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A Strategic Business Unit (SBU) is a separate, focused entity within a larger corporation that is responsible for its profitability. It concentrates on distinct product offerings and specific market segments. An SBU may function as a standalone business or as a unit within a larger corporation. Features of an SBU include a unique marketing plan^[2], competition analysis, and marketing campaigns. SBUs, or groups of SBUs, are often used by companies for strategic decision-making and resource allocation. For instance, General Electric (GE), a multinational conglomerate, is known for its multiple SBUs. SBUs enable a firm to respond effectively to market changes and achieve competitive advantage^[1].

Terms definitions

1. ↑ competitive advantage. Competitive Advantage is a key business concept that refers to the unique ability of a company to outperform its industry rivals. It is achieved through various strategies identified by Michael Porter, a foremost authority in strategic management. These include cost leadership, differentiation, and focus. Cost leadership involves the production of goods or services at a lower cost, granting higher profit margins. Differentiation, on the other hand, entails offering unique products or services that stand out in the market. Lastly, the focus strategy targets specific market segments to optimize resource utilization. Factors internal to a company, such as positioning, corporate identity, and core competencies, also contribute to competitive advantage. However, advantages can sometimes be classified as unfair if they grant benefits to a business that are not accessible to others, hence disrupting market fairness. Government bodies often intervene in such cases to maintain fair market dynamics. Furthermore, the resource-based view of a firm and its capacity for innovation are other key determinants of competitive advantage.

2. ↑ marketing plan. A marketing plan is a strategic document that outlines a company's advertising and marketing efforts for a specific period, often one year. This comprehensive guide details various facets of a business such as its activities, target market, competition, and marketing strategies like advertising and direct marketing. It includes historical data, future predictions, and ways to fulfill customer needs. This plan also helps in segmenting markets, forecasting market size, and planning market share. Furthermore, it includes budget allocation for implementing strategies and setting achievable marketing goals. A marketing plan also describes the product or service, the business location, and pricing strategy. The plan enables the company to follow a specific marketing path, increase its customer base, and build a favorable image while facilitating internal communication. It also necessitates regular reviews for plan validity and result assessment.

Glossary

Strategic business unit (Wikipedia)

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A strategic business unit (SBU) in business strategic management, 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 into itself or a branch. Corporations may be composed of multiple SBUs, each of which is responsible for its own profitability. Companies today often use the word segmentation or division when referring to SBUs or an aggregation of SBUs that share such commonalities.

General Electric (GE) 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. GE has 49 SBUs.

Business writer Michael Porter has developed a value chain model which focusses on the business unit, i.e. a firm's activities within a particular industry.

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