STRATEGIES DECISIONS AT THE BUSINESS-UNIT LEVEL

The components of a Firm engaged in multiple industries or businesses are called strategic
business units or SBUs. Managers of these units decide which objectives, markets, and
competitive strategies to pursue. Top level corporate managers review and approve such
decisions to ensure their overall consistency with the companys mission, objectives and the
allocation of resources. However, SBU-level managers bear the responsibility of collecting and
analyzing relevant information and generating appropriate strategies. Those managers are more
familiar with SBUs products, customers and competitors and are responsible for successfully
implementing the strategy.
The first step in developing business-level strategies, is to decide how to divide itself into SBUs.
The managers in each SBUs must make recommendations about the units objectives, the scope of
its target customers and offerings, which broad competitive strategy to pursue, and how resources
should be allocated across its product market-entries and functional departments.
HOW SHOULD STRATEGIC BUSINESS UNITS BE DESIGNED?
Characteristics:
-

A homogeneous set of markets

A unique set of product-markets
Control over those factors necessary for successful performance, such as production, R&D
and engineering, marketing and distribution.
Responsibility for their own profitability.

These three dimensions that define the scope and mission of the entire corporation, also define
individual SBUs:
1. Technical compatibility, respect to product technologies and operational requirements.
2. Similarity in the customer needs or the product benefits sought by customers in the target
markets.
3. Similarity in the personal characteristics or behavior patterns of customers in the target
markets.
Frequently management defines SBUs by product-markets requiring similar technologies,
production facilities and employee skills. This increases its ability to focus on few critical
competencies.
For instance, 3Ms Medical Products unit includes a wide range of products involving very different
technologies and production processes. They are grouped within the same business unit, because
all address health needs, are marketed to physicians and other health professionals, and can be
sold through a common salesforce and distribution system.

OBJECTIVES
Companies break down corporate objectives into subobjectives for each SBU. Those vary
according to attractiveness of their industries, the strength of their competitive positions within
those industries, and resource allocation decisions by corporate management.