Research several theories and strategic approaches are being used by business scholars and practitioners to improve the performance of the business being represented.  

As the congestion of business organizations both SME’s and MNC’s around the world are obviously increasing today, revising and innovating marketing structure approaches is needed to meet the demand for each market unique behavior towards the company.  As I study the nature of SBU marketing approach, particular market behavior can be observed and be given concern fitted to the market environment and the direct consumer. 

A Strategic Business Unit is a fully functional and distinct unit of a business that develops its own strategic vision and direction. Within large companies, there are several smaller specialized divisions that work towards specific projects and goals, and we see this organizational setup frequently in global companies. The strategic business unit, often referred to as an SBU, remains an important component of the company and must report back through headquarters about their operational status. Typically, they will operate as an independent organization with a specific focus on target markets and are large enough to maintain internal divisions such as finance, HR, and so forth.

There are many great examples of SBUs that  can relate to. For instance, General Electric has 49 SBUs in such markets as appliances, aerospace, electronics, and so on. LG operates along the same lines, with SBUs competing in electronics and appliances,like It makes refrigerators, washing machines, air-conditioners as well as televisions. These small units are formed as separate SBUs so that revenues, costs as well as profits can be tracked independently. Once a unit is given an SBU status, it can make its own decisions, investments, budgets etc. It will be quick to react when the product market takes a shift or changes start happening before the shift happens.

Another example of SBU is Nestle.Nestle is one of the world's largest food company and has successfully grown and increased its market share since its foundation in 1866. This already indicates that Nestlé's overall strategic posture makes sense given the markets and countries Nestle participates in.Nestle is organized into seven different worldwide strategic business units (SBUs). These have responsibility for high-level strategic decisions and engage in overall strategic business development, including acquisitions and market entry strategy. Parallel to this structure, there is a regional organization that divides the world into five major geographical zones, such as Europe, North America, etc. The regional organizations are responsible for developing regional strategies and assist in the overall strategy development process. However, neither SBU nor regional managers get involved in local operating decisions.It has four different strategic units. One SBU like Maggi deals in Food products, another deals in Dairy products like Nestle milkmaid, the third SBU deals in Chocolate products like Kitkat so on and so forth. Thus, in the above example, it is very simple to change strategy for each business unit because the strategy for each is independent of the other.

Saloni Chhabra

Member of Savior Faire Marketers