Business Unit Strategy and its Main Elements

ABOUT THIS CONTENT

A look at the elements of a business unit strategy.

The three elements of a business unit strategy:

  1. Where to compete
  2. How to compete
  3. How to design the business system accordingly

Definition of an SBU

  • A strategically and functionally distinct execution-oriented entity that is usually a subset of a corporation
  • A unit that has a:
    • Well-defined market (or market segments)
    • Well-defined group of competitors
    • Well-defined business system that serves the market
  • A unit grouped as such to optimize the collective organizational capabilities among its constituent entities

Some traditional characteristics

  • It is a single business, often with its own P&L responsibilities, or collection of related businesses that can be planned separately from the rest of the corporation/other business units
  • It has its own competitors, which it is trying to surpass
  • It has a manager who is responsible for strategic planning, profit, and performance

A Business Unit Strategy is about…

business unit strategy

An integrated set of actions means that the components parts of a strategy must complement one another, and must be executed at the proper time – a reference to the “when to compete.”

To design the entire value system refers to the industry supply chain, the company value chain, and the competitive structure therein with respect to the defined where to compete—a reference to the “where and how to compete.”

To continuously create and redefine competitive actions means that true competitive advantage must be lasting.

Through superior customer value implies that the definition of competitive advantage over a competitor is providing superior value to the customer relative to the cost required.

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